Amazon seller loses $400,000 in sales to a rival's attack CNBC
Ari Levy
2 hrs ago
You can buy this private island less than an hour from NYC. But it isn't cheap. David Damavandi should be an Amazon success story.
Using the company's marketplace, the 31-year-old entrepreneur built a skin care business to more than $10 million in annual revenue in seven years, thanks in large part to having the most popular facial steamer on Amazon.com.
But rather than gearing up for Cyber Monday and a potential blockbuster holiday season, Damavandi's Los Angeles company, Pure Daily Care, is in crisis. For the bulk of 2017, he says, he's been under assault by a rival brand named Krasr, which he says ripped off his top product, spoofed his email address and tricked customers into posting a barrage of negative reviews.
In one text message to Damavandi, a person purporting to represent Krasr called himself the "virus of Amazon" and threatened to put him out of business. "Cash flow is dead," said Damavandi, who's already let go of half of his 12 employees. "These guys are putting people out of business overnight."
After a seven-week suspension from Amazon and $400,000 in estimated lost revenue, Damavandi's storefront -- Beauty Imports -- was reinstated on Nov. 8. Now he's sitting on hundreds of thousands of dollars of inventory that he has to sell at a deep discount to pay his suppliers and remaining employees.
The Krasr clone, meanwhile, was still listed as the best-selling product until CNBC told the company that the story was about to be published. According to Amazon's website, the product was unavailable for much of the day on Thursday and Pure Daily has now reclaimed the top spot.
Down the rabbit hole
This is a story of unfettered capitalism, another example of a gigantic global technology company having a platform it can't control, where malicious actors run amok.
Facebook's vulnerabilities were exposed during the 2016 election when Russian propagandists infiltrated the network and targeted people with fake news, and Google's YouTube is in a constant struggle to determine the boundaries between free speech and over-the-top outrage.
On Amazon, the Wild West problem is particularly acute for small businesses. Millions of merchants like Damavandi have been drawn to Amazon's marketplace because of the company's massive customer base, logistics operation and global network of fulfillment centers. More than half the items sold on Amazon now come from third-party sellers.
But the marketplace is highly susceptible to fraudsters intent on exploiting the site's loopholes. While Amazon has taken steps to help brands protect themselves from counterfeits, it can't react quickly enough to the many tactics scammers are using to win business at the expense of legitimate sellers. The marketplace is just too big, with too much activity.
Damavandi's case surfaced over the summer in an Amazon seller forum post he wrote about his experience. The post was subsequently deleted, but it was archived on another website and the link was shared with CNBC.
We contacted Damavandi, who confirmed that he's the author. He was reluctant to cooperate for this story out of fear of retribution from Krasr, but he agreed to fill in the holes as needed.
He says his problems began in early April, when a new product from Krasr suddenly popped up in the facial steamer category with hundreds of five-star reviews. The listing for Krasr's Nanosteamer used the exact image and content from his Nanosteamer, including taking this line in its entirety: "A Bonus 5 piece surgical grade stainless steel blackhead and blemish extractor kit is included with every Nanosteamer."
Cloning a product on Amazon can be perfectly legal. However, there are still laws preventing the use of other people's photos and descriptions. Damavandi, having spotted a clear offender, filed a copyright infringement claim with Amazon to get the Krasr product removed. He was successful.
Then, Damavandi says, the madness started. (Krasr denies the following narrative, saying in one email that, "This is all a joke and completely made up," and in another that it sounds like Pure Daily is doing whatever it can to get rid of "threats and competitors.")
Damavandi was contacted on WhatsApp by a person claiming to be "from Krasr," who asked him to withdraw his infringement claim. Damavandi said he would first need Krasr to remove stolen content from its product page.
The next day, April 4, Damavandi received a puzzling email from Amazon saying the company had received his request to retract the infringement complaint. But Damavandi says he never sent any such request.
The email from the apparent impostor to Amazon, which CNBC has viewed, used the address that Damavandi allows Amazon to give other sellers if a conflict needs to be resolved. Krasr is the only entity that would have gotten access to that email address for that specific claim.
There were several clues it was a fake email. The sender claimed to be emailing from "onyxdist" -- the shortened version of Onyx Distribution, Damavandi's distribution company, and also the suffix in the email address, but not a name that Damavandi would ever have used in communications. The email ends with "Sincerely, Dama" -- referring to the prefix in the email address and a shortened version of his last name. He said he never uses this name in emails. Damavandi tried to clear the confusion up with Amazon immediately, but the company ignored him, he said.
It's certainly not the first time Amazon has been duped. In September, CNBC reported on a fake law firm tricking the site into kicking off the seller of a popular toothbrush head. Late last year, a number of Samsung sellers were suspended because of mistaken infringement claims, and the site has become generally more chaotic in recent years since Amazon started openly courting Chinese sellers.
After the fake retraction email to Amazon, Krasr was right back up and running with its Nanosteamer. And the attacks on Damavandi's product were just beginning.
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