US consumers happier shopping online

NEW YORK: US consumers are more satisfied making retail purchases online than

they are shopping at traditional department and discount stores, according to a

survey by the American Customer Satisfaction Index, a quarterly consumer report

by the University of Michigan Business School.

The report, which was released on Monday, found that consumer satisfaction

with the online shopping experience earned a score of 78 points out of a

possible 100, which is significantly higher than the 72 points most recently

scored by department and discount stores.

The survey found that No. 1 online retailer Amazon.com Inc. scored an 84, the

highest of any service sector company included in the study, and discount

warehouse store operator Costco Wholesale Corp. had the top score of 79 points

among traditional retailers.

"There is little doubt that the importance of customer satisfaction in

e-business is already immense and that it will become even more critical in the

near future," said Claes Fornell, director of the National Quality Research

center and a professor at the University of Michigan Business School.

"Companies that don't provide a positive customer experience will get

much less repeat business and therefore be forced out of the marketplace,"

Fornell said. "Companies that provide superior levels of customer

satisfaction have better odds of making it."

Online retailer Buy.com Inc. scored a 78, while Barnesandnoble.com Inc.

scored a 77. Online auctioneer eBay Inc. scored an 80, while beleaguered

Priceline.com Inc. scored a 66.

Fornell said as Internet businesses are forced to pay higher customer

acquisition costs to attract business, the necessity of making sure those

precious customers are happy becomes increasingly important.

"Perhaps it is a slight overstatement to suggest that competition is

only a click away, but it is certainly true that the time and effort it takes a

buyer to find a new vendor is much lower in the Internet environment compared

with traditional business," Fornell said.

The survey shows that, as an industry, e-commerce scores very close to the

national consumer satisfaction average of 73.2, which includes several

industries, such as the postal service, the federal government and banks, for

instance.

"Even though e-commerce provides higher levels of customer satisfaction

overall, this is not true for all e-commerce companies," Fornell said.

"In view of the intense competition, the high cost of customer

acquisition, and the ease by which customers can switch vendors and abandon

their current suppliers, it seems safe to predict that companies that fail in

satisfying customers will face difficult times," Fornell said.

Despite the boost from the online retail sector, Internet portals, such as

those from Internet media networks America Online Inc. and Yahoo! Inc., scored

very low on the customer satisfaction index with about 63 points.

This is lower than telecommunications and postal service, each with 72

points, hospitals, the federal government and fast food, all with 69 points, and

banks with 68 points.

Even more, Yahoo! scored a 74, while America Online is one of the lowest in

the services sector with a score of 56 points on the index.

According to the index, although customer expectations for Yahoo! and AOL are

virtually identical, AOL has many more customer complaints and much weaker

customer loyalty.

AOL's shortcomings in customer satisfaction only clears the way for other

portals, such as Microsoft Corp.'s MSN Network, which scored a 71 on the index,

to benefit even further.

"These results suggest that MSN will pose a significant threat to

AOL," Fornell said. "In addition, both MSN's and Yahoo's home pages

are considered superior to that of AOL's by the respective customers."

The index is computed by the National Quality Research Center at the

University of Michigan Business School, along with the American Society for

Quality and CFI Group, a management consulting firm.

Thirteen e-commerce companies providing portal services, brokerage services,

retail, and auctions have been added to the 170 private sector companies, 29

federal government agencies, two types of local government service, and the US

Postal Service already included in index.

Consumer contentment is measured only for a specific sector of the economy

each quarter.

(C) Reuters Limited 2000.