Customer satisfaction with the e-commerce industry has improved for the second year in a row, at least nearing its all-time high, according to the American Customer Satisfaction Index, published by the University of Michigan and ForeSee Results.
The e-commerce industry overall rose to a score of 80.0 on the ACSI's 100-point scale, nearing its all-time high score of 80.8 (reached 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, 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."
Online retail performance
The e-retail industry climbed by 2.5% to 83 overall, led by a new high from BarnesandNoble.com (up 1% to 88) and strong performances in the "all others" category (up 2.5% to 82), which measures satisfaction with online retailers not big enough to be singled out in the report.
Amazon.com remained at 87 for a second year and continues to be one of the most satisfying companies in the entire index. 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. But, despite their differing strategies, both companies have maintained superior customer satisfaction scores.
Amazon 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 returned to its previous superior satisfaction levels. "Customers rewarded Amazon with its best-ever holiday season, and I expect that Wall Street will follow suit," commented Freed.
Online auction performance
The aggregate customer satisfaction score for online auction remains at 78 for a second year. Industry leader eBay has maintained its leadership position despite a 1% drop in its score (to 80).
According to 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 performance
Customer satisfaction with online financial services has hit a new all-time high, jumping by 2.6% to 78. CharlesSchwab.com was the biggest gainer, rising 8% to 80 and setting a new high for the industry. Two new companies were included in the index 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 surprising 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 its rising score. The company is perceived as the quality leader and value leader of the industry and has recently reported a record net income of US$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."
Online travel performance
Online travel was the only industry in e-commerce that slipped. In aggregate, online travel was down 1.3% to a score of only 76. Expedia (78) and Travelocity (74) both dropped 1.3%, while Orbitz registered the only gain (up 1.4 to 75). But still, the "big three" are 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 and Sidestep," concluded 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."