• May 11, 2009
  • By Jessica Tsai, Assistant Editor, CRM magazine

Customer Satisfaction Drops for E-Commerce Top 100

Though generally outperforming its brick-and-mortar counterparts, e-commerce certainly hasn’t been impervious to the effects of the economy and inflated customer expectations. In fact, the e-commerce sector took an overall hit in the latest Top 100 Online Retail Satisfaction Index, dropping two percentage points from 75 in Spring 2008 to 73 in Spring 2009.

The index, administered by ForeSee Results and FGI Research, is based on the methodology of the University of Michigan’s American Customer Satisfaction Index.

“It’s a much more competitive environment than it was before,” says Larry Freed, president and chief executive officer of ForeSee Results, and author of the report. Those who aren’t performing well won’t necessarily disappear tomorrow, he says, but they’re going to have a more-difficult time surviving. 

Only six companies achieved “Top Performer” recognition, signified by a score of 80 or higher in customer satisfaction:

  • Netflix.com......................85, up from 86 in Spring 2008;
  • Amazon.com....................84, up from 83;
  • Avon.com.........................81, up from 79.
  • DrsFosterSmith.com..........81, unchanged;
  • QVC.com.........................81, down from 84; 
  • Newegg.com....................81, down from 80

According to the report, 55 sites saw year-over-year decreases. The most significant drops included:

  • CVS.com......................down six percentage points, from 77 in Spring 2008 to 71;
  • Apple.com....................down five percentage points, from 80 to 75;
  • NeimanMarcus.com.......down five percentage points, from 75 to 70; and
  • Willams-Sonoma.com....down five percentage points, from 78 to 73.

The decreases may reflect an ongoing trend: In fact, 47 sites now have lower customer satisfaction scores than they did the first time they were measured in Spring 2005. Freed doesn’t overlook the fact that despite a decline in customer satisfaction, these retailers are still in the industry top 100, based on revenue. “We’ve got to give them credit for that,” he says, noting that this economic climate makes success much more elusive.

For the past six months, price and merchandise have had far more impact when it comes to satisfaction, but price-cutting is just a temporary solution, Freed says. Faced with pressure to deliver positive numbers, many retailers find themselves cutting costs, negatively impacting their overall customer service in the process.

“It’s a death march,” Freed says. According to the report, satisfaction requires excellence in the following five areas:

  • merchandise;
  • ease of use;
  • trust;
  • brand strength; and
  • price.

In the past, the general consensus was that there was that the retail industry could generate enough revenue to go around. Freed says he's not certain that still holds true. As a result, he says, the industry may see more consolidation and, inevitably, more companies collapsing. “In some ways we've hit the worst, in some ways we haven't," Freed warns. "There's a wave of fall-off that's going to happen.”

Luckily, Internet retailers have the cost-effective advantage of operating on the Web. What they need to focus on now, experts say, is increasing their customer intelligence.

  • Why are customers coming?
  • Who are they?
  • What are they looking for?

The answers to these questions won't be easy to come by, but the popularity of social media has opened the door to new possibilities.

Even top-performing companies, however, can find social media to be a very slippery slope. Even Amazon.com recently experienced its own social mishap. Last month the online retailer failed to respond quickly enough to allegations that it had removed from its sales rankings more than 57,000 books involving gay, lesbian, bisexual, and transgender issues. By the time Patty Smith, the company's director of corporate communications, responded days later—the scandal that came to be known as "#amazonfail" had already ignited a very vocal following. (In social media, the use of a number sign immediately preceding a term has become a shorthand indicating a theme or topic.) Many believed that, had Amazon.com been adequately monitoring its brand within social media, the company would have been able to detect and correct the alleged “glitch” before the public-relations crisis reached a brand-damaging crescendo.

“Consumer-generated reviews and social networking [are] phenomenal and clearly a good marketing piece for companies,” Freed says. Even so, he adds, “there’s an inherent risk in the social aspect of things, and [that] points to complexity of this stuff.”

Given the difficult economic pressures, Gartner released a brief report today that aims to help e-commerce technology professionals cut costs without endangering customer loyalty. The top five tips are as follows:

  • Use off-the-shelf products, not custom development, for commodity functions. The report says that going generic for "commodity" functions (e.g., shopping-cart management, search, and product merchandising and management) can save 35 percent of maintenance-and-licensing costs for large enterprises, and 25 percent for small enterprises.
  • Optimize existing technology. Large enterprises can save 15 percent (and small enterprises can save 10 percent) on service, sales, and marketing costs. The goal should be to eliminate technology that fails to achieve a use-rate of at least 95 percent.
  • Use rich Internet application tools only if they deliver higher conversions. Moreover, build communities on established Web sites, rather than starting from scratch on your corporate site. This will save large enterprises 10 percent and smaller enterprises 5 percent.
  • Negotiate fiercely with e-commerce software vendors. According to Gartner, skilled negotiators can save anywhere from 20 percent to 50 percent on license fees in 2009, and an additional 3 percent to 4 percent in the long term.
  • Streamline the organization. Eliminating redundancy in job functions can help save 10 percent to 15 percent in this year's e-commerce human resource expenses.

News relevant to the customer relationship management industry is posted several times a day on destinationCRM.com, in addition to the news section Insight that appears every month in the pages of CRM magazine. You may leave a public comment regarding this article by clicking on "Comments" at the top; to contact the editors, please email editor@destinationCRM.com.

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