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The Wall Street Journal reports that Amazon “has adjusted its product-search system to more prominently feature listings that are more profitable for the company,” saying that last year the online retailer “Amazon optimized the secret algorithm that ranks listings so that instead of showing customers mainly the most-relevant and best-selling listings when they search - as it had for more than a decade - the site also gives a boost to items that are more profitable for the company.”

The Journal bases its report on comments by unnamed people who said they worked on the project.

“Any tweak to Amazon’s search system has broad implications because the giant’s rankings can make or break a product,” the story says. “The site’s search bar is the most common way for U.S. shoppers to find items online, and most purchases stem from the first page of search results, according to marketing analytics firm Jumpshot.”

The adjustment to Amazon’s algorithms “followed a yearslong battle between executives who run Amazon’s retail businesses in Seattle and the company’s search team, dubbed A9, in Palo Alto, Calif., which opposed the move … The Amazon search team’s view was that the profitability push violated the company’s principle of doing what is best for the customer, the people familiar with the project said.”

There are potential legal and regulatory issues here, sine both “the U.S. and the European Union are examining Amazon’s dual role - as marketplace operator and seller of its own branded products. An algorithm skewed toward profitability could steer customers toward thousands of Amazon’s in-house products that deliver higher profit margins than competing listings on the site.”

Amazon took to Twitter to deny the report, saying that the "story based on anonymous sources is wrong … We have not changed the criteria we use to rank search results to include profitability. We feature products customers want, regardless of whether they are our own brands or products offered by our selling partners.”
KC's View:
If the Journal story is accurate, there are two problems. One is that, as pointed out in the story, it would seem to be at odds with the company’s fundamental value proposition - that the customers always is first. And, it also is true that it could create legal issues, which Amazon has to be sensitive about since it - along with fellow tech giants - is being probed by both regulatory agencies and the US Congress.

When you think about it, though, isn’t putting profit-centric products central to the shopping experience sort of what many retailers do? Isn’t that why they give private label items premium exposure on shelves and endcaps? Now, if Amazon does this, it has potentially greater impact because of the retailer’s ability to shape markets and make-or-break brands,

For me, though, it has less to do with regulatory issues and more to do with the question of whether Amazon could be losing its way … if, after all, it is becoming just another retailers. I hope not, and I’d be surprised. But it has to be vigilant about the possibility.