July 23, 2014

Are consumers starting to turn on Amazon?


This man used to make customers very happy. That's starting to change.

This man used to make customers very happy. That’s starting to change.

Jeff Bezos is obsessed with customer satisfaction. In the past, he’s gone so far as to say that Amazon‘s mission “is to raise the bar across industries, and around the world, for what it means to be customer focused.”

And customer satisfaction has been essential to Amazon’s success. This past winter, the company crowed that “Customers Rank Amazon #1 in Customer Satisfaction” over the holiday season on its website, linking to a report that praised the company for being “a perfect example and is truly setting a new bar for an excellent customer experience. To achieve such high customer satisfaction scores and sustain them over time is a remarkable feat that remains unmatched by any other e-retailer.”

Over the course of its existence, Amazon’s been able to leverage the loyalty of its customers ruthlessly, gaining huge advantages in markets that it then uses to exact advantageous terms from its suppliers.

Customer satisfaction is essential to Amazon’s success—customers trust the company, so they keep buying from it. Consumers have been satisfied with Amazon for a long time—Amazon is very proud to have ranked #1 in customer satisfaction nine years in a row—and the company has grown tremendously over that period, transforming itself into a tech company, as well as a retailer.

But that might be changing. Amazon is currently under tremendous pressure from investors to make a profit, something it has rarely done over the course of its existence. It’s currently squeezing suppliers—most notably Hachette—for better terms which will, if Amazon gets its way, increase its market share and profitability. But these negotiations have been nasty, and, while few details have emerged (all parties have signed non-disclosure agreements and both Amazon and the Big Five publishers are notoriously tight-lipped), they’ve played out on the public stage. And Amazon hasn’t looked good at all.

Authors, including Stephen King, James Patterson, Sherman Alexie, Donna Tartt, John GreenJohn Grisham, Malcolm Gladwell, and Suzanne Collins have hit back at Amazon. Stephen Colbert (a Hachette author) flipped the bird at Amazon, launching an indie bookstore campaign and a debut novel in the process. And outlets like The New York Times and Salon (and many other publications) have published pieces lambasting Amazon’s tactics, and its dominance of the U.S. book market.

Meanwhile, who’s defending Amazon? The same people that always do—mostly self-published authors who have established themselves by selling ebooks on Amazon, like Hugh Howey. When the company decided it needed to defend itself at a recent panel at the New York Public Library, it flew in a blogger who focuses on self-publishing. (Interestingly, I can’t think of one surprise voice to come out on Amazon’s side in this mess. The same can possibly said of Hachette, though writers like Grisham aren’t necessarily anti-Amazon firebrands.)

As first reported by Publishers Lunch, the hit Amazon has taken over the past few months is starting to make a difference amongst book buyers. According to a survey done by the Codex Group, nearly 40% of respondents said they were aware of the standoff and a fifth of them were buying fewer books from Amazon as a result. That said, 40% also said they weren’t aware of the standoff and 37.5% said their buying habits hadn’t changed.

At face value, this is a fairly minor dent—8% of consumers saying they were buying fewer books from Amazon is notable in and off itself, but it’s probably not a number that would make a huge difference to a company that touts itself as “The Everything Store” (or one, for that matter, that has become a go-to “Web Services” provider for clients including the CIA). But it’s notable for one crucial reason: its novelty.

The Codex Group’s Peter Hildick-Smith said that this is “the first time we’ve measured consumer dissatisfaction with Amazon resulting in significant declines in purchase intent.” Hildick-Smith also saw an opportunity for publishers and other retailers, adding, “The key question now is whether book retailers and publishers will work to further increase that awareness and take advantage of book buyer willingness to switch to other book sources?”

According to The Bookseller, some consumers are buying from other outlets: “Customers said they were shopping at Barnes & Noble stores, independent booksellers, BN.com, used book stores and Costco in that order.”

These retailers—especially Barnes & Noble, which could really use the boost—and the publishers—hey, remember U.S. v. Apple?—have long sought ways to loosen Amazon’s grip on the book market. This increasingly looks like a rare opportunity to raise consumer awareness about Amazon’s affect on the book trade and, by extension, American culture. Publishers haven’t said much so far, but this increasingly looks like a great opportunity for them to begin speaking out.

Of course, the Hachette dispute may just be a fleeting opportunity; if it’s resolved swiftly and amicably (however unlikely that sounds) consumer perception could quickly rebound. But Amazon’s increased attention to profitability suggests it may make that more difficult, as the company is forced to choose between its investors and its customers. Amazon has succeeded thus far because, nearly all of the time, consumer interests and the interests of its investors have linked up: low prices mean growth, and Amazon has been a hot investment for a long time because it’s promised nearly unlimited growth to investors. But, for the first time in its history, the interests of its customers and the interests of its investors have divided. Amazon needs to start making a profit. And, like any giant corporation, it will always choose the interests of its investors over those of its customers.

Again, this isn’t necessarily a seismic shift, but it could be the start of something very interesting: A number of people are paying attention to Amazon’s business practices and they don’t like what they see.


Alex Shephard is the director of digital media for Melville House, and a former bookseller.