Are Customers Satisfied With These Online Companies?

The American Customer Satisfaction Index, founded at the University of Michigan in 1994, tracks customer satisfaction among several industries.  Through the development and popularity of the internet, e-commerce companies continue to compete for customers.  As the latest index reports shows, customer satisfaction can change on a dime.

In 2000, e-commerce accounted for nearly $28 billion in sales, less than 1 percent of all retail sales in the United States, according to the U.S. Department of Commerce.  By 2010, e-commerce collected $167 billion in sales and represented more than 4 percent of retail sales.  In that time period, Amazon (NASDAQ:AMZN) has become the dominating online retailer in terms of customer experience.  According to the newly released ACSI, the company earned a rating of 86, based on a 100 point scale.  This is a slight decrease from last year’s rating of 87.  However, Amazon still ranks ahead of other well-known companies such as Overstock.com (NASDAQ:OSTK), eBay (NASDAQ:EBAY) and Netflix (NASDAQ:NFLX).  In fact, Amazon has led the e-retail category for ten of the last twelve years.

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The biggest mover in this year’s report is Netflix.  The media company fumbled customer sentiment through price hikes and poorly communicated business plans.  Although Netflix was the highest rated e-retailer in 2010, the company’s score dropped 12 points to 74 in 2011, making it dead last.  The report explains, “One of streaming video customers’ common complaints is the relative dearth of selection.  Despite its recent fourth quarter report that showed rebounding subscriber growth, Netflix should be concerned.  Its customer base is less satisfied at a time when competition from Amazon, Hulu and other are ramping up.”  Earlier this month, Verizon (NYSE:VZ) and Coinstar (NASDAQ:CSTR) announced a joint partnership to launch streaming services.  Comcast (NASDAQ:CMCSA) is also entering the steaming video space in order to capture market share.

Customers see little difference between the major players in online financial services.  Charles Schwab (NYSE:SCHW), E*Trade (NASDAQ:ETFC) and Fidelity (NYSE:FIS) all tied for the top spot at a rating of 79.  TD Ameritrade (NASDAQ:AMTD) was a close second with a rating of 78.  “When the online brokerage category was expanded in 2006, we saw clear leaders (Charles Schwab and Fidelity), a clear laggard (E*Trade), and a player solidly in the middle of the pack (TD Ameritrade).  In 2011, we see all four measured companies within one point of each other, showing that the industry is maturing and customers see less and less differentiation between these companies.”  E*Trade’s customer satisfaction rating has increased nearly 20 percent since 2000.

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Overall customer satisfaction with e-commerce increased 0.8 points from last year to 80.1.  Retail was the highest rated industry with an overall rating of 81, while online brokers had the lowest with 76.  Online travel agencies which include Expedia (NASDAQ:EXPE) and Priceline.com (NASDAQ:PCLN) remained flat at a rating of 79.  Interesting, the report states, “A portfolio of stocks that invests in companies that do well in the ACSI and short sells companies that do poorly has consistently outperformed the S&P 500 for more than 10 years in a row, in both up and down markets.”

To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com