Dive Brief:

• Amazon’s algorithms aren't pushing the best deals for non-Prime customers, instead boosting its own products, according to research from investigative news group ProPublica.

• ProPublica looked at 250 frequently purchased products over several weeks to see which ones received the most prominent placement on Amazon as a suggested purchase. About 80% the time, Amazon favored its own products and those of Marketplace sellers paying it for various services, even when there were significantly cheaper other offers. The research found that Prime members are more likely to get offers that save money, but when non-Prime customers first see products on Amazon, they also see a notice for “FREE Shipping on eligible orders,” but at checkout are notified that they could join Prime to get the free shipping deal. Otherwise, the site requires a $49 minimum spend.

• Amazon disputed ProPublica's findings. "With Prime and Super Saver Shipping (which requires no membership and ships orders above $49 for free), the vast majority of our items ordered — 9 out of 10 — can ship for free," an Amazon spokesperson said in an email to Retail Dive. "The sorting algorithms the article refers to are designed for that 90% of items ordered, where shipping costs do not apply."

Dive Insight:

Amazon has cultivated a reputation for customer-facing priorities, even above the priorities of its investors. Part of that has driven a colossal effort in fulfillment to get purchases to shoppers in two days or less, at little to no cost to shoppers. But ProPublica’s research shows that Amazon may be trying to mitigate steep delivery costs by pushing more customers into its Prime program through the very algorithms that it says are designed foremost to benefit customers.

Amazon’s shipping and fulfillment costs, up 37% year-over-year in Q4 to $1.8 billion, are growing faster than its revenue, which increased 22% to $35.7 billion in the same period. Amazon has focused on making moves toward efficiency in its operations, rather than scaling back its fulfillment and delivery offerings to Prime members. 

Of all the perks that Amazon members enjoy — streaming television and musical entertainment, an e-book lending library, photo storage, among others — the real reason Prime members say they shell out their $99 yearly dues is the free, no minimum, two-day shipping on many items, according to a study late last year by RBC Capital Markets reported by eMarketer. In fact, the report showed that 78% of Prime members said they prize the free shipping option the most.

The company has good reason to edge more of its customers into its Prime membership program: Spending by Amazon Prime members accounts for nearly 60% of Amazon's gross merchandise value, even though they make up less than 20% of the e-retailer’s customer base, according to a note from Deutsche Bank.

Prime membership is growing fastest among wealthier households, according to Deutsche Bank, and more than 70% of households with annual incomes topping $112,000 have a Prime membership. The Prime shipping program and the complementary Fulfilled by Amazon third-party seller delivery service are the engines driving customer adoption, Piper Jaffray senior research analyst Gene Munster said in June. 

But the ProPublica research shows that there is weakness in Amazon's supposed customer-first stance, which could undermine what is one of its great strengths, at least by reputation. The report comes as Wal-Mart has made its $3 billion acquisition of e-commerce startup Jet official, which Moody’s Investor Service recently called a “turning point” and a “game-changer.”