Online Sales Up, Service Down

Online merchants had a great holiday shopping season. But they’d better watch out: Customer satisfaction is dropping.

That’s the verdict of two separate reports released on Tuesday. The e-tailing group and ForeSee Results both found evidence that online merchants could be growing complacent. But this contradicts a recent report by Goldman Sachs, Nielsen//NetRatings and Harris Interactive that holiday shoppers spent more than $30.1 billion online in the weeks leading up to Christmas 2005.

What’s more, according to eMarketer, sales over the Internet increased by 25 percent over 2004.

So what gives? Market analysis firm e-tailing group released the results of its eighth Annual Mystery Shopping Study in which researchers evaluated the shopping experience at 100 shopping sites.

Customer service initiatives, such as personalization and shipment tracking were slightly down from the 2004 holiday season, the group found.

ForeSee Results saw a similar drop in customer satisfaction. According to ForeSee’s Top 40 Online Retail Satisfaction Index, conducted in conjunction with FGI Research, consumer satisfaction with almost all of the top 40 retail Web sites dropped over the holiday season.

First, the good news: The e-tailing group found 10 shopping sites that met all of its criteria. They are, in alphabetical order, Ann Taylor, Bluefly, Blue Nile, Brookstone, Crutchfield, Finish Line, J. Crew, Sephora, SmartBargains and Tower Records.

Merchants were ranked based on 12 criteria, including offering a toll-free telephone number and keyword search. They needed to answer e-mail questions within 25 hours, state the holiday shipping deadline and let shoppers check out with six or fewer clicks.

While they met the e-tailing group’s criteria, the 100 sites delivered slightly worse customer service than they did last year. For example, 62 percent of the sites this year offered some kind of guarantee, while 71 percent did in the last quarter of 2004.

Only 88 percent offered a 100 percent guarantee of merchandise this season, while 93 percent did last year.

ForeSee’s holiday update of its Online Retail Satisfaction Index provides a comparison of online shopper satisfaction between the holidays and the rest of the year.

The study found that, despite increased online revenues, overall satisfaction dropped a significant four percent from spring 2005 to the 2005 holiday season.

Of the top 40 online retailers measured for the index, all but four had lower customer satisfaction scores during the holidays than when they were measured in the spring.

The leaders in satisfying customers’ holiday shopping joneses were Netflix, with a rating of 84;, with an 82 rating; and LLBean and QVC, both rated 80. ForeSee said 80 was an excellent score.

The sites with the biggest satisfaction drops were, scored at 67; and Kmart and Sears, both earning scores of 68. The sites with the biggest drops from spring to the holiday season were, down 10 percent;, down nine percent; and and, both with eight percent declines in customer satisfaction.

“During the holidays, it’s more important than ever to do a good job at meeting and exceeding the needs and expectations of those new and infrequent online shoppers because you’ve paid more to attract this audience, you have so many more of them, and the stakes are so much higher,” said ForeSee CEO Larry Freed in a statement.

“Retailers’ inability to satisfy this segment of online holiday shoppers translates into what we call a ‘lost loyalty conversion opportunity.'”

Lauren Freedman, president of the e-tailing group, said in a statement, “We hope that the customer service frustrations we experienced ‘mystery shopping’ these 100 merchants in [the fourth quarter of 2005] was just a bump in the road as e-commerce evolves to a more mature channel.

“We cannot lose site of the fact that short-cutting is a short-term strategy while exemplary execution is required long-term for online selling to foster loyalty, retention and grow sales.”

Adapted from

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