The True Cost of Online Marketplaces

In December 2015, kids across the country anxiously awaited the holiday season, hoping to receive that year’s most coveted toy: the hoverboard. Parents knew that the self-balancing electric scooters were the hottest toy on the market. What they didn’t know was that hundreds of them would literally go up in flames thanks to faulty batteries.

And those hoverboards are far from the only dangerous product that’s been offered for sale through online marketplaces. Alexandra Berzon, investigative reporter at The Wall Street Journal, has found everything from dietary supplements that contain illegal prescription drugs to infant sleep positioners that can cause babies to suffocate.

“We found thousands of products claiming to be FDA approved, trying to misrepresent and tell the consumer that this item is safe, when it’s not,” says Berzon.

E-commerce sales in the United States grew more than 310% between 2000 and 2021 and globally, e-commerce sales are expected to near $5 trillion by the end of 2021. The statistics show that consumers have come to enjoy and rely on the convenience of e-commerce, but it comes with a risk many don’t consider.

“E-commerce is one of the main ways illicit goods can enter the consumer market,” says Piotr Stryszowski, Senior Economist at the Organization for Economic Co-operation and Development.

According to Berzon, one reason is that consumers are no longer directly connected to the people selling them goods.

“It used to be that you would walk into a store, and you understood that this store had assembled the products for you. They also had a legal liability for the integrity of those products. Marketplaces online really changed that model. “

While online vendors like Amazon sell some products directly, they also offer products through third-party sellers. “Sixty percent or more of their sales globally are actually coming from those third-party sellers,” says Juozas Kaziukenas, e-commerce analyst at Marketplace Pulse. That added up to $80.5 billion in sales in 2020 alone. 

The third-party seller model means that even if marketplaces like Amazon wanted to, they couldn’t physically inspect the products for sale on their site the way traditional brick-and-mortar sellers can.

“The open marketplace model...prevents Amazon from enforcing the same checks and balances...because it’s not a thing you can do for millions of individual third-party sellers,” says Kaziukenas.

And even when dangerous goods are reported and removed from online marketplaces,  more simply pop up in their place. “The bad actors will always find ways to evolve, and it’s a never ending battle of trying to limit them,” says Kaziukenas.

So, who is responsible when people are injured by dangerous goods they bought online? Unfortunately, the answer may be no one, at least not yet. 

In the case of Amazon, the company explicitly states it’s not liable for sales made by third-party sellers. “There’s a whole regulatory structure and legal structure in the U.S. that’s based on the idea of stores selling items. With marketplaces online, this liability still’s being worked out, “ says Berzon.