• February 16, 2005
  • By Coreen Bailor, (former) Associate Editor, CRM Magazine

Customer Satisfaction Loses Its Grip

The convenience and accessibility of e-commerce couldn't keep the industry from suffering its first slump in its customer satisfaction rating after two years of progressive increase, according to the American Customer Satisfaction Index (ACSI) Annual E-Commerce Report. The report, which includes findings on the retail trade and finance and insurance industries, is based on findings from the University of Michigan's ACSI and ForeSee Results. Four thousand surveys were conducted for the e-commerce category. According to the study, fourth quarter 2004's e-commerce satisfaction score of 78.6 suffered a 2.7 percent slide from fourth quarter 2003's showing of 80.8. Among the sector's subcategories--auctions, brokerage, online travel, and retail--retail experienced the biggest drop from its 2003 score of 4.8 percent, from 84 to 80. The remaining industries underwent a 1.3 percent reduction; auctions from 78 to 77, brokerage from 76 to 75, and travel from 77 to 76. Brokerage firm The Charles Schwab Corporation experienced the biggest drop of all e-commerce companies, with a 5.3 percent reduction from 75 to 71. Perhaps most interesting, however, was that results indicate that two of the most recognizable names on the Web, Amazon.com and eBay, are partially to blame for the industry's dwindling reputation for customer satisfaction. EBay, placing in the auction category, fell from 84 to 80, sliding 4.8 percent, while Amazon.com dropped 4.5 percentage points, from 88 to 84. "[Amazon.com's] market has totally changed with their business model," says Larry Freed, president and CEO of ForeSee Results. "In a couple of years we won't be calling them a retailer anymore." Instead, he says, the company will be considered an aggregator. "They now offer many different products under one roof, and have many more merchants that they're selling for. The service level required to support those other products is a different level of service required by consumers than it was when they were just selling books, videos, and CDs...[and] their challenge is to maintain a very high level of satisfaction and still grow their business." Still, 84 is a strong score, but not strong enough to hold on to the top slot five years in a row. Barnes & Noble, with a 1.2 percent uptick from fourth quarter 2003's 86 to fourth quarter 2004's 87, outperformed all other e-commerce companies' satisfaction rates. "It's not a time [for Amazon.com] to hit the panic button," Freed says. "They're still competing with companies like Barnes & Noble on a category level, [but] can
they still compete well...is what still remains to be seen." EBay's evolving business model tells a similar story of moving away from its core focus and diluting its brand, leading to a drop in customer satisfaction, Freed says: "Two years ago we would've said that it was a community of individual sellers and buyers. Now, they're emerging in that same category where they are a platformer and aggregator for many small and mid size companies selling products and that's really put them in an different space as well." The remaining companies in e-retail did, however, manage to pull in solid scores-- the also-diversified Buy.com remained constant with its score of 80--the same score from fourth quarter 2002, and 1-800-Flowers.com's satisfaction rating improved 3.9 percent from 76 to 79. But, the imbalance between companies lagging in customer satisfaction and those that are meeting and surpassing customer expectations wasn't enough to keep customers from preferring e-retail to the traditional in-store shopping experience. Offline retail averaged a score of 72.6, six points less than its e-commerce counterpart. "There's no doubt that when you compare the online experience to the offline experience the online experience is sill far, far better [with] things like convenience, consistency of information, and the ability to find out about a product," Freed says. The subcategory with the least amount of score variation among competitors was the e-travel industry. Both Expedia and Travelocity scored a 76, with Orbitz close behind with a 75. "From a customer's point of view they cannot distinguish themselves from each other," Freed says. "Any innovation that's done by one company is almost immediately followed by the others. There's a transparency between them." Related articles: Marketers Cash in During the Holiday Season Shoppers Are Dreaming of a Multichannel Christmas Kmart and Other Retailers Revamp Their Web Sites
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