Amazon CEO Jeff Bezos referred to third-party sellers in his annual letter to shareholders. The letter wasn't a summary of Amazon's accomplishments in 2016, but rather a glimpse into his management approach.
The yearly letters are famous for Bezos insistence that Amazon is still in Day 1, a reference he made in his very first letter to shareholders that he includes with each year's letter to Amazon investors.
In this year's letter, Bezos tried to answer the question, "How do you keep the vitality of Day 1, even inside a large organization?"
One piece of advice he offered: recognize true misalignment issues early and escalate them immediately. Here's what he had to say about that challenge and how it impacted Amazon's approach to inviting third-party sellers onto its marketplace:
"Sometimes teams have different objectives and fundamentally different views. They are not aligned. No amount of discussion, no number of meetings will resolve that deep misalignment. Without escalation, the default dispute resolution mechanism for this scenario is exhaustion. Whoever has more stamina carries the decision.
"I've seen many examples of sincere misalignment at Amazon over the years. When we decided to invite third party sellers to compete directly against us on our own product detail pages - that was a big one.
"Many smart, well-intentioned Amazonians were simply not at all aligned with the direction. The big decision set up hundreds of smaller decisions, many of which needed to be escalated to the senior team.
""You've worn me down" is an awful decision-making process. It's slow and de-energizing. Go for quick escalation instead - it's better."
It would be hard to imagine what Amazon would be like if it hadn't embraced the concept of allowing third-party sellers on its site, but at the time, it was not an easy decision.
Other retailers have since adopted the strategy (including Sears and Walmart), but have been much more selective.
Amazon began cracking down on 3P sellers over the past 12 - 18 months, and just in the last 2 weeks has escalated the pace of its crackdown thanks to the latest wave of seller fraud brought to its attention by sellers and written about by EcommerceBytes, and then featured in a high-profile piece in the Wall Street Journal.
Some are wondering if the number of Amazon sellers will shrink or if they will be forced into Fulfillment By Amazon.
Bezos's letter made for an interesting read. It would be great to hear details about how Amazon thinks about third-party sellers, which both help it achieve volume and selection and also bring security and customer satisfaction risks to the marketplace -- but that's unlikely for what is a generally a very close-lipped company. We will get to hear about the company's first-quarter performance next week, however, when it releases its quarterly financial statement.