Customer satisfaction drops for e-commerce sites

The online shopping experience last year left customers less satisfied with e-commerce than they were in 2007, according to a new report.

The online shopping experience last year left U.S. customers less satisfied with e-commerce than they were in 2007, according to a new report.

That's the finding from the annual e-commerce satisfaction report from the University of Michigan and ForeSee Results. Based on the American Customer Satisfaction Index (ACSI) methodology, the report reveals that customer satisfaction dropped 2 percent to 80 points for e-commerce vendors.

The researchers attributed the increase in customer displeasure in general to the worsening economic conditions, which leads to slips in customer service and makes people generally less tolerant.

Although it may seem counter-intuitive at a time of economic crisis, e-commerce vendors must step up their game through investments, a focus on innovation and a sharpening of their operations, ForeSee CEO Larry Freed said in a telephone interview. Pulling back and playing defense won't cut it, because it will not result in more satisfied, loyal customers.

"Consumer spending has cooled. It's shrinking or not growing as it used to. But the number of retailers, brokerages and travel companies that are competing for that [business] is still the same, at least for now. That results in a hyper-competitive environment," Freed said.

For example, e-commerce providers can differentiate themselves by offering their products and services via mobile phones, so investing in a new mobile platform, or upgrading an existing one, could be a good move, he said.

In addition, having good data-analysis software is key for e-commerce providers to properly evaluate the effectiveness of advertising and marketing campaigns, as well as their sales performance, Freed said.

"The key is we're in this ultracompetitive state. The rising tide won't lift all online vendors like it has in the past 10 years," he said. While it's difficult to do, you have to invest and innovate to move forward. It's not a time to cut, cut, cut. If all you're trying to do is survive a shrinking revenue, that's a death march. Try to gain market share, step up your innovation, use your dollars effectively. You'll then not only survive, but come out on top," he said.

Online brokerages fared the worst in the report. Collectively, their customer satisfaction fell 6.3 percent to 74 on the 100-point ACSI scale, the researchers said. Online retailers had a decrease of one point to 82, while the online travel category saw no change from 2007 at 75 points.

TD Ameritrade had the biggest drop among online brokerages with an 11.3 percent decline in customer satisfaction, which ForeSee and the University of Michigan blame not only on the economy but also on a controversy over the yield of a bond fund that is the target of a class-action lawsuit.

Fidelity led online brokerages with 80 points, down from 84 in 2007, followed by Charles Schwab with 78 points, down from 82.

Online brokerages suffered from the inherent customer dissatisfaction that accompanies the shrinking value of investment portfolios, Freed said. But there was also something else at play.

"The trust factor played a big role, as financial services institutions fell under duress and people worried about their capability to survive," Freed said. "Consumers lost a lot of trust in financial services firms in general."

A good example of a company that has dealt well with the crisis is Fidelity, through effective communication with its customers and proactive measures to meet their needs and put their minds at ease, he said.

Among online stores, eBay had the biggest slip, down 4 percent to its lowest score -- 78 points -- in the nine-year history of this study. The researchers attribute that finding in part to increased price competition from major retailers challenging eBay's reputation for deals and discounts.

"With the deep discounting we saw by all retailers during the holiday season, the value proposition of buying a used product from [an] individual was less of a contrast to buying a new product at a 60 to 70 percent discount from a major retailer," Freed said. "That was a big challenge for eBay."

In e-tail, Newegg snatched the first place away from Amazon with 88 points, up from 87 in 2007. Amazon came in second with 86 points, down from 88, followed by Netflix with a score of 85, up one point.

In the online travel category, Expedia ranked first with 77 points, up from 75, while Travelocity came in second with 75 points, up from 73, and Orbitz was third with 74, up one point.

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