Why This Retailer Had to Apologize

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Being a great retailer means occasionally having to say you're sorry.

Just a few days after winning top billing in a major online consumer satisfaction survey, (NASDAQ: AMZN  ) had to apologize to a different set of customers: businesses who depend on its cloud services. While the good news outweighs the bad here, Amazon's AWS cloud service clearly isn't ready yet to fill the huge role that executives envision for it.

The survey
But first, the good news. With a score of 88 out of 100, the e-tail giant topped all Internet companies in Foresee's results. That tied Amazon's highest score. It's also the best ever logged by an online retailer. For the eighth straight year, holiday shoppers chose Amazon as the best shopping experience on the Web. They cited the company's wide selection of merchandise as a major reason for the high marks. But the fact that Amazon waives billions of dollars a year on shipping charges couldn't have hurt, either.

Close behind was AWS customer and streaming competitor Netflix (NASDAQ: NFLX  ) , which continued its slow climb back into customers' good graces. The online streamer notched a one-point improvement over last year to reach a score of 80 points. That's a far cry from the 86 the company registered before 2011's PR blunders and pricing changes enraged customers and sent its ranking down. Still, Netflix may not be right on Amazon's heels anymore, but it is catching up.

Not all online retailers improved their satisfaction scores. J.C. Penney's (NYSE: JCP  ) customers hacked five points away from its score this holiday. That's not surprising considering the 37% dive in online sales the company booked last quarter. And Apple's (NASDAQ: AAPL  ) online store fell by three points, to score 80. The Mac maker had to contend with a much more crowded tablet space this holiday season, in addition to a botched rollout of its Maps app.

The apology
Apple made its mea culpa back in September. And Amazon took its turn at apologizing this week.

Thanks to some technical snafus at Amazon's Web services division, there were major Internet delivery hiccups along the East Coast on Christmas Eve. Netflix was one of the most affected, as millions of customers were locked out of the streaming service during prime living room time. Amazon admitted that the timing for its service issue was bad, saying:

[W]e want to apologize. We know how critical our services are to our customers' businesses, and we know this disruption came at an inopportune time for some of our customers. We will do everything we can to learn from this event and use it to drive further improvement in the ... service.

Compare the tone of that message with Amazon's press release touting its holiday satisfaction levels for its main customers: "For the Eighth Consecutive Year, Amazon Ranks #1 in Customer Satisfaction During the Holiday Shopping Season."

All is forgiven?
But mistakes happen. And Amazon's Web services division isn't a huge contributor to revenue. Amazon doesn't break out those figures, but estimates peg sales at less than $2 billion, as compared to the $50 billion the company logged in revenue last year.

Still, there are reasons to be concerned about even rare outages at AWS. The margin of error for businesses that depend on the service is razor-thin. Retail customers might forgive a late delivery here and there. But it would only take a handful of service failures to hobble a cloud service's reputation more or less permanently.

And Amazon clearly has big plans for the service. The head of the division told the U.K Telegraph,"At the highest levels of this company, we believe that it's quite possible that AWS ends up being the largest business in Amazon. We believe [that] passionately." Executives see the market potential as something like electricity delivery. It's the type of service that all businesses will consume but that they can purchase cheaper from a central spot, rather than producing and maintaining it themselves.

That sounds like a great business to grab a foothold in, as Amazon has. The company boasts a six-year head start on Google, after all. But Amazon will need a sparkling track record from here on out if it wants to keep its AWS customers anywhere near as happy as its retail customers.

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Everyone knows Amazon is the big bad wolf in the retail world right now, but at its sky-high valuation, most investors are worried it's the company's share price that will get knocked down instead of competitors'. We'll tell you what's driving the company's growth, and how to know when to buy and sell Amazon in our new premium report. Our report also has you covered with a full year of free analyst updates to keep you informed as the company's story changes, so click here now to read more.

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