business news in context, analysis with attitude

The American Customer Satisfaction Index (ACSI), from the University of Michigan’s Ross School of Business, is out this morning with its evaluation of products and services available to household consumers in the United States. Some excerpts:

• “As the economy improves, albeit at a very slow pace, aggregate customer satisfaction with goods and services has improved as well. The ACSI gain for the final quarter of 2011 is very small, but it represents the fourth consecutive quarter without a decline. The national ACSI advances by 0.1% to an overall score of 75.8. In total, the ACSI national average gained 0.7% in 2011.”

• “The good news is that customer satisfaction continues to climb, which has a positive effect on consumer demand and economic growth. The bad news is that the customer satisfaction improvement is tepid. This is particularly noteworthy because a good part of the higher customer satisfaction in Q4 comes from lower gas prices. Gas prices have since reversed course and are now rising, which means that customers obviously are going to be less pleased.”

• “Customer satisfaction with supermarkets improves by 1.3% to an ACSI score of 76, despite a continued rise in food prices. In 2011, the cost of food prepared at home rose 6.0%, following a 1.7% increase in 2010. Even though this is a price-sensitive market, the negative effect on customer satisfaction from higher prices was dampened by changes in stores (remodeling and freshening up) and by expansion of merchandise selections—all designed to improve the shopping experience for consumers, including making it easier to compare prices.”

• “As always, Publix Super Markets reigns supreme in customer satisfaction among grocers—as it has each year since 1994. Publix holds steady with an excellent ACSI score of 84. Meanwhile, Wal-Mart’s supermarket business is at the bottom of the category, down 3% to 69—a score that is well below the next-closest chain, Supervalu at 74 (unchanged). In an industry where most competitors try to leverage quality, in one form or another, as a means to compensate for price increases, Wal-Mart’s concentration on price alone does not seem to help satisfy customers. Many consumers may be patronizing Wal-Mart because their economic situation dictates it, not because they have a strong preference for it.

“Whole Foods Market places second behind Publix, inching up yet again with a 1% gain to 80. Customer satisfaction for Whole Foods has trended upward in every year since 2007—its first year of measurement in the Index. Whole Foods is one of many examples of the payoff from satisfied customers. Its large gain in ACSI (10%) over the past four years is nearly twice that of any other chain and its stock price is up more than 600% over the past three years.”

• “Retailers that specialize in particular merchandise, such as home improvement, electronics, office supplies, or books, also do a better job of satisfying customers. The category is up 1.3% to an ACSI score of 79 and 2011 marks the fourth straight year of customer satisfaction improvement. Membership warehouse clubs lead the way, with Costco on top, up 1% to 83, followed by Wal-Mart’s Sam’s Club brand, which gains 4% to 81. Barnes & Noble drops out of the lead, falling 4% to 79. Now alone among the big bookstore chains after Borders folded last year, Barnes & Noble is trying to stave off bankruptcy as the book industry continues to evolve in the digital age. The retailer faces tough competition from (and its much higher level of customer satisfaction—an ACSI score of 86). Amazon’s online model for selling books and music is more cost-efficient and its Kindle e-reader is a formidable competitor to Barnes & Noble’s Nook e-reader.”

• “After a drop a year ago, customer satisfaction growth with online retail is back up with a 1.3% gain to an ACSI score of 81. This is not quite the satisfaction level reached two years ago, but is still very high. In fact, Internet retail is the highest ACSI-scoring retail category, well above most traditional stores. Both Nordstrom and Costco, however, outperform the online retail average and do better in ACSI than all but the very best Internet retailers. In the latter group, Amazon leads at 86, despite a slight 1% falloff, followed closely by Newegg, which gains 1% to 85. Overstock is next at an unchanged score of 83. Matching the industry average, eBay is steady at 81. The aggregate of all other online retailers, including the websites of the brick-and-mortar chains such as Target and Wal-Mart, gains 3% to 80.”
KC's View:
I can’t help but feel that this is a house of cards, and that things like increased fuel prices are going to cast a pall on the economy, and that as a result consumer satisfaction and confidence are going to take a hit.