How Much Money Do Retailers Leave on the Table?

Our 2007 study clearly shows that online retailers are not capitalizing on the customer experience and are overly focused on innovation while ignoring the basics.

U.S. online retail sales will more than double over the next six years, reaching $316 billion by 2010, according to a new report from Forrester Research — they expect e-commerce will grow to account for 12 percent of total retail sales in 2010, up from nearly 7 percent in 2004.

Industry observers report that, since the advent of the Internet, online sales have increased overall by about 25% annually (“Online Sales Lose Steam,” The New York Times - June 17, 2007). But they also note that sales are leveling off as customers return to brick-and-mortar venues for a more satisfying shopping experience.

A similar Forrester study in April 2006 revealed that only 26% of online consumers were simply satisfied with their shopping experience. This suggests a whopping 74% — three-quarters of online shoppers — weren’t even satisfied. And what of the remaining 26%? They weren’t delighted. They were merely “satisfied.” In other words, the shopping experience was, at best, adequate. Are retailers in a race to see who can be the “most adequate”?

The Importance of Customer Experience

With all the investments and improvements within the last five years in redesigns, usability, analytics, multivariate testing, and the increases in broadband speed and availability, one might have expected significant improvements in bottom line. Yet, according to Shop.org, conversion rates are still hovering around 2.5%. Customers aren’t delighted.

Research by companies like Bazaarvoice, however, paints a different picture of the current “leveling off” in the e-business world. Their results indicate the problem doesn’t lie in the allure of the offline shopping experience, but in the failure of online stores to present a customer-focused shopping environment. In our experience, many of these sites also fall short of customer-focused excellence because they fail to effectively integrate with their offline counterparts.

Sam Decker, CMO of Bazaarvoice said, “According to customers, what were once ecommerce nice-to-haves are now table stakes. Easy checkout, product search and the right policies are as important as multi-channel integration and authentic user-generated content, such as ratings and reviews. The way customers research, shop and buy has evolved. Future Now’s study underscores the need for retailers to do the same and reconsider priorities.”

To analyze the extent to which websites focus on the customer experience, Future Now sent mystery shoppers and Conversion Analysts to over 300 retail websites to gather information for our 2007 Retail Customer Experience Study.

What the Customer Focus Study Reviewed

The study consisted of visiting a retailer’s website and answering a series of Yes/No questions about the availability of 69 different factors that reflect a focus on customer experience. These factors were weighted based on our 10 years of optimizing retail website experiences and totaled to arrive at an eventual score for each site. The features we asked our shoppers and analysts to address include:

• Quality and detail of images (e.g., “Could the shopper zoom in?,” “Did the retailer provide product images from multiple angles?”)
• Product copy description answering the shopper’s implicit questions
• Whether the retailer offers customer reviews
• How the retailer met the shopper’s gift buying needs (e.g., “Did the retailer offer gift wrapping, messaging or gift certificates?”)
• Ease and simplicity of checkout (e.g., “How many pages did it take to check out?” “Did the retailer provide a progress indicator?”)
• Retailer’s ability to address the shopper’s concerns (e.g., return policies, guarantees, third-party seals and security assurances)
• Ease and clarity of retailer return policies
• Providing of shipping and tax totals early in the checkout process
• Offering multiple payment options (e.g., pay-by-check, PayPal, etc.)
• Offering estimated delivery times and showing in-stock availability for items
• Offering in-store pick-up where physical stores exist

We specifically asked the mystery shoppers to ignore:

• price points (inclusive of tax, shipping and handling);
• the ease in locating the products;
• the efficacy of the brand in conveying confidence;
• the impact of overall design on credibility and sales;
• the entire customer experience from search to purchase fulfillment.

Rather than evaluating the entire customer experience, this study provides a benchmark for retail sites based on more objective criteria. Therefore, our 2007 Retail Customer Experience Study provides a thumbnail view of how businesses speak to the needs of their customers.

There’s much work still to be done and plenty of opportunity for improvement. The top-rated site in this study scored only 67 out of a possible 100. Even the top-rated company has plenty of room to grow before it has thoroughly delighted its customers and improved its bottom line.

Given the results of our study, Future Now further believes that companies which lavish attention on improving customer focus will reap more sales and experience superior customer-retention rates in the long term .

The Results: 2007 Online Retail Study for Customer Focused Excellence

Congratulations to the top fifteen retailers for their efforts at providing visitors a customer-centric experience.

The Overall Leaders:

1. SmartBargains.com 67
2. BestBuy.com* 66
3. Compactappliance.com 66
4. BlueNile 65
5. EasternMountainSport 64
6. BackCountry.com 63
7. TigerDirect.com 63
8. CDUniverse.com 63
9. Ebags.com 63
10. Staples.com 63
11. AmericanMusical.com 62
12. Landsend.com 62
13. Crutchfield.com 62
14. Walmart.com 62
15. Walgreens.com 62

*Moved from 11th to 2nd since launching customer-generated reviews.

Average score for all retailers = 43 (± 11)

The Leaders by Category:

Apparel / Fashion
1. eBags.com
2. Landsend.com
3. Lids.com, Bluefly.com, LLBean.com

Electronics
1. BestBuy.com
2. TigerDirect.com
3. Crutchfield.com

Food
1. SurLaTable.com
2. Cooking.com
3. Berries.com

Jewelry
1. BlueNile.com
2. Ice.com
3. Diamond.com

Children / Toys
1. OneStepAhead.com
2. KBToys.com
3. BabyAge.com

Housewares / Kitchen
1. CompactAppliance.com
2. BedBathandBeyond.com
3. SurLaTable.com

Office
1. Staples.com
2. OfficeDepot.com
3. OfficeMax.com

Mass Merchants
1. SmartBargains.com
2. Walmart.com
3. Target.com

Selected highlights learned from the study:

* 58% offer gift certificates.
* 24% do not allow customers to enlarge the product image.
* 37% offer multiple image views of products.
* 33% offer customer reviews.
* 38% of sites have difficult to read fonts. (This is especially telling considering that, this year, our average age of reviewer was younger than ever before. Only 14% allow customers to change the default font size while viewing their website.)
* 43% offer free shipping.
* 61% do not offer any information on the product page regarding in-stock availability
* 52% of retailers have physical stores; only 10% of all retailers offer in-store pickup of orders.
* 74% offer estimated delivery times.
* 42% provide shipping cost early in the checkout process. 35% have a checkout process with more than 4 steps.
* (Only) 58% correctly answer an e-mail question within 24 hours.
* 20% offer pay-by-check, 10% offer Google Checkout, 20% accept PayPal and 18% offer Bill Me Later.

This study reflects significant factors that customers have come to expect. Having worked with online retailers for the past decade to observe how customers buy at retail websites, Future Now knows that customers notice the little things. In the long run, customers vote with their dollars for companies that have an intense focus on satisfying their needs.

Curious to know how your e-tail site measures up? Contact us to find out how you rank.

Related Posts:

• Online Retailers Fail Customer Experience 101
• Yahoo Beats Google in Customer Satisfaction
• The Grok's Biggest Gripes
• Study: Brand Erosion Caused By E-Commerce Friction
• Why Free Web Tools Make Customers Want to BUY NOW