Online Customers Pay Pure Plays
The wallet is not top of mind while shopping online, according to the annual Top 40 Online Retail Satisfaction Index produced by ForeSee Results and FGI Research. The report reveals that customers are much more likely to respond to brand, merchandise, and site experience than they are to the cost of an e-retailer's items. The companies that performed best in these areas garnered the highest ratings, and it was the pure plays (those companies that put all their efforts into the online channel) that came out on top.
The study analyzed the top-40 grossing Web retailers as listed in Internet Retailer, an industry trade magazine. It took into account over 8,500 customer surveys from those who had both visited and purchased on the sites to determine which companies were delivering the highest level of consumer satisfaction.
"There are always a lot of people who report on volume metrics," says Larry Freed, CEO of ForeSee and author of the report. "But that gives no indication of how companies are going to do. The best forward-looking indicator is customer satisfaction. Satisfaction will drive retention, loyalty, and recommendation, which in turn will drive financial success."
According to the survey, the top 10 percent of retailers ranked were 33 percent more likely to have customers purchase from their sites than the bottom 10 percent. Similarly, online shoppers for the top 10 percent are 18 percent more likely to go back to the same e-retailer when they look to purchase similar merchandise and there was a 16 percent greater chance that they would recommend this retailer.
Of the top-five companies listed by revenue, only one of those companies, Amazon, was also listed in the top five for customer satisfaction, pointing to the fact that bigger is not always better from a customer perspective. This statistic also promises an intensifying level of online competition for the future. Web-only merchants well outperformed all other e-retailers, with Netflix and Amazon scoring 85 and 83 respectively on the 100-point scale. Historically catalog-driven companies filled the next segment of performers with multichannel retailers coming in significantly lower in the rankings. Freed explains, "Management for multichannel companies is much more store focused, while pure plays can be more nimble in innovation and technique."
The study also found that customers respond much better to general site interaction, brand and merchandise availability, and quality than they do to price. According to Freed, online shoppers are not an overwhelmingly price-conscious audience. Price is important to them, but it does not have the impact that a good experience creates.
Although the study found the overall satisfaction factor for Spring 2006 to have risen 2.7 percent from the holiday 2005 season, it is still 1.3 percent lower than the overall score from one year ago. Freed believes that to heighten performance, companies need to better focus their customers. "Listening to your customers is first and foremost," he says. "A happy customer today is your best customer tomorrow."
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