E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
For the second year in a row, e-retailing insiders give their own industry a low score in customer satisfaction.
Finicky customers may be the hardest to please offline or online, but they’re not as difficult as e-retailing insiders. That critical bunch of executives who run e-retailing web sites gave their industry a pretty low satisfaction score-much lower than consumers rank the industry-for the second year in a row in the “Insiders View of E-Retailing” from Foresee Results Inc. and Internet Retailer.
E-retailers gave their industry a score of 63 on a 100-point scale, based on the American Customer Satisfaction Index, vs. 58 last year. “A score of 63 is not a great score,” says Larry Freed, president of ForeSee Results. “E-retailers’ expectations are much higher than the general population’s. That says that while the industry is making strides, insiders realize they have a long way to go and a lot of hard work ahead.”
An increase in satisfaction of 8.6% in one year is a good increase, Freed notes, but the score still lags consumers’ perceptions of the industry. Consumers give the e-retailing business a satisfaction rating of 83.
E-retailers’ low score is good because it indicates that retailers are trying to stay a step ahead of consumers, Freed says. The 83 that e-retailing earns from consumers in customer satisfaction is far above the scores for offline retailing-75-and all industries-73.8. But it also masks a reality of the web: The better the experience, the more consumers want. “Consumers are very pleased with what they’re getting in online shopping,” Freed says. “Yet their expectations keep rising.”
For instance, consumers are becoming adept at comparison shopping online, which will force each retailer to make its own shopping experience better. “The Internet has made cloning a reality; I can be in two stores at once,” Freed quips. “That changes the dynamics of shopping. It will be a continuing challenge for retailers to keep up.”
Satisfaction = profits
The American Customer Satisfaction Index was developed in 1994 as a uniform, national, cross-industry measure of satisfaction with the quality of goods and services available in the United States. It seeks to link customer satisfaction to future consumer behavior and economic returns. It applies a mathematical model that seeks to eliminate anecdotal reports of satisfaction, customers’ self-reported levels of satisfaction and customers’ assessments of what’s important in making a buying decision. The Insiders’ View is based on 368 e-retail insiders who responded to an e-mail poll in July.
Measuring customer satisfaction is important to the success of a business or an industry, Freed says, because customer satisfaction predicts future behavior. “High satisfaction drives behavior and profits,” he says. In fact, he says, it’s no surprise that online shopping continues its strong growth because measures of customer satisfaction predict that outcome. “Getting the tools to determine where you get the biggest return on an investment is important,” Freed says.
E-retailing insiders gave the highest scores to the ordering process, with a ranking of 71, and site functionality, with a 69. They were the highest components in last year’s survey also.
The issues they bashed are no surprise: they gave returns a 51 ranking, account set-up a 57, privacy a 59 and navigation a 59.
Image has the greatest potential to drive customer satisfaction, ForeSee says. The components that make up image are whether a retailer values the customer and how trustworthy and well established a site is. “There is a lot of value in brand,” Freed says.
E-retailers’ rising satisfaction was the result of a better mix of products available online, improved technology for online retailing and a perception that online retailers are providing better customer service, Freed says. “There have been some real strides made in the past year; the better rating is not the result of insiders getting soft on the industry,” Freed says.
Insiders’ views of an industry are important, Freed says, because they are leading indicators. Freed says he expects site functionality, particularly site search, to be an area of retailers’ focus in the near future.
The satisfaction scores
2003 2002 Change
E-Retail insiders 63 58 +8.6%
E-Commerce, consumers 83 77 +7.8%
Offline retail, consumers 75 75 0%
All industries, last quarter 73.8
Select organizations (for comparison purposes)
Amazon.com 88 84 +4.8%
H.J. Heinz Co. 88 89 -1.1%
Internal Revenue Service 62 62 0%
Comcast & Charter Comm. 55 56 -1.8%
Source: ForeSee Results Inc.
The elements that drive customer satisfaction, ForeSee says, are:
Site’s look and fee