Amazon Sold A Used Diaper. It Tanked A Mom-And-Pop Business

(Bloomberg) -- Paul and Rachelle Baron were an Amazon success story. The washable swim diaper they designed for their infant son quickly became a best-selling product as the online retailer’s algorithm worked its magic. Satisfied parents left five-star ratings and glowing feedback, elevating the diaper in search results and steering more shoppers their way. The momentum seemed unstoppable.

Then one scathing review changed everything.

This wasn’t supposed to happen. Amazon.com Inc. has committed to inspecting each return for issues before reselling it. But selling returned products as new is a major and growing problem, according to consultants who advise merchants how to navigate the online marketplace. When the practice spawns negative feedback, merchants say, the damage increases exponentially.

In interviews, two consultants said they had personal experience with returned items being sold as new and said helping clients navigate the issue has become more time-consuming. A person who spent years in Amazon’s returns operation said the sheer volume of returns makes it hard for employees to thoroughly inspect products before they’re restocked. Earlier this year, Amazon instituted a new policy that for the first time lets sellers instruct the company not to resell any returned products. Last month, Lesley Hensell, an e-commerce consultant who works with Amazon merchants, welcomed the new policy on LinkedIn and wrote “Better late than never!” 

The Barons told Amazon repeatedly that they weren’t at fault and that the review should be taken down. Yet it remained on the site, inflicting lasting harm. The couple says they’re $600,000 in debt, including a loan secured by their home that complicates the prospect of filing for bankruptcy. They make enough selling diapers to pay down debt and order more inventory, they say, but it’s not a living.

“The last four years have been an emotional train wreck,” Paul Baron said. “Shoppers might think returning a poopy diaper to Amazon is a victimless way to get their money back, but we’re a small, family business, and this is how we pay our mortgage.”

Amazon removed the review a few hours after Bloomberg published this story. 

“When we learned about this incident four years ago, we quickly made improvements to our product returns process to prevent this type of used item being returned and sold as new,” Amazon spokesperson Chris Oster said in an emailed statement. “During the returns inspection process, our teams are instructed to open the box every single time and validate the integrity of the inner seal. We are not aware of further incidents with this type of product since these improvements were made several years ago. More recently, we have updated our policy so that no returned products of this type can be resold under any circumstances. It’s extremely rare for these types of mistakes to happen, and when they do we take them very seriously to improve the experiences of customers and sellers. There is no data to suggest this was anything but an isolated incident. We have removed the negative review in question and are investigating why it was not removed previously.”

They had enrolled their newborn son Beauregard in swim class. But the swim diapers they purchased were too tight on his legs and had to be removed like underpants, making cleanup messy. So the Barons turned their frustration into an idea: a reusable swim diaper with snaps to make it adjustable and easy to remove. 

They used a credit card to place their first order with a factory in China and launched Beau & Belle Littles on Amazon. Before long, the business had reached $1 million in sales. The couple appeared on the Rachael Ray Show and were profiled in Forbes. Theirs was  the kind of small-business success that Amazon loves to tout, especially when regulators accuse it of hurting mom-and-pops.

“We started this as a dream to make enough money for Rachelle to be able to stay home,” Paul said. The alternative was Rachelle working as a teaching assistant, which barely covered the cost of childcare, they said.

The Barons were executing a plan to triple their annual sales to $3 million in 2020, when the review landed with a thud. Even though the diaper had a four-plus-star rating from hundreds of buyers, it was hard to miss the stain photos. More than 100 shoppers upvoted the damaging review as “helpful,” which increased its visibility. The algorithm was suddenly working against the Barons. Sales plummeted.

“It should be common sense,” Rachelle said. “Why would something like a diaper ever be put back into inventory to be resold?”

The amount of time Amazon workers spend inspecting returns varies, depending on what the item is, according to the former employee. But on balance, a worker shouldn’t spend more than a minute eyeballing each return, the person said. Employees often don’t even bother opening packages if they appear to be sealed and just assume they’re unused, the former worker said. But because seals are often just a sticker or zipper it’s not always clear if the product is as-new, the person said.

The breadth of Amazon’s catalog exacerbates the problem. The company sells hundreds of millions of items. An Amazon worker handling returns might see a particular product only once and never develop expertise about a given category. It might seem unlikely that a stained diaper would be resold, except that Amazon also sells fake dirty diapers as gag gifts.

Amazon says it doesn’t allow reviews that address packaging or shipping problems or product condition and damage. The guidelines appear to prohibit the stained diaper review since it suggests the item had already been used, and the Barons were hopeful that a quick note would fix things. But their emails went unanswered. Paul recalls spending hours on the phone, getting passed from one department to another. Seller support representatives acknowledged a used diaper had been mistakenly resold, but told him they couldn’t take the review down, he said. The couple tried the famous jeff@amazon email that supposedly goes to founder Jeff Bezos himself. Nothing happened.

Amazon knew reviews could be misused when it designed the system, according to a person who worked on the project. Executives realized it would be impossible to hire enough people to adjudicate every disputed review. The best remedy, they decided, was to encourage as many authentic reviews as possible so that false ones would get washed out, the person said. The company also doesn’t let businesses respond to critical feedback, unlike Google and Yelp.

“There should be a very simple appeal process where a seller can get the review removed if a used item is resold as new,” said Jason Boyce, a long-time Amazon merchant who now runs a consulting business for online sellers. “But that process has been broken for a long time.”

In the same month as the diaper review, the Barons got an email from another customer. She had ordered a swim diaper on Amazon for an upcoming lake trip and received a stained one. The customer didn’t leave a critical review and just emailed the business owners directly.

“I just received one of your swim diapers via Amazon today and when I opened it looks like it had dirt or mold on the inside. Looks like it’s possibly been previously used,” the email said.

Rachelle responded that Amazon shouldn’t resell used diapers, but sometimes it does anyway and that it was beyond their control. She offered her apologies and sent the shopper a replacement.

“It had a stain on it, and I’m not sure if it was poop or not,” said Jessica Salerno, the shopper, when reached by Bloomberg. “The business owners were really great about it when I contacted them. I feel really bad this happened to them.”

For a long time, the Barons wondered if the first review was fake, posted by a competitor bent on sabotage. Merchants have been known to buy a competitor’s product solely to leave a bad review with hopes that it elevates their business—a tactic known as “sniping.” Competition among the more than 2 million sellers on the site is so fierce, merchants have even stooped to bribing Amazon workers to give their products an advantage and sandbag their competitors. One scheme for sale was a “take-down,” in which critical reviews were left on a competitor’s product to hurt their sales, according to a 2020 federal indictment. 

As it turns out, the diaper review was real. Erin Elizabeth Herbert, a teacher from Redlands, California, confirmed to Bloomberg that she left it to spare other shoppers a similar experience. The diaper arrived encrusted with feces and hadn’t been washed, she said. It looked as though someone used it at the beach and rinsed it in the ocean. Herbert said she got her money back from Amazon and ordered a swim diaper from a different company.

The Barons “reached out to me and said they were mortified and offered to send me a new product,” she said. “They explained to me that Amazon handles all the returns and shipping. I always meant to go back and revise my review to reflect that, and life got busy and I never did.” Herbert forgot all about the review until Bloomberg contacted her in June.

The Barons spent a year trying and failing to get the review taken down despite following Amazon’s instructions on how to do so.  Today, the couple is trying to salvage a once-promising business. Paul works on the side as an e-commerce consultant and Rachelle is seeking a job in logistics.

“Amazon talks a big game about helping small businesses,” Paul said. “But they really don’t.”

(Updated with new Amazon statement.)

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