Target and Toys R Us posted overall sales declines during the holidays.
ForeSee Results measures the top online retailers’ success in making browsers happy and enticing them to consider a purchase.
In the competitive world of online retail, every e-retailer is looking for an edge. This is especially true in a down economy when business is affected by many factors outside of a retailer’s control.
One aspect of the online shopping experience that retailers can control is how well they satisfy their customers. Customer satisfaction, when measured scientifically and using a time-tested methodology, is a key performance metric of current success and a predictor of sales (online and offline), loyalty and word of mouth recommendation. Especially in a tough economy, retailers who satisfy their customers online have a competitive advantage.
Because customer satisfaction is such a vital metric, ForeSee Results measured the top 100 online retailers using the methodology of the University of Michigan’s American Customer Satisfaction Index. This is the seventh time we’ve measured customer satisfaction with the top retailers. We measure the top 100 retailers each spring in conjunction with the publication of the Internet Retailer Top 500 Guide and the top 40 retailers each holiday season as a point of comparison.
The ACSI customer satisfaction methodology is a forward-looking analytic that can predict a retailer’s success. Because the most critical success factor is future sales, online or offline, ForeSee Results also measured the purchase intent for each of the Top 100 retailers. This important metric looks at the likelihood of site visitors to buy from a retailer, either via the web or a non-web channel such as the store or catalog. Since customer satisfaction drives purchase intent, looking at both numbers shows how the web site is supporting a company’s overall sales-critical information whether the retailer is an Internet-only merchant or a multi-channel retailer.
As in the past, the Top 100 Online Retail Satisfaction Index measures the satisfaction of browsers, defined as shoppers who visited a web site but didn’t necessarily make a purchase. Browsers are a key online audience segment because they represent the dominant share of a retail web site’s visitors and have tremendous potential to convert to customers.
Customer satisfaction with the Top 100 e-retailers is up 1.3% from last year to a score of 75, which is positive news. Of the companies measured last year, 45 sites have higher scores this year, while 17 have lower. Purchase intent is flat from last year with a score of 78.
Top and bottom performers
Netflix.com, with a score of 86, leads the top 100 retailers in customer satisfaction. It is followed closely by QVC.com (84) and Amazon.com (83), meaning these three retailers have had (or have been tied with) the top three satisfaction scores for the fourth year in a row, a commendable feat. Four other sites have strong scores of 80 or higher: DrsFosterSmith.com (81), Apple.com, Newegg.com and Shutterfly.com, all at 80.
Conventional wisdom says that Internet-only retailers should have higher online customer satisfaction, as they can devote all of their resources to their sole sales channel. However, the data disproves this theory. While four of the sites with scores of 80 or higher (57%) are Internet-only retailers (Netflix.com, Amazon.com, Newegg.com and Shutterfly.com), 75% of the bottom-scoring sites with scores below 70 are Internet only.
Purchase intent is very high for the three sites that top the satisfaction rankings, showing the strong link between satisfaction and sales. Amazon.com has the highest purchase intent (89), followed by QVC.com (88), and Netflix.com and Costco.com (87). Seven additional retailers have strong purchase intent scores of 85 or higher: BN.com (86), AAFES.com (86), LLBean.com (85), Walmart.com (85), Walgreens.com (85) and CVS.com (85).
Some interesting insights from the Top 100 Online Retail Satisfaction Index include:
NeimanMarcus.com had the largest increase in customer satisfaction from last year: up 6 points to 75, showing that this multi-channel retailer is more effectively using the web channel. Talbots.com and CVS.com had impressive 5-point score increases from last spring. ToysRUs.com is up 4 points as the retailer continues to evolve after separating from Amazon.com.
With a purchase intent score 15 points above its satisfaction score, Costco.com leads a group of six multi-channel retailers where the purchase intent score outpaces satisfaction scores by 10 points or more. HomeDepot.com and Kohls.com have 12-point differences, AAFES.com has an 11-point gap and Walmart.com and Lowes.com have satisfaction scores 10 points below purchase intent. A strong brand and offline channel are driving purchase intent for these retailers, while the gap indicates opportunity for increased web satisfaction, which could have a significant positive impact on online purchases.
BlueNile.com’s satisfaction score exceeds its purchase intent score by 6 points, showing that site visitors may be more comfortable using the web to research diamonds than to buy them. However, this may be changing, as BlueNile.com’s satisfaction exceeded purchase intent by 10 points last year.
Satisfying customers is important because it directly influences purchase behavior. Extensive academic research and corporate experience show that satisfied customers are more loyal, more likely to engage in positive word of mouth recommendations and more likely to buy in the future. Satisfaction has also been linked to future financial performance, GDP, stock prices and online sales. A single point increase in satisfaction score for the Top 100 online retailers measured in the last two years predicted an increase of $112 million in online sales on average.
Satisfaction vs. buying intent
The true value of customer satisfaction as a key performance metric comes from looking at its outcomes, especially purchase intent. Sites with satisfaction scores of 80 and higher have a purchase intent score of 86, a whopping 25% higher than the average purchase intent score for the group of sites scoring under 70 in satisfaction. This is proof of the considerable bottom line impact of higher levels of customer satisfaction.
For top performers and bottom performers, purchase intent outperforms online satisfaction. For the top performers category, the average purchase intent score exceeds satisfaction by 5% compared to 1% for bottom performers, showing that retailers who do an outstanding job of satisfying online shoppers have a stronger influence over future sales.
To provide some industry benchmarks, we aggregated the individual company data into both product and sales channel categories.