We’ve made no effort to hide our thoughts on Amazon. While it sells just about everything under the sun, it also unequivocally sucks, for a thousand more reasons than we have time to unpack. Part of what makes it such a wasteland is the fact that despite its attempts to regulate its sprawling marketplace, Amazon is so large that scammers have infinite opportunities to make an extra buck. This week, Bloomberg reported on one such scam that’s affecting a century-old Midwest candy company. When you come for my candy, it’s personal.
You might know Spangler Candy Co. as the company that resurrected Necco Wafers and Sweethearts candies after the New England Candy Company shuttered in 2018. It also produces a range of other products that you might affectionately categorize as old-people candies: Bit-O-Honey, Circus Peanuts, and perhaps its most ubiquitous item, Dum-Dums lollipops. It’s a family-owned business that has been operating continually since 1906, and it’s safe to say that when the factory first opened its owners could not have foreseen a future in which millions in legal fees were being spent to keep its product from being undersold via Amazon drop-shipping scams.
How the Amazon scam works
As Bloomberg points out, this is merely a newer, more streamlined form of an old hustle known as a price-arbitrage scheme. How it works: an Amazon merchant pinpoints various items that are selling for less money elsewhere online than the Amazon list price (typically at discount stores like Walmart or wholesalers like Sam’s Club). The merchant then lists those items for sale on Amazon at the typical Amazon price, even though they themselves don’t actually have these items available to sell. In the event that a buyer purchases the item, the merchant will buy the item from Walmart at the discount price, ship it directly to the customer, and pocket the difference.
Spangler’s Dum-Dum lollipops—a popular item to buy in bulk for parties, receptionist candy bowls, and the like—are a big target for this scheme, Bloomberg explains:
With Dum Dums, the sellers are leveraging a yawning price gap between Sam’s Club, which rewards its members by selling a deeply discounted 500-pack for about $15, and Amazon, where Spangler sells its exclusive 400-pack for about $26. Sellers can charge $25 on Amazon to lure price-conscious shoppers and pocket about $6 after subtracting Amazon fees due to the $10 price difference.
That $6 profit can really add up across multiple orders, and while customers surely notice that the package appears to have come from Sam’s Club rather than Amazon, it’s unlikely to cause a stir if they technically receive the Dum-Dums they ordered (and in a larger quantity, too).
Entire cottage industries have sprung up around the exploitation of these loopholes. Mitchell Owens, who runs e-commerce operations for Spangler, told Bloomberg that Amazon has little incentive to solve this issue; the platform is so incomprehensibly large and complex that a scheme resulting in so few customer complaints is unlikely to be squashed. Whenever Spangler successfully lobbies to remove one shady vendor from the platform, another springs up in its place. All told, it’s costing Spangler millions of dollars, not only in lost profits but also the legal fees necessary to get Amazon vendors suspended.
“Amazon is too big to listen to anyone,” Owens said to Bloomberg. “If you actually get a hold of someone, they’ll say, ‘I don’t know what to tell you. Even though it’s violating our policy, there’s nothing we can do.’”
Amazon sent a statement to Bloomberg confirming that it has a policy against sellers shipping products to customers from other retailers and that it “[monitors] a variety of data and signals to detect, investigate and enforce violations of this policy.” Clearly, those processes aren’t sufficient. Not knowing the dent that this scheme has put into Spangler’s profits, I can’t say whether this is exactly devastating the candy company or not. But it’s just one more example of how Amazon has become too large to regulate itself and protect customers from a veritable Wild West of scammers and opportunists. If shoppers even checked one other online resource before buying from Amazon, they might just find that the convenience of one-click ordering isn’t always worth it.
By the way, ever wonder what became of the old Necco factory? It became an Amazon delivery center.