• January 5, 2009
  • By Jessica Tsai, Assistant Editor, CRM magazine

Amazon.com and Netflix Score in E-Commerce Customer Satisfaction

The 2008 holiday season wasn't exactly merry for retailers, with news reports opting for words such as "bleak," "weak," and even "dismal." That is, until the day after Christmas, when Amazon.com announced a record-setting holiday performance, the best in the online retailer's 14-year history. In the fourth-annual Top 40 Online Retail Satisfaction Index by ForeSee Results and FGI Research, Amazon.com firmly cemented its industry lead as it was the only non-subscription-based retailer to score above 80, the University of Michigan's American Customer Satisfaction Index (ACSI) threshold for excellence. Although a bad economy did hurt customer satisfaction, Larry Freed, ForeSee's president and chief executive officer, admits that he expected it to be much worse.

Though the holiday survey is separate from ForeSee Results' quarterly e-retail report -- which comprises a broader list (100 companies) and is next due to be updated in June 2009 -- Freed says that the retailers that rank high on the holiday list perform similarly the rest of the year.

Between December 1 and December 18, 2008, the study surveyed approximately 9,000 Americans who had, in the prior two weeks, visited at least one of the top 40 retail sites, as defined by Internet Retailer's Top 500 Guide. Sites were evaluated based on four main criteria to determine customer satisfaction:

  • Content;
  • Functionality;
  • Merchandise; and
  • Price.

Overall satisfaction held steady with a score of 74 on a 100-point scale -- equal to the results in 2007. "I expected it to decline worse than it did," Freed says, adding that retailers are suffering as badly as or worse than consumers are. The fact that e-retailers managed to not crack under the recessionary pressure, he adds, suggests that they will likely rebound as soon as consumers "get the means to rebound, the stimulus to rebound, the dollars to rebound, the confidence that they're going to have jobs to rebound."

Freed notes that Amazon.com pulled away from the crowd this year, improving by two percentage points (from 82 to 84) while the next highest scorer, QVC.com, declined one point to 79. "We usually see a little tighter grouping," Freed says.

The top eight online retailers are as follows (list shows scores from 2007, followed by 2008):

  • Amazon.com.....................82......84;
  • Netflix.com.......................86......84;
  • QVC.com..........................80......79;     
  • Apple.com........................79......78;
  • BN.com (Barnes & Noble)...78......78;    
  • LLBean.com......................80......78;
  • Newegg.com.....................77......78; and
  • Wal-Mart.com....................74......78.

(Netflix, tied for the lead at 84, was included in this survey but its subscription-based model makes it difficult to compare to other online retailers on this list.)

Not surprisingly, price had more impact on this year's satisfaction rankings than it had in recent years. "Price never scores incredibly well because consumers always want a lower price," Freed says, which helps to explain Wal-Mart's relatively high ranking. Traditionally, consumers have put more emphasis on functionality and content. "In a difficult economic time, consumers are becoming much more price-sensitive, and much more value-oriented shoppers." What will be interesting, he adds, is to see whether, coming out of this recession, consumers will continue down the bargain aisle or revert back to a more freewheeling approach to spending.

Based on data from the U.S. Bureau of Labor Statistics, the International Council of Shopping Centers estimates that 148,000 retail stores shut down in 2008. That figure, notes the Chicago Sun-Times, represents the highest number of closures since 151,000 stores shut down in 2001, during the previous recession. "The growth rate of new stores clearly seems to have diminished and that's going to continue," Freed says. While brick-and-mortar locations, which cater to consumers who still prefer to engage with the touch and feel of a product, will never completely disappear, competitive retailers will have no choice but to secure an online presence. If not now, then soon. "Online," Freed says, "will be the key to the retailer strategy."

Merely having an online storefront, however, is not the most critical factor. Consumers want what Freed refers to as a "merged channel," whether it's across the physical store, the Web site, or the contact center. The Web site has become more important simply because it's moved beyond just a shopping destination, evolving into a source for research and consumer education. The information found online far exceeds the amount of information that can fit on an index card taped to a shelf under a store-bound product.

"Consumers always like the online experience better than offline experience," Freed says. "It's on [the consumers'] own time. They're in control. They're not being pressured. You can jump from store to store at the click of a mouse. You can be in two places at once online and there are a lot of advantages to it."

Even in apparel, where many consumers worry about size, fit, and fabric quality, advanced technology has improved this shopping experience by providing tools such as image zoom to simulate some aspect of touch and feel. Many retailers also offer a wider selection on the Web, and the beauty of shopping online is a reflection of the challenges retailers have tackled over the last 15 years, making the experience as easy as possible.

But a process that's "as easy as possible" can have its drawbacks. Zappos.com, for instance, offers a free return policy for one year -- so what's to stop a consumer from buying multiple pairs of shoes, keeping one pair, and returning the others? "It becomes not an economic hardship for the consumer, but [one] for the retailer," Freed says. "They're going to great lengths to really minimize the benefits of the store over the online [experience]." Because of that, retailers are constantly trying to find the balance between consumer perks and company costs.

"This holiday season was full of [online] promotions and discounts -- far more than what retailers can afford to do on an ongoing basis," Freed says, adding that, instead of price cuts, offers such as free shipping may soon become the standard. (Online operations have lower costs for labor, real estate, and inventory maintenance -- savings, Freed says, that e-retailers can use to offset the absorption of shipping costs.)

"If I'm a retailer, I want to eliminate barriers to purchase," Freed says. "If a consumer sees that product online, and wants to buy, I don't want to put a shipping barrier.... We want to make sure there's no hurdle. I think shipping is definitely a hurdle today."

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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