Johnson & Johnson is pressuring Amazon to step up efforts to control the quality of brands resold by third party merchants, highlighting a problem faced by the entire e-commerce sector.
Johnson & Johnson stopped directly selling some of it health care products including Rogaine and Tylenol on Amazon earlier this year because of incidents when third parties sold damaged or expired units of those products on the e-commerce platform, the Wall Street Journal reports. The e-health care giant recently resumed sales of most of its products directly to Amazon, the news service reports.
Approximately 40 percent of the products sold on Amazon come from third party merchants that are not affiliated with the website, according to the company's reports to investors.
Johnson & Johnson declined to comment for this article. Amazon did not respond to requests for comments.
Amazon has become the online retailer of record by improving the online shopping experience with competitive prices for products and faster convenient, shipping, but controlling the quality of products sold by third party merchants is the next great challenge of e-commerce, says Sucharita Mulpuru, a retail analyst at Forrester Research.
Amazon sold approximately $61 billion worth of products in 2012, so the company is limited in how closely it can inspect the quality of the products sold by third parties, Mulpuru explains. Amazon should work closer with customers and brand owners because of the scale of its operations to spot sales of counterfeit, expired or damaged products by third party merchants, after which the e-commerce giant should weed out merchants that violate quality standards, Mulpuru says.
"Amazon likes the third party re-seller business because it's very lucrative and you don't have to own the inventory," Mulpuru says. "Amazon has a lot of integrity and we forget sometimes that like other e-commerce sites they are vulnerable to unscrupulous third party re-sellers."
Amazon incentivizes third party merchants by offering storage space and shipping for the products sold on the website. The company also announced on Monday that its Amazon Prime service will partner with the U.S. Postal Service to make Sunday shipments in the New York and Los Angeles metropolitan areas, with plans to expand that service to other cities in 2014.
The U.S. Census reports that e-commerce was 5.8 percent of retail trade during the second quarter of 2013, and IHS Global Insight projects that e-commerce will be approximately 8 percent of retail trade by 2016 or 2017, says Chris Christopher, head of consumer for IHS Global Insight market research firm.
Over time quality control agreements with merchants will be enforced and companies will be on the lookout for misrepresentation and poor product quality from third party re-sellers, Christopher predicts.
"As people buy more things online, quality will matter more, or they will be more skeptical about buying online," Christopher says. "When a company like Amazon takes a larger and larger share of shipping, quality control becomes more transparent."