Amazon drop-selling resellers are costing a family-run candy maker millions

Mitchell Owens recently discovered that mysterious entities were selling bulk orders of Dum Dums lollipops on Amazon for a few dollars less than his company’s asking price. Owens, who runs e-commerce operations for Spangler Candy Co., worried the candies were potentially dangerous counterfeits.

So he placed an order with one of the Amazon merchants. A few days later, a package of 500 lollipops arrived at her doorstep. They weren’t counterfeit and – strangely enough – shipped directly from Sam’s Club at Walmart Inc.

Owens had stumbled upon a price arbitrage scheme in the imperfectly-monitored online marketplace of Inc.

The hustle works like this: Sellers, often guided by how-to tutorials on YouTube, TikTok and Instagram, scour the internet for products at lower prices than Amazon. Then they post the items on the website, wait for someone to place an order, buy the product from another retailer, have it shipped directly to the customer, and pocket the difference.

Amazon’s rogue merchants sell a wide range of items, including breath mints, cereal, baking powder and feminine hygiene products.

They never touch the merchandise, a practice known as drop shipping. The scheme is a violation of Amazon policy, which prohibits merchants from shipping products from other retailers, but the perpetrators are betting they will escape detection amid the clutter of Amazon’s vast online store. the company.

With Dum Dums, sellers are taking advantage of a gaping price gap between Sam’s Club, which rewards its members by selling a deeply discounted 500-pack for around $15, and Amazon, where Spangler sells its exclusive 400-pack for about $26. Sellers can charge $25 on Amazon to entice price-conscious shoppers and pocket around $6 after Amazon’s fees are subtracted.

Amazon shoppers might find it odd to receive a box from Sam’s Club, but they receive an extra 100 lollies and are therefore less likely to report the issue.

In the beginning, lollipop dropshippers were rare. Spangler complained to Amazon, which usually suspended the seller a week later.

But over the past six months, the number of merchants selling Dum Dums on Amazon has proliferated so rapidly that Spangler can’t keep up with them. Owens thinks a contest of forces — the work-from-home trend, rising prices, online tutorials — has prompted more people to seek out side hustles.

Bloomberg identified about 20 merchants selling 400 packs of Dum Dums on the site in July, but that number is constantly changing as sellers jump in or new ones start up.

“It’s become a tsunami that we can’t control,” Owens said. “There’s a whole cottage industry that encourages people to start their own businesses selling on Amazon and shipping directly from other retailers.”

Complaining to Amazon no longer works because when Spangler suspended a seller, others appeared to replace them. It’s too expensive to have lawyers deal with it, and the consultants who help businesses navigate the online market haven’t been of any help.

Spangler, a 115-year-old family business that also makes candy canes and Sweethearts at its factory in Bryan, Ohio, says the Dum Dums racket has cost it millions of dollars in lost business and legal fees – real money for a company of its size.

“Amazon is too big to listen to anyone,” Owens said. “If you get your hands on someone, they’ll say, ‘I don’t know what to tell you. Even if it violates our policy, there is nothing we can do.

In an emailed statement, Amazon spokesman Nathan Strauss said the company has long prohibited sellers from shipping products from other retailers to customers.

“We monitor a variety of data and signals to detect, investigate and enforce violations of this policy,” Strauss said. He declined to provide further details on how Amazon enforces the policy or how many merchants have been suspended for violating it.

Sam’s Club, which allows drop shippers to ship products for free to 10 addresses, declined to comment.

American shoppers will spend nearly $400 billion on Amazon this year, which is more than $1 for every $3 spent online, according to Insider Intelligence Inc. This market dominance makes the online marketplace a convenient place for brands to shop. reach buyers.

The reach also makes a great hangout for unscrupulous people looking to make a quick buck. Amazon constantly battles counterfeits, fake reviews, and even employees who take kickbacks from merchants who buy preferential treatment.

But the company’s efforts are largely reactive, and the problems persist because anyone can start a business selling virtually anything on Amazon with little more than an email address. The Dum Dums racket doesn’t seem to hurt Amazon because it still makes a commission on every sale even if the product is from Sam’s Club.

The direct delivery method practiced by Dum Dums sellers is a variation of a long-standing version of retail arbitrage.

For many years, enterprising Americans have been buying clearance merchandise from physical chains and reselling it at a premium on Amazon and EBay Inc. These people have to visit multiple stores and prepay inventory and shipping costs. .

In contrast, dropshipping can be done at home without spending money until orders are placed. Proponents advocate the use of store credit cards with cashback bonuses to sweeten the rewards. As one TikToker pushing the drop-shipping method put it: “It costs you nothing to list a thousand items on Amazon.”

It is difficult to assess the extent of the phenomenon, but it seems to be gaining momentum. Google’s monthly searches for “Amazon dropshipping” hit 22,200 in June, up 50% from a year earlier, according to BuzzSumo, a social media analytics tool.

And explainer videos are proliferating online.

In a YouTube post last year, someone calling himself “ecomTom” shows how easy it is to find cheaper ceiling fans on the Lowe’s Cos Inc. website, create an Amazon account for sell them, ship the fans from the home improvement chain to the customer and pocket the difference. EcomTom, whose video has generated nearly 200,000 views, says those who follow its system can earn between $5,000 and $10,000 a month.

His videos and other free online videos often serve as advertisements for other paid services, including lessons and advice.

An exterior view of Spangler Candy Company in Bryan, Ohio.

(Madalyn Ruggiero/Associated Press)

Spangler’s e-commerce chief Owens suspected that many people selling Dum Dums on Amazon got the idea from an entity called Dragons E-commerce, which released a YouTube video in April showing how to find deals on Sam’s Club for things like Starbucks coffee, Bounty paper towels and Tide Pods laundry detergent, then resell the products on Amazon for a profit.

Ali Haider, who makes Dragons E-commerce videos in Pakistan, told Bloomberg he has clients in the United States, Mexico and Canada who he teaches his dropshipping methods for around $250 per class.

“You can do it from anywhere in the world,” he said. “Following this model is not a problem.”

Haider, whose video has been viewed nearly 4,000 times, knows he is breaking Amazon policies but said the company only takes action if customers complain. He said he had only had one account suspended, after a customer complained about receiving a product late.

Haider said he never sold Dum Dums or encouraged any of his customers to sell the lollipops. “When we sell branded products, in all my time, I have never received messages from brands.”

Most merchants that deliver Dum Dums have obscure names like MZPRS Services or MK Investments, which can make it difficult to find owners.

Matt Priest of Sandy, Utah, sold the lollipops on Amazon under the trade name MattP Store. Reached by phone on July 6, Priest said he was unaware he was selling Dum Dums online. He said he invested $15,000 six months ago in a group that helps would-be entrepreneurs build businesses online. He declined to identify who he invested the money with and said he has recovered $45 so far.

“They said they had other clients who had been doing this for longer and were making thousands of dollars a month,” Priest said. As of July 20, her store no longer sold Dum Dums but carried seven other products, including a bulk box of Chex Mix snack mix and a 15-pound bag of Arm & Hammer baking soda. The priest said he was on vacation and did not return subsequent calls.

Joseph Mesi of Sewell, NJ, sold Dum Dums on Amazon under the trade name JRM Apex Sales. Reached by phone on July 6 and asked about Dum Dums, he replied, “It’s one of the things I sell there, yes. Sam’s club? Yeah, that’s one of the places I drop-ship from.

Mesi said he was busy and ended the call. Joined on July 18, he said: “I really don’t want anyone to know about my business or what I do. I am a private person. Mesi’s store hadn’t sold Dum Dums since July 20. It was selling 43 other products, including 20 Mule Team Borax, kitty litter, Life-Savers breath mints, 20-pound bags of rice and jumbo packs of Always brand maxi towels.

Spangler’s Owens said he had been able to reach merchants in the past, but found it a waste of time.

“I will explain who I am, say you are violating this policy and ask them to please stop,” he said. “Twenty-five percent of them say, ‘Oh, we’re sorry. Please don’t write a bad review. We are going out of the list. The other 75% say “fuck you,” and we have to wait a week for Amazon to go through their process to get the seller removed. That’s why it’s so damning. You go down to four or five vendors and the next day there are 20 more.

To help solve the problem, Spangler signed up for Amazon’s “transparency” program, created to allow companies to track products through the supply chain. More than 23,000 brands joined the program last year, according to Amazon, paying for a unique QR code for each item sold in the marketplace.

Spangler, who pays 5 cents per QR code, has spent thousands of dollars so far and is seeing some improvement, but Owens fears drop shippers may find a workaround.

Meanwhile, he continues to order Dum Dums to prove to Amazon that another unauthorized seller has appeared. It happens so regularly that Owens has reserved a section of his garage for all the boxes arriving from Sam’s Club.

“We tried so hard to resolve this issue with Amazon,” he said. “It’s just a shame they don’t work more closely with manufacturers. I wish there was a better relationship.

Virginia C. Taylor