Platform Fulfilment and Seller Reputation: Evidence From Amazon's Marketplace

ABSTRACT In 2006, Amazon launched the Fulfilment by Amazon (FBA) program, providing support to third‐party sellers for a fee. While the program has the potential to enhance sellers' reputations, evidence regarding its effectiveness is limited. This study estimates the association between FBA usage and seller reputation, measured by the average star rating a seller receives. Using fixed effects and staggered difference‐in‐differences estimation approaches as well as 26 weeks of panel data from Canada, the United Kingdom and the United States, three key findings emerge. First, using FBA is significantly and positively associated with a seller's reputation, leading to higher average ratings in the short term than in the long term. This improvement is mainly due to FBA's competitive advantages, such as eligibility for Amazon Prime, standardised fulfilment quality and excellent customer service. Second, although the correlation between FBA and reputation is positive in every country, we find cross‐country heterogeneity in effect sizes and significance levels, with the largest effects in Canada. Third, we show that large sellers have the best reputation, and all sellers benefit from the FBA program. However, medium‐sized sellers benefit the most from the program. This trend can be attributed to how the benefits of the FBA program accrue optimally to sellers based on their operational scale. These results suggest that the FBA program is indeed effective in enhancing seller reputation, with implications for third‐party sellers, Amazon and regulators.