The Journal. - Amazon’s Secret Operation to Gather Intel on Rivals

Episode Date: April 29, 2024

For almost a decade, Amazon staff went undercover on Walmart, eBay and other marketplaces selling products under the guise of a company called ‘Big River.’ WSJ’s Dana Mattioli reports on the secret arm of Amazon that surreptitiously gathers intelligence on its competitors. Further Reading: -Inside Amazon’s Secret Operation to Gather Intel on Rivals  -Inside Amazon’s Push to Crack Trader Joe’s—and Dominate Everything  Further Listening: -TikTok Wants to Be More Like Amazon. Amazon Wants to Be More Like TikTok.  -What Is Amazon’s Secret ‘Project Nessie’?  Learn more about your ad choices. Visit megaphone.fm/adchoices

Our colleague Dana Mattioli has spent months reporting on a company that you've probably never heard of, Big River Services International. It sells products on sites like eBay, Shopify, and Amazon. Things like beach chairs and walks and industrial-sized tubs for food. On its face, it looks just like a mom-and-pop or a small business that's selling their goods. If you go to Big River's website and click on the Who We Are section,

it doesn't actually say much about who they are, just that they're entrepreneurs, thinkers, marketers, and creators. It's like very much boilerplate. It looks like a Wix site that was thrown up in like 20 minutes. There's some like typos. They spell Seattle wrong in one instance. So why have you been paying attention

to this relatively generic looking company? So it looks like totally benign and not very sophisticated at first glance. But I learned a few months ago that this actually isn't just some small third-party seller or mom and pop. This is a shell company created by Amazon. The purpose of the shell company? To gather intelligence on its rivals. You know, sensitive information, pricing information, things of that nature, and fed it back to Amazon senior leaders to incorporate into their own businesses. Welcome to The Journal, our show about money, business, and power.

I'm Ryan Knudson. It's Monday, April 29th. I'm Ryan Knudson. It's Monday, April 29th. Coming up on the show, Inside Amazon's Top Secret Project Curiosity. Attention all soccer fans. From Orlando to Los Angeles, take to the fields of the USA for your next vacation.

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Okay, so how does something like Big River Services International compare to what other companies normally do when they want to research their competitors? So all companies research their competitors. That's not new. And, you know, the way that typically they would go about this is looking at publicly available information to glean insights. So anything like earnings call transcripts, you know, depositions that are public, walking the competitor's stores. That's all fair game, right, to get a sense for how your rivals are working. If you're in the e-commerce space, it's very common for you to place an order with a competing website and track, you know, how long does it take to ship? How does the item arrive? Is it arriving in good condition?

But with Big River, Amazon went much, much further. What Amazon was doing is they set up a very secretive show company that people at Amazon didn't even know existed. The team had to be very careful about divulging any information with anyone not in the loop on this. And they even had conversations with some of their rivals as members of Big River Services, and they were told not to disclose their ties to Amazon, even by lawyers at Amazon. To understand what Big River is and what it does,

Dana had to do some digging. She spoke with current and former employees, looked at internal company documents, and business registration records. And the story of Big River started about a decade ago. Amazon and a lot of companies have benchmarking teams where they size up the competition. And in late 2015, the benchmarking team had a bit of a novel idea. They pitched a project called Project Curiosity to management where they said, you know, we

want to understand the seller experience on Amazon.com. You know, 60% of what is sold on Amazon is from third-party sellers from around the world. So this project was pitched under the auspices of helping Amazon's own sellers by understanding what they experienced both on Amazon and elsewhere to better the experience. But then it morphed. Under the guise of Big River, the Project Curiosity team started gathering information about its rivals on things like pricing and logistics, and then sharing that information with others at Amazon, including senior leaders. An Amazon

spokeswoman said that benchmarking is a common practice in business, and that Amazon, like many other retailers, does it in order to improve the experience for businesses that sell on its site. She also said that Amazon believes its rivals also carry out research by selling on Amazon. So once this Project Curiosity got greenlit, how did the team actually go about setting up and operating this fake business? At the beginning, it was pretty primitive. To test their theories here, they went out to local stores in Seattle that were going out of business and bought up all of their merchandise. So they weren't very picky as to what they bought. They bought up racks of Saucony sneakers at a shoe retailer that was going out of business. They would go to Costco that had a pretty lenient reselling agreement, and they

would stock up on Tommy Bahama beach chairs and other items. And they got a warehouse in Seattle right in Amazon's headquarter district, very close by, and they started applying for these rival websites, getting on them and shipping them. Over time, Big River expanded its operations globally. It ran warehouses in Germany, the UK, India, and Japan. And under the banner of Big River, the team also invented its own brands. They created a brand called Crimson Knot in India, and their website's kind of hysterical. It says that there's eight woodworkers in Bangalore crafting, you know, really high quality woodworks for customers. They created a company in Japan called Not So Ape, which actually have this fun hat. Oh my gosh,

you've actually got the hat. I've got the merch. When you go to the Not So Ape's website, they have a TikTok page and Instagram. What makes your style unique is the stories behind it. I've got the merch. When you go to the Not So Apes website, they have a TikTok page and Instagram. What makes your style unique is the stories behind it. So it got pretty sophisticated. So these are like actual businesses that they're setting up with actual products that are getting made and people that are actually designing them. Correct. That's right. That sounds like a lot of work. A lot of work and not a lot of payoff from a monetary perspective. Some of the documents I received, for instance, show that the Indian Big River team in 2019 was projected to have revenues of $165,000,

but its costs were to be $463,000. So this was not all about making money. It was about gathering intelligence. Interesting. So what kinds of information or what kinds of intelligence was Amazon able to collect by doing this? Yeah. So the team, once they gained access to these rival platforms, they were told to take as many screenshots as possible of the inner workings. So they would take screenshots of pricing on the websites,

the ad systems, how many clicks it takes to set up a product to sell it, the cataloging on the back end, and things of that nature. By 2019, Big River had started selling on marketplaces including Alibaba, Etsy, and Rakuten. But one of its main rivals was more difficult to gain access to than others. Walmart is Amazon's biggest retail competitor. But in the beginning, they were unable to get onto Walmart as a third-party seller because Walmart had a higher threshold for their sellers on there. They wanted higher volume sellers. They didn't want just like fly-by-night companies. Big River needed more sales in order to qualify for Walmart's website. So Big River started selling as much order to qualify for Walmart's website.

So Big River started selling as much as they could on Amazon.com, which was easier for them since they own it, to pump up their revenues. And then eventually in 2019, they do get on Walmart.com. What does Big River do on Walmart's website? Their seller account on Walmart's website is called Atlantic Lot. They sell 15 different items, and it's kind of a hodgepodge of items when you look at it. And interestingly, not only did that give Amazon or Big River Services access to Walmart's marketplace in the back end, they're also, if you look closely, it's apparent that Atlantic Lot is also using Walmart Logistics, which is Walmart's version of Fulfillment by Amazon. Fulfillment by Amazon is Amazon's logistics business that sellers use to ship their items. The business has boomed over the past decade.

So they're also getting information on the shipping process there and those rates and how that works. So Amazon is just like hoovering up tons and tons of information about how its rivals operate. That's right. Did Walmart know that these brands belonged to Amazon? They did not. And did they ever figure it out? They figured it out when we started calling about it.

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down the seam of the wall. It's like poetry in motion. Benjamin Moore, see the love. For Amazon employees working on Project Curiosity, it meant living kind of like a secret agent. employees working on Project Curiosity and met Living kind of like a secret agent. People on the Big River Services team had two email addresses. For, you know, internal Amazon work, they used their at amazon.com email address. But when they were emailing with other platforms, rivals, manufacturers, they used at Big River International as their email address. They had a separate part of the buildings they worked in,

and they were very hush-hush about the nature of the work they were doing. Including how they were getting packages to their customers. These are Amazon employees on the white-collar side of the business going out to the warehouse in the middle of the day to ship them and not telling anyone where they were going. It's kind of comical. Employees were also secretive in how they shared information. When they presented their findings to senior Amazon leaders, they very often relied on paper printouts that were numbered. And what they would do is they would hand those out to the Amazon

managers to read and take notes on. And at the end of the meeting, they would collect is they would hand those out to the Amazon managers to read and take notes on. And at the end of the meeting, they would collect it all back. They'd make sure they had every single paper because it was numbered. There was no paper trail for a lot of this. And that was all by design. Amazon says it kept the project secret because it didn't want Big River to get special treatment when it sold products on Amazon. But when I speak to my sources for this story, they say that's not the reason it was so secretive. They were really concerned about the optics of this leaking to the point where they even set up an emergency document as to what they should do if competitors found out about the nature of Big River services or the media. And what did the document say? So the document that I read said

that there's any number of different questions about this from the media to just say, we make a variety of products available to customers through a number of subsidiaries and online channels and just keep it at that. But in conversations about what to do in the event of a leak, they discussed saying that this sort of research is normal, saying that this was really created to help sellers and to really just normalize the process. How did employees who worked there feel about what they were doing? I would say many of them felt really conflicted. I had heard stories of employees on the team feeling deceptive or feeling weird about misrepresenting themselves to competitors. Like one group of Amazon employees who attended a Rivals conference. So, you know, for years, eBay, which was also a big competitor

to Amazon in marketplaces, had this big seller conference in Las Vegas. And they bill it as a way for their sellers to have access to eBay's management and get quote-unquote exclusive information. At the end of the day, it's about winning together. This is a partnership. eBay supporting you, our sellers, and our sellers supporting eBay. So you get big reveals at this conference and it's like a rah-rah eBay sort of scene in Las Vegas. And Big River Services would go. And they would go as sellers on eBay, as the Big River Services team. They would not disclose that they worked for Amazon and they had conversations with eBay leaders there.

is that they worked for Amazon and they had conversations with eBay leaders there. And it goes to the whole double life sort of part of this, where it could get uncomfortable because there is a nature of misrepresenting themselves. While employees hid their ties to Amazon at conferences, Dana found that some Big River team members actually listed Amazon as their employer on LinkedIn, potentially blowing their cover.

Dana also found other clues. So when you start a company or a shell company, you have to file documents in local jurisdictions. And I was able to track a number of them down in Delaware, in Washington State, and in the UK. And interestingly, some of them didn't mention Amazon at all, but they did say on their Big River Services documents that they had a board of directors or a management team and all of the people listed were senior Amazon executives and lawyers. And the address listed for all those senior executives

was 410 Terry Avenue in Seattle, which is Amazon's headquarters. So there's some clues if you're looking closely enough. In the UK, there was a document because of their disclosure rules where Amazon is named as owning more than 75% of Big River services. That's something you have to disclose. So that was there.

But people on the team said that they weren't worried about any of the marketplaces looking that far into the paperwork because these marketplaces have so many sellers. They're not going to dig in on any specific one. So it sounds like they wanted to be secretive, but they didn't like try to do everything they possibly could to hide their origins. That's right. It was sort of out there if you started to dig. Even if you think about the name Big River, what's one of the biggest rivers in the world?

The Columbia River, which runs between Washington and Oregon. Amazon. God. It's one of the biggest rivers in the world. Well, I feel dumb because that's much more obvious. Of course, it's Amazon. Columbia. This is me being from the Pacific Northwest. It's all I ever think about is, you know, Pacific Northwest things. But so why does any of this matter, though? I mean, Amazon is a business. They're trying to be smart.

So this matters because, first of all, it's just very much a direct contradiction to how the company portrays itself. When you speak to anyone at Amazon, including in Jeff Bezos' speeches, they go on and on about being customer obsessed. And they outright deny that they focus on the competition. We want other companies to look at Amazon and see us as a standard bearer for obsessive focus on the customer as opposed to obsessive focus on the competitor. And, you know, this just shows the extent to which they very much focus on the competition to the point where they're going above and beyond what most companies would consider doing to track the competition. You know, I spoke to a lot of legal experts for this story, and they did say that when companies misrepresent themselves to competitors to gain proprietary information, that can lead to lawsuits on trade secret misappropriation. At the very least, though, it does seem to say something about Amazon and the way it approaches the world and sort of the lengths that it's willing to go in order to compete.

It absolutely does say something about that. compete. It absolutely does say something about that. And what's funny to me is that they're already so much further ahead than all of the companies it gained access to, but they still wanted to get any sort of competitive intelligence they could gather. You know, this is a company that is in the regulatory spotlight in the US, but all over the world for its business tactics, the way it competes. And this just shows another way that the company is willing to compete in a way that's maybe more aggressive than what's considered the standard. What kind of reaction have you heard from people after you revealed the true identity of Big River? I heard from a lot of people in the retail industry who say, you know, yeah, there's

one thing to be a secret shopper, to go into Walmart store and shop and see what the experience is like. But to be a secret seller and to misrepresent yourself to gain access to a platform just seemed different to them. That wasn't something they'd heard about. Do you think that this might change the seller marketplace in some way? I mean, like now will companies like Walmart or eBay try to apply more scrutiny to their sellers to make sure that there aren't any people in there

pretending to be someone that they're not? That's a great question. All of these marketplaces have terms and services that you agree to when you sign up. You could see tweaks to that to make sure that no one's misrepresenting themselves. Just add to the terms of service. If you are a competitor to us, you have to disclose or something like that. Or if you are a shell company, please disclose your holding company. Right, right. If you're actually three kids sitting on each other's shoulders in a giant trench coat,

you have to tell us. That's all for today. Monday, April 29th. The Journal is a co-production of Spotify and The Wall Street Journal. Additional reporting in this episode by Sarah Nassauer. Thanks for listening. See you tomorrow.