After a dismal retail season in 2008, online retailers made an astounding comeback back this holiday season, according to ForeSee Results' Holiday Retail Satisfaction Index. At the aggregate level, this year's top 40 online retailers - selected from Internet Retailer's Top 500 E-Retailers — jumping from a score of 74 on the University of Michigan's American Customer Satisfaction Index's (ACSI) 100-point scale last year to 79 in 2009. Online-only retailers lead those that have bricks-and-mortar locations 81 to 77, largely thanks to Amazon.com's leading score of 87, up 3 percentage points from last year.
This year, 12 online retailers scored above an 80, the ACSI threshold for excellence, up from just eight last year:
- Netflix.com * .................86;
- JCP.com (JC Penney).........81;
- TigerDirect.com................80; and
(*Freed notes the appearance of Netflix.com on the list may be contested given its subscription-based model.)
While the economy is far from recovered, Larry Freed, president and chief executive officer of ForeSee Results, says consumer attitudes toward the downturn have certainly stabilized. "[Last year], consumers were in shock. Everything was price sensitive," Freed recalls, "They didn't know the future. They didn't know what to do and how to deal with it. Everyone was expecting the world to meltdown." As a result, consumer expectations have changed as they adjust to the economy, becoming more tolerant and more forgiving toward retailers.
For their part, consumers have learned to spend more wisely and as a result, are conducting more research before purchasing, and in turn, they have a more informed experience when they land on a retailer's site. Few e-retailers made multimillion dollar redesigns, opting instead for more of a block-and-tackle approach, Freed says. New additions to improve the site experience included:
- more merchandise;
- more product reviews;
- better site content;
- purchase online and have curb-side or in-store pick up;
- more language options; and
- increased payment options.
"[Large retailers] really focused on improving the functionality of the Web site," Freed says, "and it's paid dividends for them."
Unfortunately, the same could not be said for the small and midsized retailers this year. Worried about the economic impact, smaller retailers were being more cautious about purchasing inventory and focused more on surviving than growing, Freed says. Moreover, he adds that retailers have the added challenge of facing a more competitive landscape. With the money consumers are willing to spend, they're not just looking at a single product line (e.g., a new laptop) anymore but at a variety of options (e.g., a vacation or new wardrobe).
Compared to the bigger players, midsize retailers can't afford to discount as deep, nor do they have a large enough footprint to meet the needs of a wider market. Walmart, for example, can afford to be more aggressive with their promotions, and for the customer who's strapped for cash, it's the preferred choice. "Up until last September and October, price was never a high-priority element across the masses," Freed says. "If you improved the price of products, people were appreciative, but [it was] never a driver of purchase intent." He anticipates that as the unemployment rate declines and spending increases, customers will place more value on service and relationships.
While price may be a strong factor, the overall customer experience is critical. ForeSee Results identifies a clear differentiation between satisfied and dissatisfied customers that clearly indicates a differences between the behaviors of satisfied and dissatisfied customers. Compared to dissatisfied retailers (those who rated their experience 69 or lower) shoppers who have had a satisfactory site experience (those who rated their experience 80 or higher) are:
- 65 percent more likely to purchase online;
- 44 percent more likely to purchase offline;
- 61 percent more likely to buy from the same retailer for similar purchases;
- 64 percent more committed to the brand;
- 49 percent more likely to return to the Web site; and
- 67 percent more satisfied with the retailer overall.
For now, Freed sees the bigger getting better and the others facing serious challenges. This trend will likely continue into the new year, and turning it around will call for consolidation and shrinking of the retail market to what he calls "the right number." When consumer spending was high, retailers eagerly set up shop in anticipation of future spending growth. Due to the economic decline, that rate declined and flattened, resulting in a surplus of stores.
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