Online retailer Amazon and Internet DVD rental service Netflix led e-tailers in customer satisfaction during the holiday shopping season.
But other major e-tailers stumbled and saw their customer satisfaction wane, according to the latest annual survey conducted by online customer satisfaction consultancy ForeSee Results and market analyst firm FGI Research.
The survey found that
visitors to the e-commerce stores operated by retailers including Circuit City, Gap and Home Shopping Network all reported steep satisfaction drops.
That may come back to sting those merchants. According to ForeSee and FGI, a satisfied site visitor is 73 percent more likely to purchase online, 38 percent more likely to purchase offline and 75 percent more likely to recommend the site than would a dissatisfied shopper.
As a result, the researchers said that e-tailers with higher customer satisfaction are more likely to see a strong year of sales to come, while those that struggled in the rankings may have a tougher 2009 in store.
That’s likely to be unwelcome news to retailers looking for signs of hope in the coming year after a brutal showing in 2008.
“In a recession, knowing that improving customer satisfaction with your Web site can engender that kind of loyalty and purchase intent is like money in the bank,” Larry Freed, ForeSee
Results‘ president and CEO, said in a statement. “But too many e-retailers are ignoring this crucial metric, and it shows in the results of our study.”
Amazon, Netflix rise to the top
ForeSee and FGI’s survey examined the top 40 retail Web sites and calculated their results based on the University of Michigan’s American Customer Satisfaction Index (ACSI).
Amazon (NASDAQ: AMZN), which posted a satisfaction score of 84 in ForeSee Results’ study, said last week that the holiday season has been its best ever, selling 6.3 million items during its peak day of sales, Dec. 15.
“Amazon has really done a great job,” Freed told InternetNews.com. “Over the last couple of years, they’ve added a lot more products and retailers they’re selling.”
It’s unclear yet whether the increase in sales — or in Amazon’s two-point increase in ForeSee’s score from last year — can be attributed to joining in on the steep discounting seen throughout the retail market this season. As a result, it’s difficult for anyone outside of the company to say how Amazon’s performance will translate into actual profits. Spokespeople for the e-commerce giant declined to disclose how much it earned during the shopping period.
“It’s very gratifying,” Craig Berman, a spokesman for Amazon.com, told InternetNews.com. “We’re certainly grateful to our customers who participated in the survey and said great things about us.”
“We work hard everyday to live up to our motto of striving to be the [most] customer-centric company on the planet,” he added. “That’s what we focus on, and it’s very gratifying to get results back like this from our customers.”
Netflix (NASDAQ: NFLX), last year’s leader, also scored a satisfaction index of 84 — representing a two-point decline from last year but still keeping it tied for first place.
Spokespeople at the company declined to disclose specific figures on how it fared during the holiday season. Any results, however, may be buoyed by recent launches of streaming video services on consumer electronics devices like Microsoft’s Xbox 360 game console, and Sony and LG Blu-ray players.
Netflix spokespersons attributed its top ranking — its eighth since ForeSee began ranking e-commerce sites biannually in 2005 — to the movie rental site’s convenience, selection and value.
“Netflix provides all three in equal measure,” Steve Swasey, a spokesman at the company, told InternetNews.com. “Great companies try to do everything they can for the consumer.”
“We’re always doing things to make the customer experience better and better,” he added. “We always look for things that improve the customer experience: reducing prices, which we’ve done in the last year; adding titles to the site — we add about 300 titles a week on DVD — or improving the way you get you discs by opening more distribution centers … or by streaming them … or adding more white space [to the site] to make it easier to see.”
Swasey also said that another key part to delivering customer service is ensuring that problems, such as Netflix’s multi-day shipping slowdown earlier this year, are dealt with quickly.
“When we make a mistake, we own up to it and make it right with our members,” he said. After the shipping problem had been fixed, the company issued credits to affected users without prompting — “without any hue and cry from anybody,” he added.
Next page: In a class by themselves
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Amazon and Netflix were the only two e-commerce sites that scored above an 80, which is generally considered the threshold for excellence by the ACSI. The rest of the industry wasn’t so successful, Freed said.
“Only two of the 40 measured e-tailers scored above 80, and more than a quarter scored 70 or below,” he said in a statement. “Nearly 40 percent saw satisfaction drop year-over-year. That’s just not playing to win in this economy.”
Spokespeople from Shop.org, an e-tailer industry association, did not return requests for comment by press time.
Season’s top gainers and largest drop-offs
Among the big losers in customer satisfaction were CircuitCity.com, Gap.com and HSN.com, all of which posted an index of 69 points. Each saw declines in their indexes, ranging from a drop of four points for CircuitCity.com to a seven-point fall for HSN.com.
It’s not all bad news, however. Several retailers managed to improve their rankings compared to last year’s survey.
HP came away with the title of most improved e-tailer. The PC giant’s online store, HP.com, saw a 7 percent increase in customer satisfaction, raising its score to 79.
WalMart.com also fared well, with a 5 percent spike in customer satisfaction that lifted its rating to 78. Staples.com and Target.com also saw lifts in customer satisfaction of 6 percent (to a score of 77) and 4 percent (to 75) respectively.
Playing to win
How should retailers have tried to boost their customer satisfaction?
Despite widespread discounting among online and offline retailers this season, it’s not clear whether slashing prices is a reliable way to attract loyal buyers.
“Consumers aren’t all that happy with the prices that they pay, but [discounts] are going to have minimal impact in changing their purchasing behavior,” Freed told InternetNews.com.
Instead, retailers may experience a downside of the discounting: It may be hard for many to claw their way back to higher margins.
“Consumers are getting trained to expect the free shipping and the promotions,” Freed added. “I think there’s a long-term impact there.”
There’s another reason why discounting isn’t necessarily the answer to improving satisfaction. He added that ForeSee has found that price has typically has a lower impact on satisfaction do than the other factors it ranks — merchandise, content and functionality. And while the current tough spending climate makes price more important to shoppers, it’s really only a key criteria for some retailers.
“Companies like Wal-Mart have really taken advantage of that — we saw big increases in their score this time around, and that’s attributed to their prices,” he said. But overall, discounting has had “a bit of a dampening effect. In spite of the difficult economy, in spite of lighter wallets and pocketbooks … satisfaction at the aggregate level kind of held its own.”