By 2027, fines from government and other regulatory bodies focused on commerce ethics will exceed $5 billion, according to Gartner, Inc.
“Aggressive digital commerce practices are innovative, but they often introduce ethical pitfalls,” said Jason Daigler, Vice President Analyst in the Gartner Marketing practice. “When ignored, these issues erode customer trust, damage the customer experience, and lead to loss of customers and revenue.”
Three examples of digital commerce pitfalls include:
Fake Product Reviews
Fake product reviews include reviews generated by company employees or individuals who are unduly compensated. This includes computer-generated bots or AI agents used to create fake reviews.
In the U.S. and several other countries, fake product reviews are illegal. In 2022, the U.S. Federal Trade Commission began exploring additional regulations that would impose “stiff civil penalties for violators.”
“Product ratings and reviews are an integral part of the product discovery process for consumers,” said Daigler. “Although many consumers seek out negative reviews to better understand the product they’re considering, positive reviews play a significant role. When these reviews are not genuine, consumers are misled into purchasing products that may not satisfy their expectations.”
Misusing Third-Party Seller and Product Data
This occurs when enterprise marketplace operators gather data about products and sales on the marketplaces they operate and use the data for their own benefit. By their very nature, enterprise marketplaces enable the operators who manage them to expand their assortment, acquire more customers, generate more data and achieve many other benefits.
However, as marketplaces scale with more third-party sellers, products, and customers, the increased volume of data becomes more valuable. Operators are tempted to use the data for their own purposes, often to improve the profitability of their products, to introduce new products, or to work with sellers to shift products from third-party to first-party.
“In the absence of clear governance on what is allowed, marketers should evaluate the data they are using to promote their brand or products, and determine whether or not the data should be considered proprietary to marketplace sellers,” said Daigler.
Unduly Favored Sellers on Marketplaces
This scenario occurs when marketplace operators give premium positions to brands based on factors that benefit the operator or the sellers, such as whether or not the seller spends more money with the marketplace, to the detriment of the customer.
As enterprise marketplaces scale and ultimately have multiple third-party sellers in individual categories, the marketplace operator must make decisions about which products to surface to customers when they search or browse.
“When positioning these products, if the operator also suppresses products that it knows are a better fit for the customer, the behavior is dishonest and unethical,” said Daigler. “Operators should surface products based on whether or not they meet customers’ needs, whenever supporting data is available.”
To address these pitfalls and avoid possible fines, marketing leaders should:
- Address ethical violations internally, then externally: Create a team, or advise senior leadership to create a team, whose purpose is to identify and rectify ethical pitfalls. When an ethical violation occurs, ceasing the unethical activity is merely the first step. The next step for marketing leaders is to identify what caused the activity to occur in the first place.
- Create transparency and monitor government intervention: Rectifying ethical pitfalls will directly affect the customer experience, especially when an ethical violation was a common part of the shopping experience. Any changes should therefore be communicated to customers, either on the digital commerce site or via outbound communications.
Gartner clients can learn more in the report: “Avoid Ethical Pitfalls Caused by Unscrupulous Digital Commerce Practices.”
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