Two years removed from its all-time high, customer satisfaction with the retail sector falls for a second consecutive year. Fourth quarter data from the American Customer Satisfaction Index (ACSI) show a slide of 2.6 percent to 74.8 on a 100-point scale. Despite the decline for 2015, the overall score for retail stands nearly exactly at its long-term average. Among the six retail categories covered by the ACSI, all drop but one: gas stations. Due to the lower cost of fuel, customers are more satisfied.
“Customer satisfaction with retail has been higher than its historical norm over the past few years as the economy slowly emerged from the Great Recession,” said Claes Fornell, ACSI founder and chairman. “This was because it was a tough environment to compete in. Job security for customer service personnel was hard to come by and everybody was trying harder to please customers. As both job security and employee turnover have increased, the level of customer service seems to have worsened.”
Supermarkets: Less than super
After several years of relatively higher customer satisfaction, supermarkets register their lowest ACSI score in more than a decade, dropping 3.9 percent to 73. Supermarket leader Wegmans is one of only three companies in the retail sector to improve customer satisfaction, up 1 percent to 86 and securing a share as the highest-scoring company in the Index overall. Trader Joe’s (83), H-E-B (82) and perennial high performer Publix (82) round out the top supermarket chains. Aldi is stable at 81, while ACSI newcomer Hy-Vee, which is employee owned, debuts at 78.
Whole Foods suffers a 10 percent customer satisfaction hit, plunging to 73 to match the previous low posted in 2007 when the company debuted in the ACSI. Whole Foods cannot shake its reputation for high prices, and customers recently have reported the perception of increasing prices despite the grocer’s statement that it is trying to align its pricing to be competitive with other grocery stores. Additionally, competition is encroaching on its turf as a supplier of natural foods. Target, Walmart and others have increased their inventory of organic offerings providing an alternative to those who want organic foods at a lower cost.
Target’s supermarket operations plunge 12 percent to 71. Popular as a discount store, Target quickly built up its grocery business to help attract more customers. But the luster of convenience is wearing off as the company works to expand its grocery brands and fresh food offerings. At the bottom of the industry, Albertsons dives 8 percent to 68 as it works out the kinks from its merger with Safeway. Giant Eagle and Walmart share last place at 67.
“When consumers put a premium on service and quality, smaller companies often achieve higher customer satisfaction scores, and it’s the smaller independent chains that continue to set the bar for supermarkets,” said ACSI Managing Director David VanAmburg.
According to customers, the supermarket experience has eroded across nearly every element compared with a year ago. The customer service areas that have suffered the most are staff courtesy and helpfulness (-6 percent to 77) and quality of pharmacy services (-5 percent to 76). These also are the weakest areas for grocers, along with checkout speed (72) and call centers (78).
Lower satisfaction for internet retail, but beats brick and mortar
Internet retail, which includes websites of brick-and-mortar stores, remains ahead of every other retail category despite a 2.4 percent drop to an ACSI score of 80. Every single online company shows deteriorating customer satisfaction, but Amazon continues its dominance at 83, remaining among the highest-scoring companies in all of the ACSI. Online retail sales growth year over year was about 13 percent for the holiday quarter, but Amazon nearly doubled that pace at 22 percent.
Netflix raised its subscription price for new customers in October, and existing customers will be impacted later this year. Its customers have shown price sensitivity in the past, and its ACSI score drops 6 percent to 76 as subscriber growth also slows. Computer and electronics online retailer Newegg scores 79, while eBay and Overstock bring up the rear at 75 and 73, respectively. The group of all other online retailers matches the category average of 80.
Department and discount stores: Nordstrom still tops, Walmart still bottoms
Department and discount stores offer a case in point for the return to long-term averages, as the category loses 3.9 percent to 74 and returns to pre-recovery levels of customer satisfaction. Although no company has improved customer satisfaction, the top and bottom companies remain in place. Nordstrom has an ACSI score of 82, which is the best in class; a position it has held every year. Walmart remains in the basement with a score of 66. The next closest chain, Sears, is 5 points higher at 71. Macy’s 8 percent drop to 73 returns the company to near pre-recovery customer satisfaction levels, but the large decline coincides with a disappointing holiday season.
“Macy’s is in a tough spot as it tries to figure out how to best allocate resources between storefront and online channel,” said VanAmburg. “Closing stores and reducing workforce might help the bottom line in the short term but only at the expense of customer satisfaction, which could create problems in the long term.”
Among “dollar” stores, Dollar Tree (76) edges out Dollar General (74). ACSI newcomer Fred Meyer cracks the top three for department and discount stores with an ACSI score of 79, just behind Dillard’s at 80. Kohl’s (77) and Target (75) come in just ahead of J.C. Penney and new ACSI entrant Ross (both 74).
Costco and L Brands repeat at peak of specialty retail
Specialty retail slips 2.5 percent to 77 but is still above where the industry was before the Great Recession. L Brands, which owns Victoria’s Secret and Bath & Body Works, joins Costco atop the specialty retail ratings at 81. Despite its thinning retail presence, Barnes & Noble continues to beat the industry average for customer satisfaction with a score of 79. Video game mega-retailer GameStop bucks the negative ACSI trend, up 1 percent to 78.
Among 22 specialty retailers, 15 are below the industry average for customer satisfaction. Abercrombie & Fitch, which debuts at 65, is the lowest-scoring company in the retail sector. Over the last two years both its revenues and profit are down, and its stock has followed suit. Home improvement competitors Lowe’s (74) and The Home Depot (73) haven’t been this close in customer satisfaction since 2011, a time when the housing market began to show signs of recovery. Costco competitors BJ’s Wholesale Club and Sam’s Club tie at 76. Newcomer AutoZone (75) comes in ahead of its rival Advance Auto Parts (72), also a new entrant in the ACSI.
Among other clothing retailers, TJX (TJ Maxx, Marshalls) remains at 78 for a second year in a row. Burlington Coat Factory makes its first appearance at 76 and Gap (Gap brands, Banana Republic, Old Navy) is in line with its long-term average at 75.
Large drug stores lag in health and personal care stores
Health and personal care stores suffer a steeper decline in customer satisfaction than any other retail category, shedding 5.2 percent to a record low of 73. Walmart’s drug stores are at the bottom with 68, and the company scores last in every retail category covered by the ACSI. Walgreens, the largest drug store retailer, falls 4 percent to 74. Ride Aid plunges 12 percent to 69, tied with Safeway’s in-store pharmacies.
Kroger at 81 and Target’s in-store pharmacy business at 80 lead for customer satisfaction among pharmacies. CVS recently acquired Target’s drug store operations. Given CVS’s much lower customer satisfaction (71), it will be interesting to see if the merger will help CVS more than it will hurt the Target, according to the ACSI spokesmen.