Lax E-marketplace Rules Stoke Crime, Congress Must Act – WWD

Stores are facing another epidemic to spread alongside COVID-19, as a wave of cheeky vandals and other thefts continues to rock retail world.

Big companies are used to factoring in thefts and other losses. But the increasingly rampant crime across the country is creating shock waves in the sector – and spurring a new effort to clamp down on a key illegal selling destination: the online marketplace.

This week, executives from the top 20 retailers, including Target, Levi Strauss & Co., Nordstrom Inc., Neiman Marcus Group, Ulta Beauty and VF Corp. co-signed a letter urging Congress to pass the Consumer Information Act, a bipartisan bill that would tighten how marketplaces like Amazon vet third-party sellers.

Brian Dodge, president of Retail The Association of Industry Leaders, the group that led the letter, explained in a statement that “criminals will continue these brazen thefts as long as they can anonymously sell their stolen goods.” through online marketplaces.”

The letter addressed to congressional leaders, Representative Nancy Pelosi, Representative Kevin McCarthy, Senator Chuck Schumer, and Senator Mitch McConnell, calling it a simple online action. security measures. It will require online sales platforms to verify the government ID, tax ID, bank account and contact information of the seller. Bulk sellers will be mandated to provide consumers with their contact information.

The letter argues that the Information Act would “enhance online transparency in all markets, make it easier for consumers to determine exactly who they are buying from, and make it harder for criminals to hide.” hide behind fake screen names and false business information to barricade illegal products while evading law enforcement. ”

The companies did not single out Amazon or any other specific company, but blamed “certain” online marketplaces for failing to ensure the integrity of their platforms. They argue that, despite retailers’ best security efforts, criminals will continue to “take advantage of the internet’s anonymity and the failure of certain marketplaces to verify their sellers” unless when Congress takes action.

Shopping has always been a dilemma for the retail industry, which has seen in-store thefts soar above $68 billion in 2019. But the recent rise is particularly making it difficult for retailers.

The scourge of organized retail crime costs businesses an average of more than $700,000 per $1 billion in revenue, according to a 2020 survey by the National Retail Federation. The organization added that “social changes and the shift to digital from the pandemic have led to an increase in the problem,” adding that their latest National Retail Security Survey showed 57% marked an increase in organized retail crime.

In the Bay Area, petty theft during the holiday season even makes some shoppers nervous about hanging out. Luxury retailers like Louis Vuitton and other Union Square stores have seen a spike this year, and it’s not limited to the city of San Francisco. A Saturday in November in Walnut Creek saw dozens of looters flock to a local Nordstrom and fetch $100,000 to $200,000 worth of merchandise.

The crime wave has many groups lining up to support the bill. America’s Safe Buy Coalition – which includes some of the letter’s co-signers, such as Levi Strauss & Co. and Ulta Beauty, among others such as Gap Inc. and JC Penney Co. Inc. – along with groups such as the Footwear & Apparel Association of America, Footwear Distributors and Retailers of America and the Fashion Jewelry and Accessories Trade Association, have called the move an approach. “usually, common, normal”.

But the situation is not so clear-cut, and the nuances matter. Because for its critics, the Information Act is not meant to prevent crime but rather to protect physical retail from online competition and independent sellers.

“It’s like the wild, wild west,” Marshal Cohen, retail expert and chief industry adviser for The NPD Group, told WWD. “It’s free for all, if someone goes and gets [product], and can redistribute it any way they want. So it’s essentially usurping control from the brand that used to control its destiny when it comes to retail, up until now, when basically anyone can control and harm detrimental to the brand.

“So why would you want to give up what you’ve worked so hard for to control your historic endeavor?” he posed. “What’s happening now is, we have consumers looking at things and saying, ‘Well, where’s the brand integrity?’ and retailers have lost control. So they need some sort of regulatory action that can help maintain the integrity of these brands.”

But resale and peer-to-peer platforms see the bill as an existential threat. Citing privacy concerns for individuals and the potential impact on the second-hand business, eBay, Etsy, Mercari, OfferUp and Poshmark have formed the American Small Seller Protection Alliance. in March. Others also lined up to criticize the measure.

“The real mission of the Information Act is to eliminate competition from big box retailers by hurting small sellers,” the Union of Manufacturers and Merchants said in a statement. before the press.

“The [Inform] The act does nothing to prevent goods from being stolen at their primary source, brick-and-mortar retail stores, but threatens to compromise the safety and personal information of small online sellers. Retailers use larger markets to sell their products. In other words, this particular measure does not help physical retailers directly address thefts as they happen. Instead, the proposal targets the destination of illegal and dangerous goods. opportunity to turn retail sellers into collateral damage without addressing the root problem.

It’s also unclear how the rules will impact tech platforms and their social commerce efforts. Fake user profiles are rampant on social media, while apps like Facebook, Instagram, TikTok, Snapchat and more race to expand their shopping needs and turn creators into merchants. . If Congress also considers them to be online marketplaces, the crackdown would probably apply to them as well.

For established retailers, it is notable that Target Corp., the only company on the list that operates a marketplace with third-party sellers, is a co-signer. That may be because the Target Plus offering is invitation-only, which evaluates each seller before granting access to their selling platform. So, presumably, it did the testing required by the bill. However, since it does not disclose the criteria for acceptance, its policy remains unclear. That seems to contradict the spirit of transparency introduced in this week’s letter.

Target declined WWD’s request for comment on the letter, as did Nordstrom and Levi’s. Neiman Marcus, Ulta Beauty and VF Corp. did not immediately respond to requests.

Although Walmart does not appear in this letter, it has publicly supported the bill. Amazon, too, marks a face of the company. The ecommerce Juggernaut invested $700 million in security last year to protect against counterfeiting and stolen goods, including live video and address verification — even as brands continue to claim that Illegal sales are still a big problem for the company.

Amazon was originally a critic of the bill, but now it wants to play an active role in shaping the law. The stakes are sky high. In the third quarter, the company saw net revenue through third-party sellers grow nearly 18 percent year-over-year to $24 billion.

In essence, the Information Act has created a boundary, or perhaps a front line, with which side the top companies of retail take. And because it’s set against the backdrop of recent rampant crime, there’s a whole new urgency driving the issue.

But even if stopping criminal activity is the sole driver, Cohen of the NPD Group warns that the Information Act is still not a cure. He likens online security to a game of fishing.

“Someone is going to figure out how to do that… it is putting Band-Aid in a bigger leak than we can solve with one bill and one try,” he said. Whether the bill passes or fails, “you will see some kind of action, just because it becomes such a big deal. It will not go away on its own. ” Lax E-marketplace Rules Stoke Crime, Congress Must Act – WWD


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