Report: Online Retailers Are Slipping

by Sarah Mahoney, Dec 30, 2008, 7:15 AM

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While it's no surprise that perennial Web favorites Netflix and Amazon stayed on top this holiday season, the latest customer-service rankings from ForeSee Results show that nearly 40% of the biggest online retailers are slipping. And a few big names--including Circuit City, Gap, Home Depot, HSN, Neiman Marcus, and Overstock--all fell below industry standards. 

"We heard so much about the bad economy going into the holidays," says Larry Freed, president/CEO of the Ann Arbor, Mich.-based ForeSee, which specializes in online satisfaction measures. "And it was one of the most dismal holiday sales period on record. Yet, we do see some retailers that have done a really good job in the online space this year. And I suspect that when the financial reports come in, we'll see much more of a separation between winners and losers than we have in the past."

One big change, he says, is that while price typically has little impact on customer satisfaction when compared to issues like merchandise and functionality, it played a much bigger role this season. The better the deal, the more satisfying the experience. Two of the biggest gainers, he says, are Walmart and Target, both with plenty of low prices to tempt shoppers. (Overall, 10 of the sites improved their ranking from last year.) Still, there are exceptions: Apple, not seen as a value brand, comes in at an enviable fourth place.

The annual survey ranks the 40 largest online sites on a 100-point scale, and finds that that how happy a consumer is with an online purchase is critical. A highly satisfied online shopper is 73% more likely to purchase online, Freed says, 38% more likely to purchase offline, and 75% more likely to recommend than someone who is unhappy with the site. And they are 65% more likely to make an additional purchase.

Netflix and Amazon tied with a score of 84, while QVC came in third, at 79.

Gap was among the biggest decliners, with a fall of 6.8%. Freed says that this may be partly due to the company's strategy, which allows customers to switch too easily among its Gap, Old Navy, and Banana Republic brands. "Consumers may start to question both fashion and price--'why am I paying more for Old Navy clothes if I buy them at Banana?' They may view the brands as too different to be in one spot."

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