retail news in context, analysis with attitude

The American Customer Satisfaction Index (ACSI) is out with its fourth quarter report, suggesting modest improvements in how shoppers perceive the retail companies with which they are doing business.

Some excerpts:

Supermarkets...

"Customer satisfaction with supermarkets improves by 1.3% to an ACSI score of 77. Following a 6.0% spike in food prices in 2011, the cost of food prepared at home rose only 1.3% in 2012, slightly less than the overall increase in the Consumer Price Index. Grocery chains continue to offset rising prices with improved quality of service, expanded merchandise selections, and better store layouts. Judging from the increase in customer satisfaction, they have been quite successful.

"Among supermarket chains, Publix reigns when it comes to customer satisfaction, just as it has done in every year since the American Customer Satisfaction Index’s inception in 1994. In 2012, Publix gains 2% to a score of 86, thereby widening the gap to Whole Foods, which has leveled off at 80 following four straight years of gains. Several other chains cluster closely behind Whole Foods. Kroger is unchanged at 79, followed by Winn-Dixie, up 4% to 78 to tie the aggregate of all smaller chains, which slips 1%.

"The drop-off to the rest of the supermarket industry suggests that even in a strapped economy, focusing primarily on discounting is not sufficient to create high levels of customer satisfaction. Supervalu gains 3% to 76 as the company tries to reduce costs in order to be competitive after years of lackluster sales. Low prices can create short-term gains in customer satisfaction as consumers look for the best deals, but for the strategy to work over the long term, any business that tries it should make certain that it has the cost advantages to pull it off. If not, and it is not clear that Supervalu has such advantages, either profit margins will be squeezed or prices need to be raised. Safeway is unchanged at 75, while discount giant Wal-Mart is in last place despite a 4% gain to an ACSI score of 72."

Internet commerce...

"Two years after a fall in customer satisfaction, online retail is back on track. The category shows a small gain for the second consecutive year, up 1.2% to an ACSI score of 82. While this score is still short of the category’s all-time high, the Internet, by and large, remains a more amiable means of shopping for a variety of merchandise compared with traditional retail. Still, there are exceptions to this rule. The very best of traditional retailers—such as Publix, Nordstrom, Office Depot, and Costco—outperform the average for Internet retail. Among the individual online retailers, Amazon retains its lead despite a 1% drop to an ACSI score of 85. The company remains the highest scoring in the ACSI among Internet, department, discount, or specialty retailers. Close behind Amazon, Newegg scores 84 after a 1% slip, while eBay gains 2% to an ACSI benchmark of 83.

"The aggregate of smaller websites improves 2% to match the online retail average at 82, followed closely by Overstock, down 2% to 81. Among online retailers, only Netflix falls well below the category average, inching up 1% to 75. In 2011, customer satisfaction with Netflix plunged 14%, one of the largest-ever single-year drops in ACSI history, as a result of hefty price increases. Now, the price shock has settled and customer satisfaction remains about where it was after the price hike."

Department & Discount Stores...

"Customer satisfaction with department and discount stores rises slightly, increasing 1.3% to 77. The juxtaposition of higher-priced department stores that offer better service and higher quality merchandise and discount chains that offer lower prices creates a mixed picture of highs and lows across the industry. Department store Nordstrom leads the way, unchanged at an ACSI score of 84, while discounter Wal-Mart is last, inching up 1% to 71. While quality trumps price with respect to customer satisfaction, pricing pressure remains a challenge for all retailers amid sluggish consumer spending. Even the high-end department stores have resorted to more price promotions to boost sales, particularly during the holiday shopping season ... Well below the field are Sears, down 1% to 75, and Wal-Mart at 71. Sears continues to struggle following its acquisition by Kmart, while Wal-Mart continues to offer the same mixture of lower quality and lower prices that has kept sales strong and customer satisfaction weak for several years. A big part of Wal-Mart’s challenge is that the chain is no longer the only game in town when it comes to discounting. Twenty years ago, Wal-Mart was able to beat the industry average for customer satisfaction, not because quality was better, but because it had the low-price market essentially to itself. That is no longer true."
KC's View: