The entire traditional retail sector saw a decline in its customer satisfaction rating in the American Customer Satisfaction Index Retail Report 2014.
Retailers saw their collective score drop by 1.4% to 76.8: the first time it has fallen in four years. Aside from Internet retailers, which bounced back from their depressed score in 2013 when winter storms caused delivery delays, "all retail categories show weakening or flat customer satisfaction," according to the report. "Higher prices contribute to the downturn, with the strongest impact on retailers that sell non-discretionary products".
ACSI also cited the rising cost of food and other staples as a downward drag on supermarkets and drugstores, while noting that department stores and specialty retailers were less affected. The report also noted a 2.7% drop in consumer satisfaction with gas stations, but expects a rebound in 2015 due to lower prices.
What about department and discount stores?
Department and discount stores remained unchanged from the previous year as a category, putting up a score of 77: slightly above the overall retail average. This was the only brick and mortar retail category in the report that did not post a decline. That's a positive, but the news was not all good for every company in this segment.
"Foot traffic and sales dropped by 8% on average for big box retailers during the 2014 holiday shopping season, which should have translated into an improved shopping experience and higher levels of buyer satisfaction due to better service in less crowded stores," the report said.
That did not happen, but some companies fared better than others. While the overall department and discount store segment remained flat at an ACSI score of 77, some individual players posted big gains and drops.
Which department store has the highest customer satisfaction?
Nordstrom (NYSE:JWN) stands as the big winner, topping the category and raising its score by 4% from an already impressive 83 (making it the top player in 2014) to an 86. That puts the company well ahead of its nearest competition, Dillard's, which was flat with last year at an ACSI score of 81.
The big loser in the 2014 report is Wal-Mart (NYSE:WMT), which dropped 4% to 68 from its 2013 score of 71, which was already well below the category average. It's possible that the chain's poor customer satisfaction scores are impacting its bottom line, according to ACSI. The report stated:
With its customer satisfaction at the lowest level since 2007, Wal-Mart also posts its weakest annual sales growth in five years. The company's ACSI score is now well behind national rival Target (NYSE:TGT) (80) and regional chain Meijer (78). Wal-Mart also lags Sears (73) by a wide margin, but Sears is struggling too -- falling 5% for customer satisfaction while closing more of its Kmart stores and spinning off the Land's End division.
However you parse the data, there's nothing positive to be said for Wal-Mart, which shares the bottom of the list with Exchange.
A comeback is possible
While Wal-Mart has nosedived, Target's recovery after its credit card hacking scandal shows that rebuilding consumer confidence is possible. To do that, the struggling but still gigantic retailer would likely have to make major changes -- it sits at the bottom of the rankings despite actually delivering the three things customers say are most important.
It's hard to fault Wal-Mart for convenience of store locations or its hours, and the company has frequent sales. It also has a pretty impressive variety of merchandise, meaning it checks off the top three categories from the chart above. That means that the beleaguered retailer has clearly done something else to lose the public's confidence, and winning it back will require more than just opening more stores.
Nordstrom -- which is not cheap and does not offer a lot of sales -- has clearly resonated with consumers by delivering a pleasant, high-end shopping experience. The company shows that it's not all about offering heavy discounts or cheap merchandise. At some level, customer satisfaction comes down to offering quality service, which is something Nordstrom does and Wal-Mart could do a lot more of.
Daniel Kline owns shares of Apple. He does not shop at Nordstrom or Wal-Mart, albeit for different reasons. The Motley Fool recommends Apple and Nordstrom. The Motley Fool owns shares of Apple. 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.