Amazon Soars; Netflix Plummets in ForeSee Holiday Study

Study Finds Customers are Less Price Sensitive in 2011, Gap and Overstock Struggle with Holiday E-Commerce

Ann Arbor, Mich. (December 28, 2011) — Customer experience analytics firm ForeSee today released the results of their annual Holiday E-Retail Satisfaction Index, showing that after seven years spent jockeying for first place in the Index, Amazon and Netflix are headed in divergent directions.

Amazon climbed two points to score 88 on the study’s 100-point scale, registering the highest score from any retailer in 14 consecutive studies. Meanwhile, Netflix’s well-publicized blunders caused its customer satisfaction to plummet by seven points and 8% to 79. After years of being separated by a point or two, Amazon and Netflix, which are increasingly in direct competition as Amazon expands into streaming video and rentals, are now separated by nine points in terms of satisfaction, a gulf that may be too wide for Netflix to overcome anytime soon.

Today’s report provides the first scientific quantification of customers’ experience with Netflix since its missteps earlier this year. With its satisfaction decline, Netflix has gone from satisfaction superstar to merely average, matching the Index’s aggregate score of 79 (up one point from 78 in the 2010 holiday shopping season). Netflix saw scores drop in every single element of the website that ForeSee measures, including site content, site functionality, merchandise, and prices.

“Netflix totally misread its customer base and is paying the price, damaging its brand among both consumers and investors,” said Larry Freed, president and CEO of ForeSee. “Raising prices by 60% and splitting the baby into separate DVD and streaming services totally undermines Netflix’s cost and convenience advantages. Customer satisfaction is predictive, which means that Netflix’s financial woes may be just beginning.”

“Meanwhile, Amazon may have started as an online bookstore, but it now competes in almost every significant retail category and it is setting the bar very high for any company selling online,” continued Freed. “E-retailers have consistently upped their game since we first started measuring holiday satisfaction in 2005, but Amazon is still the 800-pound gorilla of retail, and it just keeps getting better. It’s tough for a smaller retailer to compete with this level of dedication to providing an excellent customer experience.”
                                         
Since 2005, the average customer satisfaction score for the Index has increased from 74 to 79. A score of 80 has always been the standard for excellence; given the causal relationship between satisfaction and financial success, it is not surprising that most of the sites receiving the top 40 largest revenues according to Internet Retailer also have very high satisfaction scores. Any retailer scoring below average risks eroding loyalty, recommendations, sales, and market share to competitors who score higher, so even the Top 40 need to improve stay at the top of the heap. If satisfaction drops significantly, a revenue drop is likely to follow.

Key Findings

The report includes individual satisfaction scores for the 40 top e-retailers (see chart below) for the past seven years, allowing for comparisons over time and between companies:

  • Next to Netflix, both Gap.com (down 6% to 73) and Overstock.com (down 5% to 72) have the largest declines in satisfaction, leaving them with scores at the bottom of the Index.
  • On the other end of the spectrum, the largest gains in satisfaction go to TigerDirect.com (up 8% to 79) and JC Penney (up 6% to 83), which named Ron Johnson, former head of Apple’s retail operations, as CEO this year.
  • Price matters less: American consumers were less price sensitive during the 2011 holiday shopping season than they were last year
  • Nearly 20 years of research coming from both academia and the private sector indicates that increasing customer satisfaction is one of the most powerful things a retailer can do in any channel to increase sales, loyalty, and positive word-of-mouth recommendations. The report quantifies the impact of satisfaction on these desirable customer behaviors.

 

“Customer satisfaction is a leading indicator of consumer spending, and the bump in the Index is good news for online retailers,” said Freed. “Unemployment is down, consumer confidence is up, and holiday retail sales are up from last year. Improved customer satisfaction suggests the good news may continue into the new year.”

 

Internet Retailer Rank*

Website

Holiday 2005

Holiday 2006

Holiday 2007

Holiday 2008

Holiday 2009

Holiday 2010

Holiday 2011

Point Change Since Last Year

Point Change Since First Measured

Average, Top 40 E-Retailers

74

75

74

74

79

78

79

1

5

1

Amazon.com

82

84

82

84

87

86

88

2

6

3

Avon.com

75

76

79

77

81

83

83

0

8

31

JCP.com (JC Penney)

71

76

75

76

81

78

83

5

12

17

QVC.com

80

80

80

79

83

84

83

-1

3

12

Store.Apple.com

76

79

79

78

82

82

83

1

7

36

VistaPrint.com

NM 

NM

NM

NM

NM

80

83

3

3

11

Newegg.com

79

78

77

78

81

82

82

0

3

26

BN.com (Barnes and Noble)

77

77

78

78

NM

NM

81

NA

4

20

LLBean.com

80

80

80

78

80

83

81

-2

1

40

VictoriasSecret.com

NM 

NM 

NM

76

80

79

81

2

5

34

Dell.com

74

77

74

74

79

76

80

4

6

NA

eBay.com

NM 

NM 

NM

NM

NM

80

80

0

0

4

HPShopping.com

74

78

75

76

78

78

80

2

6

19

SportsmansGuide.com

 NM

NM 

NM

NM

NM

NM

80

NA

NA

24

Williams-Sonoma.com

 NM

77

75

74

79

80

80

0

3

13

Cabelas.com

NM 

 NM

NM

NM

82

77

79

2

-3

22

Costco.com

69

69

72

72

79

79

79

0

10

15

Kohls.com

NM

NM

NM

NM

NM

NM

79

NA

NA

32

Netflix.com

84

86

86

84

86

86

79

-7

-5

6

TigerDirect.com

77

76

77

77

80

73

79

6

2

39

Walmart.com

73

73

74

78

79

80

79

-2

5

38

BestBuy.com

72

73

74

73

77

77

78

2

7

9

HomeDepot.com

 NM

NM

NM

69

NM

75

78

4

9

30

Macys.com

NM 

71

71

70

79

75

78

3

7

16

NeimanMarcus.com

72

73

72

69

73

NM

78

NA

6

2

Staples.com

71

73

73

77

77

78

78

0

7

28

Nordstrom.com

 NM

74

74

74

79

78

77

0

NA

27

HSN.com

75

75

76

69

76

79

76

-3

1

21

Target.com

70

74

72

75

78

77

76

-1

6

41

Blockbuster.com

 NM

NM 

NM

72

77

76

75

0

4

7

OfficeDepot.com

72

73

71

72

77

76

75

-1

3

5

OfficeMax.com

 NM

NM 

68

70

75

75

75

0

7

8

Sears.com

68

73

70

70

75

74

75

1

7

37

ToysRUs.com

69

71

72

NM

75

77

75

-2

6

14

Buy.com

72

72

70

70

76

77

74

-3

2

33

Store.Sony.com

69

73

70

70

77

76

74

-2

5

23

Gap.com

73

74

NM

69

76

78

73

-5

0

25

Overstock.com

71

71

70

69

76

76

72

-4

1

* 2011 Rank in Internet Retailer’s Top 500 Guide, a ranking of the Top 500 online retailers in the U.S. by sales volume. Internet Retailer does not include eBay in its Top 500 guide because eBay is a marketplace rather than an individual retailer. ForeSee opted to include eBay although they are not officially on Internet Retailer’s list because of the large volume of retail transactions they represent. The composition of the list varies from year to year based on Internet Retailer’s list.

The following Top 40 retailer sites had sample sizes that were too small to report a statistically meaningful score: AmwayGlobal.com, CDW.com, and Grainger.com.  Blockbuster.com, number 41 on Internet Retailer’s list, was measured in lieu of number 35, Buy.Norton.com, for the Top 40 study because there were not enough responses to provide a score for Buy.Norton.com in the spring Top 100 study.

About the ForeSee Results E-Retail Satisfaction Index (U.S. Holiday Edition)

The seventh annual holiday online satisfaction report is based more than 8,500 responses from visitors to the top 40 e-retail websites according to sales revenue as reported by Internet Retailer’s Top 500 Guide.  Survey responses were collected via FGI Research’s Smart Panel. ForeSee Results used the methodology of the American Customer Satisfaction Index (ACSI) to calculate the scores. The ACSI is the national standard for customer satisfaction, and this measure has been shown to have a direct link with stock prices and other measures of financial performance.

About ForeSee

As a pioneer in customer experience analytics, ForeSee continuously measures satisfaction across customer touch points and delivers critical insights on where to prioritize improvements for maximum impact. Because ForeSee’s superior technology and proven methodology connect the customer experience to the bottom line, executives and managers are able to drive future success by confidently optimizing the efforts that will achieve business and brand objectives. The result is better business for companies and a better experience for consumers. Visit www.foresee.com for customer experience solutions and original research.