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It's 2012, but these major retailers still can't get online right

By Douglas A. McIntyre, Charles B. Stockdale, Michael B. Sauter, 24/7 Wall St.

Customer service surveys cannot entirely distinguish between true, direct customer service on the one hand and brand perception and reputation of the company providing the service on the other. A look at the customer service scores of the largest retailers proves that point. 24/7 Wall St. examined the internet retailers with the best and worst customer satisfaction ratings based on ForeSee’s Holiday E-retail Satisfaction Index.

To put those customer service rankings in context, we looked at how the parent companies that own the websites have performed recently. We found that a strong customer service rating often coincides with a company that has widely regarded brands.

It begs the question: Does Apple have such a high customer service ranking because so many consumers love the Apple brands? Or, is Apple’s customer service for online shoppers really superior to that of other e-commerce businesses? Apple is tied for second place in the index. Amazon.com is in first place. It also has a sterling reputation with consumers, as do some of its major products like the Kindle.

At the bottom of the ForeSee index are Gap, Sony, and Overstock. Gap recently said it would close 21 percent of its U.S. flagship stores. Sony has had trouble gaining sales for its PCs, games, smartphone and TV products. Overstock, an also-ran online department store, was founded in the days of the dial-up internet. It is hard to see how any of these could be at the top of the list. Or, perhaps if they were at the top of the list, they would not be in such deep trouble now.

ForeSee’s E-retail Satisfaction Index included the top 40 retailers by sales. The company surveyed 8,500 customers between Thanksgiving and Christmas. Despite its shortcomings, 24/7 Wall St. used the data from ForeSee as a foundation, because it is a reasonable measurement of the experience that consumers have with specific e-commerce sites, whether those sites are part of highly successful companies or ones on the verge of failure.

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There is also some evidence that a few troubled retailers have actually performed well online. Whether that success is enough to save the companies themselves is impossible to tell. One such example is Avon, with online service that is tied for second among all e-commerce sites in the ForeSee index. But Avon recently posted a disastrous quarter, and its CEO of 12 years was dismissed. Similarly, JCPenney’s online operations’ customer satisfaction is equal to Apple’s, which is also tied for second place in the ForeSee rankings. However, JCPenney has lost sales to big-box retailers such as Walmart for years. It is worth noting that JCPenney just hired the head of retail stores at Apple to turn the bricks-and-mortar retailer around. Apple is one of the few companies that was successful online long before it began to build physical stores.

These are the companies with the worst online customer satisfaction. To draw our conclusions about why they are on the list and what the relationship is between the companies and their e-commerce operations, we examined three factors: the ForeSee satisfaction data, the annual sales of each of the companies, and the amount of traffic each site had in November— the most recent month measured by audience research firm Compete.com. Foresee describes its rating as “Average customer satisfaction with the top 40 U.S. e-retail websites increased by one point this year to tie 2009’s all time high score of 79 on the study’s 100-point scale. Satisfaction scores for individual e retailers span a 16-point range, from a high of 88 (Amazon) to a low of 72 (Overstock).”

 

The Worst Online Stores This Holiday

10. Target.com

  • Score: 76
  • Point change from last year: -1
  • Audience size: 59,284,283
  • 12-month change: +12.86 percent
  • Revenue: $67.4 billion

Target has the second-most sales of any company in the world and the third-most visits among e-retailer sites, behind Amazon.com and Walmart.com. However, while Walmart’s site rated average for customer satisfaction during the holiday shopping season and Amazon.com rated the highest, Target.com falls among the 10 worst e-retailers, with a score of 76. Earlier this year, the big-box retailer chose not to renew its contract with Amazon, which had been running Target’s site. Since Target transitioned to running its own website, Target.com has experienced repeated crashes.

9. Blockbuster.com

  • Score: 75
  • Point change from last year: +0
  • Audience size: 3,194,674
  • 12 month change: +8.40 percent
  • Revenue: n/a

Blockbuster currently has one of the worst brand reputations. The company filed for Chapter 11 bankruptcy in September 2010 and was subsequently acquired by Dish Network. The brand now barely exists, and one could argue that the company may not be around much longer.

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8. OfficeDepot.com

  • Score: 75
  • Point change from last year: -1
  • Audience size: 5,949,331
  • 12-month change: +0.08 percent
  • Revenue: $11.6 billion

Office Depot, along with OfficeMax and Staples, is suffering as a business. Revenue has dropped each year since 2007. Office Depot’s online presence is also doing poorly. This has clearly hurt customer service, as OfficeDepot.com has among the lowest customer satisfaction scores.

7. OfficeMax.com

  • Score: 75
  • Point change from last year: +0
  • Audience size: 3,650,460
  • 12-month change: -2.86 percent
  • Revenue: $7.2 billion

Like Office Depot and Staples, Office Max is part of a dying breed of large-scale brick-and-mortar office supply centers. Compared to closest competitor Office Depot, it is doing somewhat better, turning a reasonable profit in 2010 for the first time in three years. And that’s after earning just $1 million two years ago. However, site traffic is down compared to 12 months ago. And with a customer satisfaction rate during the holidays of just 75, OfficeMax.com is going to struggle to keep customers away from Amazon.

6. Sears.com

  • Score: 75
  • Point change from last year: +1
  • Audience size: 31,007,405
  • 12 month change: +19.06 percent
  • Revenue: $43.3 billion

While Office Max and Office Depot struggle, Sears is in a league of its own. After reporting even worse-than-expected holiday sales, the company shares dropped nearly 30 percent in one day. The company has also announced it would be closing 120 locations. The fact that the company’s website had the sixth-worst customer satisfaction among e-retailers does not bode well for Sears’ long-term recovery.

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5. ToysRUs.com

  • Score: 75
  • Point change from last year: -2
  • Audience size: 23,247,431
  • 12-month change: +13.86 percent
  • Revenue: n/a

Toys “R” Us is currently a private company, but it is about to have its initial public offering. However, it has been 15 months since the company filed the initial paperwork, and according to sources in The Wall Street Journal, the transaction will not happen until at least early 2012. Toys “R” Us brick-and-mortar sales are down. Same-store sales for the 13 weeks that ended October 29th have declined 2.2 percent in the U.S. and 3.9 percent overseas.

4. Buy.com

  • Score: 74
  • Point change from last year: -3
  • Audience size: 4,435,356
  • 12-month change: -27.29 percent
  • Revenue: n/a

Buy.com was founded in 1997 and is one of the oldest e-retailers in the world. Originally selling overstock items, the company has since moved to directly compete with Amazon. However, the company has not been half as successful as Jeff Bezos’s company. Traffic on Buy.com has dropped more than 27 percent over the past 12 months. Customer satisfaction during the all-important holiday shopping period dropped three points, from an already poor score of 77 to a 74.

3. Store.Sony.com

  • Score: 74
  • Point change from last year: -2
  • Audience size: 2,938,348
  • 12-month change: N/A
  • Revenue: n/a

Sony, like Apple 30 years ago, does not have many new products to drive its brand. Revenue has decreased significantly since 2007. The customer satisfaction score for the company’s online store has dropped two points from last year. These facts imply a growing unhappiness among consumers.

2. Gap.com

  • Score: 73
  • Point change from last year: -5
  • Audience size: 13,153,291
  • 12 month change: +7.86 percent
  • Revenue: $14.6 billion

Gap has been a profitable company for years, but it is struggling of late. The American retailer has just announced it would be closing 21 percent of their North American locations by 2013. This shift away from bricks-and-mortar may be a wise move, but for a website that had more than 13 million unique visitors in November, the company should invest more in its customer service. Online shopper satisfaction at Gap.com dropped an incredible 5 points from the last holiday season to this. Gap.com now has the second-worst score among all e-retailers.

1. Overstock.com

  • Score: 72
  • Point change from last year: -4
  • Audience size: 17,106,353
  • 12-month change: -15.04 percent
  • Revenue: $1 billion

Overstock.com has the lowest customer satisfaction score for 2011. Additionally, the number of unique visitors the site receives has dropped dramatically over the past year. The company’s CEO, Patrick M. Byrne, has frequently been referred to as one of the worst CEOs in the U.S. At this point, it is hard to imagine the company improving in such a significant way that it could rival competitors such as Amazon.com, which is doing just about everything right.

Click here for 24-7 Wall St.'s list of the best online retailers this holiday.