In its second-largest acquisition, Amazon buys the company for $970 million.
Online retail’s score of 83 on a 100-point scale tied for first with breweries and electronics manufacturers in the American Consumer Satisfaction Index survey of more than 40 industries conducted by the University of Michigan. But retailers cannot rest on their laurels, says Larry Freed, CEO of ForeSee Results, which owns the patent to the ACSI technology for gauging consumer satisfaction.
Just as online retail sales outshone offline sales during the recent holiday season, so, too, did web-based merchants easily outpace their store-based brethren in the latest customer satisfaction survey by the University of Michigan.
In fact, online retail’s score of 83 on a 100-point scale tied for first with breweries and electronics manufacturers in the American Consumer Satisfaction Index survey of more than 40 industries. Offline retail scored 74.2, slightly below the cross-industry average of 74.9.
What’s more, all five of the web-only retailers included in the survey-Amazon, Newegg, Netflix, eBay and Overstock.com-scored in the top 10 of the more than 200 companies measured. Amazon, with a score of 88, was second only to food manufacturer Heinz, which scored 90.
While the results are impressive, e-retailers cannot rest on their laurels, says Larry Freed, CEO of web-measurement firm ForeSee Results, which owns the patent to the ACSI technology for gauging customer satisfaction. He says consumers will expect to encounter the same innovations they see on entertainment, financial, information and other web sites when they visit e-commerce sites.
“As things change across the Internet,” Freed says, “that sets a new standard that customers are looking for.”
Online retail is included in the fourth quarter ACSI survey each year, and the category’s score of 83 was the same as in 2006. The sector scored 78 when it was first measured in 2000, hit a high of 84 in 2003, then dropped to 80 the following year before recovering in the past three surveys.
A relative lack of new features in the past year-following the widespread introduction of such innovations as zoom, color choices and side-by-side comparisons in prior years-may account for online retail’s score staying steady, Freed says. “This year there wasn’t any breakthrough innovation, which has a lot to do with why the score leveled off at 83,” he says.
There were several changes in the way companies were included in the online retail survey this year. The ACSI eliminated the online auction category and moved eBay into online retail, reasoning that it offers more products consumers can buy without bidding, making it increasingly a competitor to Amazon. With the auction category dropped, Priceline.com was moved to online travel and uBid.com was eliminated from the survey.
Newegg comes on strong
Within online retail, Buy.com and 1-800-Flowers.com were dropped and Newegg, Netflix and Overstock.com added. The ACSI includes companies based on market share within their industry. BarnesandNoble.com also was dropped, and Barnes and Noble added to the specialty retail category, which includes many multi-channel retailers.
In fact, Barnes and Noble, which sells books and music, led the specialty retail category with a score of 83, followed by warehouse club Costco and rival bookseller Borders at 81. Home Depot trailed the category at 67.
Among department and discount stores, Nordstrom had the highest score at 80, followed by Kohl’s at 79. Wal-Mart had the lowest score at 68.
All the online-only merchants scored well above the survey average, with Overstock having the lowest score at 80. While that is a respectable score, Freed says Overstock.com’s score likely suffers from the uncertain selection that comes from its model of selling surplus merchandise.
At the top of the e-retail charts once again was Amazon, whose score of 88 was one point better than its score in the 2006 survey. Freed credits Amazon’s management with understanding “early on that customers are fickle when they aren’t satisfied, but very loyal when they are.”
He also notes that Newegg scored high with 87 in its first appearance in the ACSI survey. Newegg, a retailer of computers and consumer electronics, has set itself apart by delivering products quickly to its tech-savvy customers, Freed says. “The fact that it closed out 2007 with sales just shy of $2 billion-an increase of more than 26%-is a sign that its strategy is working,” he says.