Retail customer satisfaction improves for a third consecutive year

Customer satisfaction has improved for a third consecutive year for retail, according to a report released today by the American Customer Satisfaction Index (ACSI). The retail sector overall gains 1.7 percent to an ACSI benchmark of 77.9, boosted by higher customer satisfaction with specialty retail stores, supermarkets, drug stores and gasoline service stations. A fourth traditional retail industry, department and discount stores, shows no change in customer satisfaction compared with a year ago.

According to the report, better customer service and widespread discounting among brick-and-mortar retailers more than offsets a drop in customer satisfaction with Internet retail. With more shoppers choosing to purchase online, customer service may have hit a rough patch for Web retailers during the 2013 holiday season. Although online sales growth for the period was weaker than expected, it far exceeded the uptick for traditional retail sales.

"A spate of last-minute holiday purchases online, combined with inclement weather, left some buyers disgruntled by delayed shipments," said Claes Fornell, ACSI Chairman and founder. "That's the likely reason for Internet retail getting its lowest customer satisfaction benchmark in more than a decade. Nevertheless, diminished foot traffic at malls—along with a surge in shopping via mobile phones and tablets—indicates that consumers are increasingly embracing the advantages of online commerce."

The American Customer Satisfaction Index (ACSI) is a national economic indicator of customer evaluations of the quality of products and services available to household consumers in the United States. The ACSI uses data from interviews with roughly 70,000 customers annually as inputs to an econometric model for analyzing customer satisfaction with more than 230 companies in 43 industries and 10 economic sectors, as well as over 100 services, programs, and websites of federal government agencies.

Specialty retail improves but lackluster results for department, discount stores

Customers had a better shopping experience at specialty retailers during the 2013 holiday season, with the category gaining 2.6 percent to an ACSI benchmark of 80. Department and discount stores, on the other hand, remain flat at 77. Upscale Nordstrom leads at 83 and discounter Walmart has the lowest score of 71.

"For traditional retailers, discounting in and of itself is not necessarily associated with weak customer satisfaction, nor is high-end retailing a guarantee of the opposite," said David VanAmburg, ACSI Director. "Discount chains Kohl's and Dollar General are both above average for customer satisfaction and are among the industry's top four, while Macy's, a traditional department store, comes in at the low end."

Several chains cluster in the ACSI range of 77 to 79, including J.C. Penney, Sears, Target and the aggregate of smaller stores. Compared with a year ago, JCP is down 2 percent, while Sears is up by 3 percent. Macy's declines 3 percent to 76, but Target suffers the greatest negative change, tumbling 5 percent to an ACSI benchmark of 77.

Among specialty retailers, including wholesale warehouse clubs, office supply chains or clothing stores, Costco regains the lead with a 1 percent uptick to 84, followed by Barnes & Noble (unchanged) and Lowe's (+4 percent) at 82. Home Depot improves 3 percent to 79, but doesn't catch Lowe's, which has held the customer satisfaction advantage in home improvement for over a decade. At the low end, discounter TJX gains 4 percent to 79, pulling slightly ahead of both Gap and Best Buy (tied at 77).

The newly merged Office Depot and OfficeMax move in opposite directions as of the fourth quarter of 2013, with Office Depot slumping 6 percent to 79 and OfficeMax gaining 5 percent to 82. Staples improves as well, up 3 percent to an ACSI benchmark of 81.

"Mergers often lead to problems with customer service and reduced customer satisfaction," said VanAmburg. "It is too early to tell how the larger company created from the Office Depot-OfficeMax merger will fare in 2014, or if Staples will emerge as the real winner among office supply chains in the battle for customer satisfaction supremacy."

Specialty retailers earn strong ratings for staff courtesy and for store layout and cleanliness (ACSI benchmarks of 81) compared with department and discount stores at 78. Specialty stores also do a better job of providing name-brand merchandise (81) than department and discount stores (77).

Publix shines among supermarkets; Smaller drug stores strengthen lead

Customers recognize good value for their money when buying groceries, and the industry inches up 1.3 percent to an ACSI score of 78. Among national and regional supermarket chains, Publix dominates for customer satisfaction with a stable benchmark of 86. Since the ACSI's inaugural year in 1994, Publix has remained number one in its category—a feat unmatched by any other company in the Index.

The aggregate of smaller grocery chains places second at 81, followed closely by Kroger at 80. For the first time in six years, Whole Foods drops in customer satisfaction, down 3 percent to 78. Winn-Dixie, Supervalu and Safeway are tightly grouped with scores of 76 to 77, while Walmart lags behind at 72.

Customer satisfaction with health and personal care (drug) stores is up 2.6 percent to an ACSI benchmark of 79. The improvement comes from a large gain for smaller drug stores. Walgreens and CVS are tied at 76, while Rite Aid slides 4 percent to 74.

Customers give high marks to both supermarkets and drug stores for locations and hours (ACSI benchmarks of 86 and 87, respectively). When asked about the quality of pharmacy services, shoppers give better marks to drug stores (84) than to supermarkets (80).

Customer satisfaction with online retail falls to 12-year ACSI low

Customer satisfaction with Internet retail plummets 4.9 percent to an ACSI benchmark of 78, the lowest score since 2001. While results for the largest pure-play Internet retailers like Amazon.com and eBay vary, the decline is mostly attributable to a big drop for smaller sites, including both pure players and the websites of brick-and-mortar retailers. This group plunges 9 percent to the bottom of the industry at 75.

While higher demand at holiday crunch-time may have posed a service challenge to some Web retailers, Amazon improves customer satisfaction by 4 percent to top the category at 88. Newegg is second at 83, while eBay drops 4 percent to 80. Likewise, Overstock retreats 2 percent to 79. Netflix shows a large gain of 5 percent, recovering partially from a massive blow to customer satisfaction the company took in 2011. At 79, Netflix is gaining, but still not close to its peak ACSI result of 87 in 2009.

Shoppers find the checkout and payment processes of online retailers (ACSI benchmark of 90) to be vastly superior to that of traditional department and discount stores (72) or specialty retailers (77). Online sites also beat traditional stores by a wide margin for both merchandise selection and availability.

The full report is available for free download at www.theACSI.org.