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Being an Amazon customer has historically been a great deal — low prices, a massive selection of products, and an effortless return process. The company has taken the small wonder of two-day delivery and transformed it into an expectation of our modern lives. No parking hassle, no shopping list to carry, and no planning needed. That’s the magic of Amazon.

However, a recent survey shows that customers are not as satisfied as they used to be. Why does it feel like “Earth’s most customer-centric company” has a decaying shopping experience?

Let’s dive in.

Suppose I’m in the market for a new pillow. The first place I look for most things is Amazon. I type “pillow” into the search bar and I’m presented with over 90,000 results. Sweet.

I’ve seen some of these brand names before, like Casper and Tempur-Pedic. But I also come across some unfamiliar brand names like HOOMQING and MZOIMZO. I look a little closer and see a “Sponsored” label affixed to about 35% of the results on the first page.

I’m a stomach sleeper (I know, horrible) and many of these pillows are magically described in a way that caters to every sleeper and every need. They even make for some fun reading, but it's not helping me make a decision:

With no strong preference for pillow brands, I turn to the gospel of Amazon: reviews. All of the product offerings have nearly perfect ratings between 4.6 and 4.9 stars, based on thousands of reviews. When every product is supposedly amazing, it’s truly hard to find any distinguishing factors. 

Nonetheless, after laboring through several reviews I’m finally somewhat convinced that I found a suitable pillow. In two days, one of those 90,000 pillows arrives at my doorstep.

Whether it is the website that’s straight out of the Internet Explorer era, the multibillion-dollar advertising network wedged between you and what you’re actually looking for, or the flawed reputation system, none of the experience feels normal.

Now, Amazon is so pervasive in our society that they essentially do set the standard for ‘normal’. But normal doesn’t always mean good. Two of the main customer complaints from the survey were poor search results and low-quality items.

It’s evident throughout the website. From the abundance of junk products, to artificially inflated product reviews, and advertisements at every turn, it's hard not to wonder if Amazon has stopped caring about its retail business. But in reality, it's quite the opposite.

How did we get here?

Phase 1: Attract buyers. When a marketplace is first established, it faces a classic chicken and egg problem. Vendors have products to sell, but without buyers, there’s no one to sell to. To overcome this, the marketplace must make itself irresistible to buyers.

Amazon took this challenge head-on. For years, they operated at a significant loss, relying on debt to finance purchases made by customers. The products they sold were priced and shipped lower than cost.

The search bar feature was clean and useful. When someone searched for a product, Amazon had a massive incentive to make sure it was the first search result.

Customers flocked to the site, and the Amazon Prime membership base grew, making Amazon the go-to shopping destination for millions. Meanwhile, traditional brick-and-mortar stores struggled, fueling Amazon's mission to become the "everything store". It was a tremendous deal for customers.

Phase 2: Attract sellers. With buyers flocking to Amazon in droves, sellers quickly took notice. To encourage them to join, Amazon offered low commissions to marketplace sellers, which meant they could reach a large audience without having to break the bank.

This was the phase in which Amazon truly became the "everything store." Suddenly, there was an explosion of products available on the platform. It seemed like you could find anything and everything on Amazon. Retailers sprouted up left and right, each offering a unique selection of products to customers. To date, many retailers were essentially built on Amazon.

Phase 3: Extract value. That brings us to today’s pay-to-play environment, where Amazon seeks to maximize value for itself and its shareholders.

Gone are the days when searching for a product on Amazon would yield a list of the most relevant and best products. Now, search results are dominated by products from sellers who have paid the most to be at the top of your search.

The New York Times published a piece that shed light on the inflection point when Amazon made a decision about advertising:

It’s a far cry from when, in 2009, Jeff Bezos said: "Advertising is the price you pay for having an unremarkable product or service." Clearly times have changed.

This is a feature, not a bug, of a company as big as Amazon. Bezos, nor anyone, wanted to build an advertising business. But once billions of eyeballs are viewing your website and advertisers are willing to pay to get in front of them, it’s hard to refuse.

Back to our pillow example, here’s what the first results look like.

Take a closer look at the first results and you'll notice that most rows at the top are sponsored. To get in this spot, Amazon charges its sellers billions of dollars a year in a cutthroat competition to outspend each other for placement at the top of the search results.

Clawing your way to relevance on Amazon involves spending a good chunk of change on advertising. It's not uncommon for sellers to spend up to 50% of a product on listing fees and advertisements.

Amazon says that advertising is optional, but getting buried on page 2 of the search results is bad for business. Why? Because nearly two-thirds of Americans have a Prime membership. If you’re a seller, you basically need to have a presence on Amazon. Otherwise, your products may go unnoticed.

Say you're building a business around selling pillows. Your ad spend is limited by your profit margin. But you’ll notice the very first result is an Amazon Basics pillow set. Guess how much it costs Amazon to advertise on Amazon. They can always outbid everyone else.

Amazon reportedly began trimming its private-label selection after drawing attention from regulators accusing them of using internal data to identify, clone, and undercut competitors. It was also far less profitable.

As a result, third-party sellers are on the rise. When you buy something on Amazon, it’s unlikely you are buying it from Amazon at all.

The increased difficulty of identifying quality products is by design. Shoppers are no longer Amazon's main customers — third-party sellers are.

It has led to the creation of those weird-sounding brand names I mentioned earlier. A smorgasbord of letters apparently expedites the trademarking process. So brand naming conventions like HOOMQING and MZOIMZO begin to matter less in a marketplace where search placement and reviews reign supreme.

Everything From A to Z Wall Street

When a company goes public, its leaders march to Wall Street’s quarterly drumbeat where basically all that matters is revenue and profit growth.

Jeff Bezos was actually one of the few who told investors that long-term growth is more important than short-term profits, staying focused on customers no matter the cost (remember Phase 1).

Keeping Wall Street happy is central to Amazon’s departure from customer obsession.

You may remember Milton Friedman’s doctrine, also called shareholder theory, which states that a business’s sole responsibility is to maximize profits. In other words, if you’re not squeezing your customers for every cent, you’re not living up to your fiduciary duty.

The least surprising thing about the theory is that doing so often comes at the expense of your customers, as we saw in the survey. Decisions to improve the user experience are always at odds with potential lost revenue from advertising. Executives and shareholders have strong financial incentives to reduce the experience to a point where users are nearly frustrated enough to leave, but don't.

The Logistics Giant

All of this starts to make sense when you look at Amazon as a logistics company.

The promise of Amazon has always been the removal of inefficiencies, with one of the most significant being the elimination of middlemen and their associated costs. Instead of sellers purchasing products from manufacturers and then listing them on Amazon, they welcome manufacturers to sell directly on the platform.

While this cuts costs and reduces friction, it also adds new challenges to the equation.

In traditional supply chains, relationships and trust were the keys to ensuring product quality. Becoming a vendor for a retailer like Walmart was a coveted achievement that took years of sustained sales and experience to earn. There was proof of work.

The difficulty to get on their shelves meant Walmart could trust its network of vendors to continue delivering quality. If anything went wrong, it was easy to trace back. Friction meant trust.

Contrast this to Amazon’s open marketplace where the same level of trust does not exist. It's not uncommon to see reviews claiming that the product received is not the same as what's described or shown in the listing, or even as what’s offered in stores.

Customers have grown used to the convenience of fast delivery and not having to search for a parking spot, but in exchange, they now have to do extra work in other areas. It’s not a huge deal, but it’s yet another area where Amazon fosters an unnatural shopping experience.

The issues are not limited to the physical products themselves. Traditional retailers have ‘buyers’, or people who curate their product selection using research and trust. On Amazon, the search algorithm is as close as you get to curation.

It attempts to pick the best products out of hundreds of millions of choices, but consumers are yet again left to work to find the right product. And when advertisements are added to the mix, there’s no telling what is genuinely a good product without prior knowledge or time to spend.

Many of the issues with Amazon revolve around a lack of trust in the supply chain. Its infinite product selection and the millions of sellers behind it are not manageable in the same way other retailers’ networks are. They are the very things that enabled its growth but also led to its problems.

In theory, a commerce sector without middlemen should result in the lowest prices. In reality, non-monetary costs are passed on to the customer. Friction makes everything harder, and sometimes that’s a good thing.

For nearly three decades, Amazon defined itself by an obsession with customers. But obsessing over customers goes beyond low prices and speedy delivery. Advertising has now taken the top priority in Amazon’s marketplace.

Amazon broadly meets the expectations of most customers: We are able to get our hands on almost anything we want, get it fast, at a reasonable price, and return it without hassle.

The convenience is undeniable, but so is the chore of parsing artificial reviews, navigating a maze of advertisements, and the disappointment that comes with receiving a product that doesn't live up to its hype. That convenience starts to lose its luster.

As a company whose goals lie in efficiency, don’t expect Amazon to innovate here. The feedback they’re seeing — mainly increased sales growth — is telling them there is no reason to change.

— Sam

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