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E-Commerce Nears All-Time High in Latest American Customer Satisfaction Index

Posted on: Tuesday, 20 February 2007, 09:00 CST

Customer satisfaction with the e-commerce industry improves for the second year in a row and nears an all-time high, according to the American Customer Satisfaction Index, released today by the University of Michigan with e-commerce partner ForeSee Results.

The e-commerce industry overall rises to a score of 80.0 on ACSI's 100-point scale, closing in on its all-time high score of 80.8 in 2003. The e-commerce sector continues to outpace most other sectors of the economy in terms of satisfying customers and exceeds the national ACSI aggregate score (74.9) by 7%.

"The Internet is a hyper-competitive environment and companies need to evolve and adapt quickly to customer needs and expectations or risk losing them," said Larry Freed, an online customer satisfaction expert and president and CEO of ForeSee Results. "The improved scores are evidence that e-commerce companies are working hard to maintain and improve the industry's extremely high customer satisfaction standards."

Every fourth quarter, the ACSI E-Commerce Report measures customer satisfaction with the following sub-industries: online retail, online auction, online brokerage and online travel companies.

Online Retail: BarnesandNoble.com and Amazon.com Again Post Superior Scores

The E-retail industry climbs 2.5% to 83, led by a new high by BarnesandNoble.com (NYSE: BKS) (+1% to 88) and strong performances in the "all others" category (+2.5% to 82), which measures satisfaction with online retailers not big enough to be singled out in the report. Amazon.com (NASDAQ: AMZN) remained at 87 for a second year and continues to be one of the most satisfying companies in all of the ACSI. Aggregate satisfaction for the e-retail industry (83) still outshines the offline retail sector (74.4) by 11.6%.

Barnes & Noble and Amazon have taken very different approaches to their online operations. Whereas Barnes & Noble has remained focused on its core competency selling books, CDs and DVDs, Amazon has branched out from its roots as an online bookseller to selling almost everything imaginable, from gourmet food to HDTVs. Yet both companies maintain superior customer satisfaction scores.

"Barnes & Noble's revenue growth has remained relatively flat year over year, which isn't surprising given the maturation of the market for books, music and movies," said Dr. Claes Fornell, Director of the National Quality Research Center and founder of the ACSI. "The company continues to provide an extremely satisfying experience for its customers, which will help them maintain their market position in the face of the constant onslaught of competition online."

Amazon, on the other hand, has significantly diversified its product offerings, which has as many challenges as it does opportunity. Amazon's customer satisfaction score dropped nearly 5% in 2004, but it has since recovered to previous superior satisfaction levels.

"Customers rewarded Amazon with its best-ever holiday season, and I expect that Wall Street will follow suit," said Freed.

Online Auction: eBay Winning Auction

The aggregate customer satisfaction score for online auction remains at 78 for a second year. Industry juggernaut eBay (NASDAQ: EBAY) maintains its leadership position despite a 1% drop to 80.

"eBay is winning the auction category handily, but should be worried that they are still considerably behind Amazon.com, since the two companies increasingly compete," said Freed. "Amazon is selling more used goods, and eBay now sells many items brand new and direct from the retailer. The lines between auction sites and retail sites get more blurred every year, and eBay will need to bring more innovation to satisfy customers like more traditional retailers do."

Online Brokerage: Bullish Outlook for CharlesSchwab.com

Customer satisfaction with online financial services hits a new all-time high, jumping 2.6% to 78. CharlesSchwab.com (NASDAQ: SCHW) is the biggest gainer, soaring 8% to 80 and setting a new high for the industry. Two new companies are included for the first time, Fidelity (80) and TD Ameritrade (77). E*TRADE also improved, up 4% to 74.

Charles Schwab has been making all the right moves. The return of its founder, a refocused business model, and upgrades to its website have helped its customer satisfaction scores to climb an incredible 12.7% since 2004. Customer satisfaction as measured by the ACSI has been proven to be directly linked to future financial performance, and Charles Schwab is reaping the benefits of their rising scores. The company is perceived as the quality leader and value leader of the industry and just reported record net income of $1.2 billion for 2006, up from $725 million in 2005.

"The Internet is the perfect vehicle for personal finance and brokerage companies to interact with their customers," said Freed. "There is no better, faster, easier, or more convenient research tool than the web, which means investment companies have enormous potential to use their websites to serve customers in the best possible way."

"Economic factors are also contributing to the surge in satisfaction. Economic growth and stability combined with improved Internet security and better research tools on the web make for a satisfying experience for the consumer," said Freed.

Online Travel: Aggregators Struggle in Wake of Increasing Competition

Online travel is the only industry in e-commerce that slipped. In aggregate, online travel is down 1.3% to 76. Expedia (NASDAQ: EXPE) (78) and Travelocity (74) both drop 1.3%, while Orbitz registers the only gain (+1.4 to 75). The "big three" are still tightly grouped as they continue to struggle to differentiate themselves.

"These aggregators are really suffering from the competition from airline and hotel sites and travel search engines like Kayak or Sidestep," said Freed. "They can no longer clearly differentiate themselves on price, convenience or availability. I think we're going to see that this business model needs to adapt or these companies will be eclipsed by the supplier sites that are ultimately accountable for service delivery."

About ForeSee Results

ForeSee Results is the market leader in online customer satisfaction management and specializes in converting satisfaction data into user-driven web development strategies. Using the methodology of the University of Michigan's American Customer Satisfaction Index (ACSI), ForeSee Results has created a model that scientifically quantifies the elements that drive online customer satisfaction and predicts future behaviors, including the likelihood to return to the site or recommend the site to others. ForeSee Results, a privately held company located in Ann Arbor, Michigan, can be found online at www.ForeSeeResults.com.

About the ACSI

The American Customer Satisfaction Index (ACSI) is the only uniform, national, cross-industry measure of satisfaction with the quality of goods and services available in the United States. A key distinguishing feature of the ACSI methodology is its patented scientific approach to customer satisfaction measurement. The technology behind the ACSI computes scores that reflect performance-based on the relative impacts of various components of satisfaction on overall satisfaction and the likelihood of desirable future behaviors, such as repeat purchases. Accordingly, the ACSI methodology is able to isolate and determine the importance of the features and functions most likely to produce these behaviors-an important distinction from basic customer satisfaction ratings.

Source: Business Wire

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