The emergence of online marketplaces such as Amazon and eBay has provided consumers with the advantage of purchasing a variety of items anytime from any number of merchants with just a few clicks of a mouse. This evolution and transformation of commerce from traditional brick and mortar (bricks) to E-Commerce (clicks) have created economic opportunities for entrepreneurs to acquire and resell items to consumers at a minimal markup, driving profit through sales volume. In order to compete with traditional supply chain channels with retailers like Walmart, businesses use an online platform’s distribution and logistics networks such as Fulfillment by Amazon (FBA). While this amazing ecosystem has made “point and clicks” on Cyber-Monday preferable to “shop ‘til you drop,” Black-Friday, it does not come without risks to businesses with virtual storefronts. If you are an online seller, having a presence on Amazon is absolutely necessary - as its platform alone represents almost 80% of online market share among other platforms like, eBay, Newegg, Rakuten, according to 1010data for Ecom Insights. Even among all retailers with an online presence, Amazon alone represented more than 25% of all sales as reported by Digital Commerce Magazine.

One of the greatest risks for these roughly two million outside marketplace sellers, who represent almost half of all items sold on Amazon, is a suspended or delisted account. A delisted account is basically the equivalent to boarding up your storefront. This can occur for a variety of reasons such as receiving negative feedback by consumers or worse or for selling phony or fake items or items stolen or not authorized to be sold in certain markets by the original manufacturer. You do not want to be delisted because re-opening your virtual storefront can be an arduous and time-consuming process. As you are getting back into business, other sellers will quickly step in to provide products to your potential customers. Meanwhile your inventory sits stagnant, gathering dust in a garage or on a warehouse floor.

It pays to do the right thing and avoid the hassles associated with doing the wrong thing. Oversight of vendors through an E-Commerce Due Diligence Program can significantly reduce risks attributed to suppliers and vendors in order to keep fast-moving commercial enterprises moving quickly.

As a result of our experience in assisting clients with “virtual storefronts,” we have developed a process to uncover “red flags.” Here are a few common concerns:

Initial Appearance

The fictitious website or no website - The company website has no hyperlinks. For example, XYZ Company states it sells a certain product, however, when clicking on the apparent hyperlink there is no link. When clicking on the contact information, there is still no hyperlink. All of the data is on only a home page, denoting the page was “thrown up” quickly for appearances only. Scammers can spin up a fully functioning and fairly sophisticated website very quickly.

Lesson: Don’t judge a company by its website!

Spelling mistakes and poor language on the website - Poor language indicates deeper issues. Fraudulent websites can be designed or produced in other countries where English is not the first language. Review the website for spelling and grammatical errors. For example, “we are selling factory outlet via the internet, we by are products from the factory and have products throughout the world, this why we offer cheep prices.”

Lesson: If doesn’t look professionally written, it probably isn’t!

Nailing Them Down

Physical location - In this circumstance, the company is not located at the address listed according to the due diligence investigation and a search of public records or proprietary databases. In addition, calls to the property owners denote the company moved out years ago. Phone calls to the company to determine the location are directed to voicemail, and no response is received. There are a number of address locations that are frequently used to incorporate a business and a few of those are domiciled in Delaware. However, it is not unusual for E-Commerce businesses to operate out of warehouses, so don’t be surprised if that is actually the case.

Lesson: Use good judgment when seeking out the actual location of the company!

Who is the Owner?

Principals of the company - The LinkedIn profiles of principals state they serve as the CEOs of numerous companies. However, due diligence uncovers that those businesses do not exist. The

principals also use various modifications of their names. Sometimes, the name you associate with the vendor is not the name on record. This can be confusing when conducting record checks, so getting the correct name can make all the difference.

Lesson: It is helpful for you to know the other parties in the business and their track record!

By the Numbers

Financial issues - Due diligence turns up lawsuits, liens, bankruptcies, evictions and foreclosures for the principals of the company. For example, in a review of the property tax records, the tax bill was not paid for the past five years.

Lesson: Financial details from previous years really matter when determining the honesty of a vendor or online retailer.

Public Records

Criminal history and civil litigation - A Federal criminal case indicates that the principal was charged with having a fake passport, or the business is subjected to numerous lawsuits, by debtors.

Lesson: A pattern of less than ethical behavior or fraud can be an indication of a future actions.

The Take Away

When conducting business in E-Commerce, supplier and vendor relationships can be based on short-term transactional needs which often translate into conducting fewer transactions with a greater number of partners. Often times, these resources come as a referral from other businesses in the industry, through word of mouth, and reputation.

With so much at stake, we recommend clients take all the necessary steps to reduce the risk by establishing an E-Commerce Due Diligence Program.

For more information on this critical topic, please visit or call Kim Miller at 908-399-8386 or email