10 Things Amazon Won’t Tell You
What every shopper should know about the world’s largest online retailer.
1. “Take our customer reviews with a grain of salt.”
The writer Dorothy Parker once remarked of a book she read: “This is not a novel to be tossed aside lightly. It should be thrown with great force.” But while Parker was widely celebrated for her sharp wit — and often blistering pans — a recent study suggests her style of criticism is less common at online retailer Amazon.com (AMZN: 225.61, 5.54, 2.52%) . Out of the top reviews analyzed in 2011 by technology entrepreneur Filip Kesler and Trevor Pinch, a professor at Cornell University’s Department of Science and Technology Studies, more than 80% were positive. One big reason, the study found: 85% of the site’s most prolific reviewers have received free products from publishers, agents, authors and manufacturers. Members of the Amazon Vine program — a select group of the site’s “most trusted” reviewers — do receive free products from participating vendors, according to the site’s terms and conditions.
That’s not to say reviewers don’t tap their inner Parker from time to time. One recent review of the bestselling bondage-themed erotic novel, “Fifty Shades of Grey,” charged author E.L. James’ choice with overusing certain words and phrases. (“I have discovered that Ana says ‘Jeez’ 81 times and ‘oh my’ 72 times,” he wrote.). Regarding “In the Breath of a Moment: A Collection of Short Tales,” by Andrew Kieniksman, another reviewer pointed out that “things were so bad, so clich , and derivative, my skeleton burst violently from my skin, grabbed the book and began beating me with it.” But generally, experts say readers looking for unbiased reviews should go elsewhere. A spokesman for Amazon says these reviewers often write critical reviews, too.
2. “Kindle Fire? You might be happier with an iPad.”
The $199 Kindle Fire was launched last year as a less expensive alternative to the iPad, which starts at $499. But many experts say consumers who buy Amazon’s tablet eventually move on to the iPad and other fuller-featured products. Yung Trang, president of TechBargains.com calls Kindle Fire the “starter home” of tablets. Indeed, only about 54% of Kindle Fire owners said they’re satisfied with their purchase, according to a recent survey by ChangeWave Research, compared to 74% of iPad owners. The Kindle’s cost, the survey found, was what buyers liked best about it.
Many fans point out that the Fire does have some advantages over the iPad beyond its lower price — including the ability to display Flash videos and its small size. But critics say that doesn’t make up for the product’s many shortcomings. For starters, its small screen size means a lot of magazine websites and apps are not designing products for the Kindle, says tech expert and blogger Jakob Nielsen. Other users complain on Amazon’s online forum about the Fire’s choppy Wi-Fi reception. An Amazon spokesman says the Fire averages four out of five stars on customer reviews and that software updates addressed the Wi-Fi connection issue.
Demand appears to be cooling, however. A report by ABI Research found that while shipments declined by 33% for the tablet industry in the first quarter, Fire shipments fell by 80%, based on information from manufacturers, suppliers and retailers. (“Amazon has been tight-lipped on Kindle Fire sales,” says Jeff Orr, ABI’s director of consumer research.) To be fair, the second quarter is usually a stronger indicator for tablet sales, say Stephen Baker, vice-president of industry analysis at NPD Group, a market research group. An Amazon spokesman says the Fire is the most successful product launch in Amazon’s history “and continues to sell very well.”
3. “You’ll spend a bundle on e-books.”
Despite the Kindle’s low price and many conveniences, studies show e-readers have a way of emptying wallets. In one market research survey from ChangeWave, a third of Kindle owners said they planned to increase their Amazon spending over the next 90 days, compared to 19% of non-owners. And, as we reported, Amazon customers who don’t own a Kindle spend an average of $87 a month, those with a Kindle spend $136, and Kindle Fire owners spend over $150.
Kindle owners bought nearly half of all the books they purchased in April at Amazon’s Kindle Store, according to a survey conducted by Cordex-Group. “Weirdly, iPad people are also more loyal to the Kindle store than Apple’s iTunes store,” says Peter Hildick-Smith, president of Cordex-Group. Although the Kindle ($79) and Kindle Fire ($199) are relatively cheap, he says it doesn’t take long for Amazon to make their money back on e-book sales. There is a good reason why people tend to spend more in the Kindle Store, Hildick-Smith says: Amazon was one of the first companies to embrace the new technology and, as such, has a massive selection.
On the plus side, Amazon’s push to make e-books popular has encouraged more people to read as they generally cost less per book. A typical e-book user read 24 books in the past year versus just 15 read by buyers of paper books, according to recent research from Pew Internet and American Life Project, and one-fifth of American adults say they’ve read an e-book. The research also suggests people would rather buy an e-book than borrow one from a friend: 61% of e-book readers would choose buying over borrowing versus 48% of print readers. Plus, a third of people who read e-content say they now spend more time reading than they did before e-books.
4. “Free shipping helps you over-spend.”
Free shipping can get expensive. Amazon offers the perk for those who spend more than $25 on certain goods. And its Amazon Prime members get free two-day shipping on most items for an annual fee of $79. But some research shows that free shipping often causes customers make a large number of impulse buys. Some 36% of respondents will spend more online this year if shipping comes free, according to a 2011 survey by the National Retail Federation’s online shopping news website, Shop.org. And 59% of consumers buying Father’s Day presents this year said free shipping will entice them to buy a product they might not have otherwise chosen, according to a survey from PriceGrabber.com, a deal aggregator site. (See more in “How Amazon Made Me A Shopping Machine“.)
Many customers are more calculated in their spending. For instance, in a bid to reach the $25 free shipping limit, some people will end up spending more than they would have by paying for shipping. “I have friends who do that over and over again,” says Rishi Shah, a marketing consultant and blogger. “Just $2 shy of spending $25?” he says. “Why not buy an $8 DVD?” Free shipping also makes Amazon Prime members less likely to comparison shop, he says.
5. “Our list prices are sometimes misleading.”
When shopping online, experts warn not to be dazzled by sky-high list prices and eye-popping bargains. List prices on Amazon’s site — typically set by manufacturers and merchants — may not be actual prices that are commonly charged for the item, says consumer advocate Edgar Dworsky. Amazon’s vendors tend to use list prices that are rarely if ever charged and, as such, make the consumers believe they’re saving much more than they really are, he says. A case in point: this three-pack of 2 oz. bottles of Rogaine on Amazon costs $45, a savings of 14% on a list price of $53. The same product on Drugstore.com has a cheaper list or “suggested” price ($50) and sells for $45 — a discount of 10%. The list prices and discounts are often arbitrary, Dworsky says. Of course, promotional pricing strategies are hardly unique to Amazon, experts say. But lately they’ve been falling out of favor with both consumers and retailers. JC Penney recently abandoned its heavy promotions, Dworsky says, because the terms “list” and “discount” prices lost all meaning. (JC Penney did not respond to requests for comment.)
What’s more, Amazon’s vendors appear to regularly list discounts in error, experts say. For instance, a “Belkin 10-socket surgemaster” is on sale for $23.16. According to the listing on Amazon last week: “List Price: $528.99. You Save: $505.83 (96%).” A spokeswoman for Belkin says it was an error and the site has since corrected the original retail price to $34.99. However, Dworsky says these kinds of mistakes by merchants and manufacturers seem to be a common occurrence. Earlier this year, some of Amazon’s vendors made similar claims about groceries, including a box of Kraft mac-and-cheese that had an original list price of $791.76 on Amazon, which was selling the box for $30.86. (Amazon declined to comment.)
6. “We hurt mom-and-pop stores.”
Amazon’s 24/7 site and low prices have been blamed for putting local bookstores out of business, analysts say. Brick and mortar stores with high overheads and sales tax simply can’t match Amazon’s discounts. Even big chains like Borders — which filed for Chapter 11 bankruptcy last year — have been out-priced by Amazon, says R.J. Hottovy, an analyst with Morningstar. But it’s independent stores that really feel the heat, he says. Ten years ago, there were about 4,000 independent bookstores in the U.S., according to the American Booksellers Association. Today, only about 1,900 remain. Amazon has revolutionized book publishing, Hottovy says, and smaller bookstores were unable to keep up. Some 28% of people who bought books online said they had looked at the book in an actual bookstore first, according to a 2011 survey by Codex. More than a third of Kindle Fire owners say they price-checked book prices at brick-and-mortar stores before buying their books online. Codex estimates that Amazon makes up 70% of online print book market and over 60% of the e-book market. “So any showrooming in bookstores will most prominently benefit Amazon,” he says.
During the last holiday season, it played hardball with brick-and-mortar stores, experts say. On Dec. 10, 2011, it offered consumers 5% off its price for up to three qualifying products (which did not include books) a maximum discount of $5 apiece or $15 total — for shoppers who scanned an item in a bricks-and-mortar store first and then bought those items from Amazon — a practice known as show-rooming.
Despite this, the Internet retail giant doesn’t seem to get a bad rap the way Wal-Mart and other big-box stores do. Marketing experts say that’s because Amazon is an Internet retailer and doesn’t physically replace other independent stores. As the largest retailer in the world, Wal-Mart obviously has a physical presence, says Hottovy. Amazon’s impact on local bookstores or mom-and-pop shops is harder to quantify, he explains. (Wal-Mart and Amazon did not comment.)
7. “We’re slow to improve our working conditions.”
Amazon has come a long way since founder and CEO Jeff Bezos set up the company in his garage and packed boxes himself. Now the company has corporate offices, customer service centers, warehouses in 18 states, and 69 “fulfillment centers” globally. But not all of them are exactly state of the art. Last summer, some Amazon workers in a warehouse in Allentown, Penn. fainted due to temperatures in the building that soared above 95 degrees. Some workers were taken to the hospital, prompting complaints to federal authorities. After a local newspaper, The Morning Call, wrote about the incident last September, Amazon did not dispute the report and set aside $2.4 million to install industrial air conditioning units in four of its distribution centers.
At the time, the retailer said in a statement that it had shortened shifts, increased breaks, issued “constant reminders and help about rehydration,” and added extra ice machines. The controversy didn’t end there, however: more than 100 protesters staged a rally outside the company’s annual shareholders meeting at the Seattle Art Museum last May. At that meeting, Bezos pledged to spend $52 million this year retrofitting its warehouses with air conditioning. The local paper that broke the story has since reported a “dramatic change” at the warehouse.
Marketing experts say the controversy hasn’t done much damage to Amazon’s brand. As with Apple, negative publicity doesn’t seem to impact the loyalty of Amazon’s customers, says Robert Passikoff, president of BrandKeys marketing firm in New York. Loyal customers are six times more likely to give certain brands the benefit of the doubt in the face of negative publicity, his research found. “Amazon maintains a very strong and consumer-friendly brand,” Passikoff says. (Amazon declined to comment.)
8. “We know more about you than you think.”
Amazon has troves of data on what its customers browse and buy. The company says it will share that information with third parties, but never sell it. Critics have expressed concerns about its user privacy, most recently over Silk, the browser used on Amazon’s Kindle. To facilitate faster browsing, Silk works partially on the tablet and on Amazon’s “EC2” cloud — a virtual storage system that lives on Amazon’s servers. Chester Wisniewski, senior security advisor at Sophos, an online security consultancy, says all surfing habits on the Fire will be transmitted to Amazon’s cloud. “Social networking sites are watching what you do on their sites, but this service is guaranteed to have a record of everything you do on the web.”
9. “Our recommendations leave shoppers flummoxed.”
Amazon uses the troves of data it collects about users to make product recommendations. But the results often leave consumers bewildered. Here’s how they work: When customers create an account and browse or buy items, other similar products pop up on a their personalized Amazon account page. According to the site: “Your Amazon.com is a way of making sure that you don’t miss the perfect item.” Too often, however, the algorithms come up with products that are less than perfect experts say.
Here are some wacky recommendations listed by this customer on Amazon’s online forum: Dockers men’s original pleated khaki pants “recommended because you rated Star Wars Trilogy” and pure cotton handkerchiefs “recommended because you added Blink : The Power of Thinking Without Thinking to your Wish List.”
Jakob Nielsen says he’s rarely happy with the kind of recommendations he gets for classical music and movies, and says Amazon’s search function isn’t much better. He recently searched for the “most recent” work by the science fiction writer Larry Niven. He was recommended the novel “The Mote In God’s Eye.” “I read that 20 years ago,” he says. He’s had similar problems searching for classical music. (The audio-book was published in 2012, but the book itself was published in 1974.) “They don’t have an understanding between what you need and a product with the word in it,” he says.
Of course, there are ways for Amazon customers to help the site make more accurate recommendations. For example, they can “like” various books or music via the “Amazon Betterizer” function or remove previous purchases from being used to predict their shopping habits by clicking “Don’t use for recommendations” or clicking “Delete this item” from the browsing history. Recommended products that offend the most can be removed by clicking “fix this recommendation.” Nielsen says the site has an impressive range of products and appreciates the Herculean task, but says the constant stream of odd recommendations “pollutes the service.”
10. “We don’t always have the best deals.”
Experts say even the most loyal Amazon customer may be better off getting a little exercise and shopping in their local store instead. A case in point: In the past six months, DealNews.com listed 228 product deals sold by Best Buy. In instances “Best Buy had a lower price on that item than Amazon or any other reputable merchant,” according to Dan de Grandpre, editor of the retail aggregator. These include deals on everything from digital cameras to gaming consoles, he says. Trang from TechBargains.com agrees. “If Amazon always had the lowest price, then deal sites like us would only highlight Amazon deals and that simply isn’t the case.” This is true for big ticket items, too. He cites this 50-inch LG plasma screen television set, which costs $650 from Best Buy and Dell – $70 cheaper than the current offer via Amazon.com. According to the site, most third-party vendors selling items pay fees and a percentage of the sale price to Amazon. Trang says vendors get massive exposure for their products, but these fees can help push up the final price tag on some items. He says Amazon has successfully dominated the book market, but it’s sometimes harder to achieve those same economies of scale and cheap shipping costs with larger, big-ticket electronic items. (Amazon did not comment.)
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