Brick and Mortar Stores Aren’t Dead Yet -- Customer Satisfaction Higher Than Online

The holiday season was a good one for brick and mortar stores -- at least as far keeping customers happy.

Feb 25, 2014 at 7:45AM

Customers are happier with traditional brick and mortar retail stores, and are showing increased dissatisfaction with Internet retailers.

According to a report released on Feb. 19 by the American Customer Satisfaction Index, the retail sector gained 1.7% to an ACSI benchmark of 77.9. It was boosted by higher customer satisfaction with specialty retail stores, supermarkets, drug stores, and gasoline service stations. A fourth traditional retail industry -- department and discount stores -- shows no change in customer satisfaction compared with a year ago.

Internet retailers fell in the ratings, however. ACSI Chairman Claes Fornell said in a press release that the Internet retailers were done in by their own success.

"A spate of last-minute holiday purchases online, combined with inclement weather, left some buyers disgruntled by delayed shipments," said Fornell. "That's the likely reason for Internet retail getting its lowest customer satisfaction benchmark in more than a decade. Nevertheless, diminished foot traffic at malls—along with a surge in shopping via mobile phones and tablets—indicates that consumers are increasingly embracing the advantages of online commerce."

Higher-end, happier customer?
Upscale Nordstrom  (NYSE:JWN) got the highest mark in the survey with a score of 83, while discounter Wal-Mart (NYSE:JWN) was the lowest at 71. In general, though, the chains selling higher-priced merchandise do not necessarily score higher customer satisfaction marks than those selling discounted goods.

"Discount chains Kohl's (NYSE:KSS) and Dollar General (NYSE:DG) are both above average for customer satisfaction and are among the industry's top four, while Macy's (NYSE:M), a traditional department store, comes in at the low end," said ACSI Director David VanAmburg. 

Target (NYSE: TGT), which was the victim of a credit card fraud scandal where the card numbers of 40 million customers were compromised, saw its ACSI benchmark fall the most of any company with a 5% drop to 77.

Busy Internet leads to angrier customers

The report showed that customers were less happy with Internet retailers, with the overall category dropping 4.9% to an ACSI benchmark of 78; this was the lowest score since 2001. Those results, however, are somewhat misleading as the major Internet players scored higher than average. The category's numbers were brought down overall by smaller sites, including the websites of brick-and-mortar retailers. (NASDAQ:AMZN), which had the highest rating at 88 (an improvement of 4%), scored that rating in a period where  net sales increased 20% to $25.6 billion in the fourth quarter, compared with $21.3 billion in fourth quarter 2012.

eBay (NASDAQ:EBAY) dropped 4%, but still scored an 80, while dropped 2% to 79. Netflix (NASDAQ:NFLX) might be the big winner as it gained 5% to score a 79; this was a major improvement, but still well below its score of 87, which plummeted after the company's attempt to change its pricing structure in 2011.

Online retailers need to satisfy customers
Based on the survey results, online retailers appear to win more customers when they have a higher level of customer satisfaction. That makes sense, as it seems logical that customers would not want to give their credit card information to an online store that did not offer a satisfying (and trustworthy) experience. In the digital world, it's easier to hop to another site than it is to go to a different physical store in the real world.

Customers in the physical world can buy a can of soda from Wal-Mart because it's cheapest, or spend more at a neighborhood convenience store because of convenience. Even if that local store is in a bad neighborhood, has a surly clerk, and only takes cash, you still might buy the soda because you're thirsty and it's just around the corner.

In the online world, where merchandise is bought a little bit more on faith, it makes sense for shoppers to trust the most established sites. According to ACSI, "shoppers find the checkout and payment processes of online retailers (ACSI benchmark of 90) to be vastly superior to that of traditional department and discount stores (72) or specialty retailers (77.)"

Who will win?
An online store that offers a bad customer experience may never see that customer again. A physical store that offers a mediocre experience, but is on the customer's way home from work, might get another shot. With the top online retailers leading their physical counterparts in customer satisfaction (despite the dip caused by increased holiday business), it seems that at some point the trust factor will switch to the top online retailers.

If Amazon scores an 88 for customer satisfaction and Wal-Mart scores a 71, might there be enough of a gap that Amazon has overcome the fact that it has no physical store and can't offer immediate satisfaction? Judging by Wal-Mart's huge sales numbers, this may not be happening yet. Physical retailers are clearly losing business to online competitors, however. If online retailers continually satisfy their customers at higher levels than physical stores, it may be only a matter of time before physical stores start to suffer and even disappear.

The next step for you
Want to profit on business analysis like this? The key for your future is to turn business insights into portfolio gold through smart and steady investing … starting right now. Those who wait on the sidelines are missing out on huge gains and putting their financial futures in jeopardy. The Motley Fool is offering a new special report, an essential guide to investing, which includes access to top stocks to buy now. Click here to get your copy today -- it's absolutely free.

Daniel Kline has no position in any stocks mentioned. The Motley Fool recommends, eBay, and Netflix. The Motley Fool owns shares of, eBay, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers