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Netflix is Biggest E-Commerce Loser As Competition Heats Up: ACSI

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ANN ARBOR — Netflix suffered one of the largest drops in ACSI history as e-commerce inched up and competition stiffened, according to the American Customer Satisfaction Index’s annual E-Commerce Report, produced in partnership with the Ann Arbor customer satisfaction measurement consultant ForeSee.

Customer satisfaction with e-commerce Web sites overall was up 1 percent to 80.1 on the ACSI’s 100-point scale. But Netflix plummeted 14 percent to 74, the lowest score of any e-commerce Web site in the Index.

“E-commerce continues to shine in satisfaction, seemingly regardless of economic conditions,” said Claes Fornell, founder of the ACSI. “It is no wonder the sector continues to grow when you consider that satisfied consumers are more likely to increase spending as their means allow. Satisfaction with brick and mortar retail is also improving, but we may never see it match the scores held by retail websites.”

A full analysis of scores released Tuesday is available on ForeSee’s Web site, and a table with all scores can be found at http://photos.prnewswire.com/prnh/20120221/DE55230.

Online Retail

Satisfaction with overall online retail climbed 1 percent to 81, led by an improvement in the “all others” category (up 3 percent to 80), which reflects smaller e-retailers and other companies not individually measured. Amazon slipped 1 percent to 86, but still maintained its spot as the top online retailer in satisfaction, but former champ Netflix suffered a huge drop, placing it firmly in the basement, 6 points below the all others category.

After raising prices 60 percent and threatening to split its convenient DVD and streaming media rental services into two, Netflix customers left in droves and investors followed suit. The ACSI E-commerce Report, based on surveys collected in the fourth quarter, shows that the remaining customers are much less satisfied. Netflix’s DVD customer base is shrinking while streaming media customers continue to grow. This shift could potentially exert additional downward pressure on satisfaction, as Netflix struggles to beef up its streaming media content and DVD releases decline.

“Netflix’s fall from grace was predictable given their missteps, but shocking in its degree of severity even though everyone could see this coming,” said Larry Freed, president and CEO of ForeSee. “Though they’ve gained back many of the subscriber losses, it remains to be seen if Netflix will be able to satisfy them enough to keep competitors like Amazon and Hulu at bay. These results suggest that Netflix is vulnerable.”

Newegg gained a point, with a score of 85, putting the company in the position of second place and the closest online retailer to Amazon in customer satisfaction. Overstock.com and eBay remained unchanged at 83 and 81, respectively.

Online Brokerage

Customer satisfaction with online brokerage dropped 3 percent to 76. Last year, Charles Schwab led the pack and Fidelity has been a perennial leader. This year, Fidelity, up 1 percent, Charles Schwab, down 1 percent, and E-Trade, up 4 percent, tied to lead the sector with a score of 79. TD Ameritrade, up 1 percent to 78, was close behind. From 2002 to 2008, E-Trade was at the bottom of the list of measured companies, but has steadily increased its score over the past four years.

“Satisfaction is leveling out among the top online brokerage firms though their satisfaction is still ahead of the all others category considerably,” said Freed. “E-Trade is benefiting from its efforts to position itself as the leader in online investment tools and trading in a marketplace where investors and the industry itself have become more tech-savvy and comfortable in the online space.”

Online Travel

Customer satisfaction with online travel remains flat at 78, consistent with the category’s all-time high set last year. Travelocity, up 3 percent to 79, overtook Expedia, down 3 percent to 77, for the top spot. Expedia had led or held a share of the industry lead since 2000. Orbitz, up 1 percent, and Priceline, up 4 percent, rounded out the category with scores of 76.

A free report of the historical e-commerce scores for all companies measured by the ACSI is available at www.ForeSee.com.

Overall customer satisfaction with all aspects of the economy and government was up 0.1 percent to 75.8. Amazon, Nordstrom, Publix and Costco remained the top ACSI performers, while Wal-Mart was among the notable decliners, down 4 percent to 70, alone in last place at 70, 6 points below the industry average and the next-lowest chain, Sears at 76.

The fourth quarter 2011 national score is based on January results for government — which overall was nearly stable, up 0.1 percent to 67.0, despite a gain for federal services — along with new scores released Tuesday for retail and e-commerce. In total, 44 companies are measured within eight industries: supermarkets; department and discount stores; specialty retail stores; health and personal care (drug) stores; gasoline service stations; and Internet retail, brokerage, and travel.

The American Customer Satisfaction Index is a national economic indicator of customer evaluations of the quality of products and services available to household consumers in the United States. Data from interviews with approximately 70,000 customers annually are used as inputs into an econometric model to measure satisfaction with more than 225 companies in 47 industries and 10 economic sectors, along with over 200 services, programs, and websites of approximately 130 federal government agencies.

ACSI results are released on a monthly basis, with all measures reported using a scale of 0 to 100. ACSI data have proven to be strongly related to a number of essential indicators of micro and macroeconomic performance. For example, firms with higher levels of customer satisfaction tend to have higher earnings and stock returns relative to competitors. Stock portfolios based on companies that show strong performance in ACSI deliver excess returns in up markets as well as down markets. And, at the macro level, customer satisfaction has been shown to be predictive of both consumer spending and gross domestic product growth.

The Index was founded at the University of Michigan’s Ross School of Business and is produced by ACSI LLC. ACSI can be found on the Web at www.theacsi.org.

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