Nine Retailers with the Worst Customer Service

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In this Oct. 10, 2011, file photo, the exterior of Netflix headquarters is seen in Los Gatos, Calif.  Netflix stock, on Thursday, Jan. 24, 2013,  is on its way to its biggest one-day gain since the video subscription service went public more than a decade ago. (AP Photo/Paul Sakuma, file)
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In this Oct. 10, 2011, file photo, the exterior of Netflix headquarters is seen in Los Gatos, Calif. Netflix stock, on Thursday, Jan. 24, 2013, is on its way to its biggest one-day gain since the video subscription service went public more than a decade ago. (AP Photo/Paul Sakuma, file)

Customer satisfaction with retailers is at an all-time high. However, while the industry improved overall, according to the American Consumer Satisfaction Index (ACSI), not all retailers received high marks. At the positive end of the spectrum, while traditional brick-and-mortar retailers set a record, e-commerce scored better still. At the negative end, traditional retailers received the most negative assessments.
 
Despite a positive multiyear trend, many traditional retailers’ scores remain average at best — especially those that are struggling to keep up with growing online rivals. 24/7 Wall St. reviewed the ACSI data to find the companies with the worst satisfaction scores in retail.

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In the most recent ACSI study, the averages for all retail companies peaked at 76.6 on a 100-point scale in 2012. The exception was Internet retail, which the ACSI groups with e-commerce. This part of the industry had an average score of 82 last year. Of the nine retail companies with the worst ACSI scores, just one was an online retailer.

But even average ACSI scores actually weigh negatively on retailers. Larry Freed, CEO of consumer analytics firm ForeSee, which works with ACSI on Internet retailer rankings, told 24/7 Wall St. that consumer expectations are an important part of a company’s or an industry’s score. According to Freed, consumers are not expecting a better experience stores. “The bar’s not getting any higher; it’s getting lower, if anything.” Meanwhile, “In the online world, it’s getting higher every day,” Freed said.

Some of the companies that failed to impress consumers in 2012 have struggled to satisfy customers for years. Safeway, which had among the lowest scores among all retailers, has underperformed in customer satisfaction every year for the past 10 years.

For one company, underperforming its industry benchmark is a relatively new development. Netflix outperformed the average Internet retailer in customer satisfaction for four years, and in 2009 it was the top retailer. But in 2011 and 2012, the video streaming company has been the lowest rated internet retailer.

Although brick-and-mortar retailers have struggled to keep customers happy, they still account for the majority of sales. However, if online retailers continue to outperform traditional retailers in satisfying consumers, they are likely to continue to erode brick-and-mortar market share. A February U.S. Census Bureau release noted that, while only 5.4% of retail sales came from e-commerce, this is up from 4.8% the year before.

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To identify the nine retailers with the worst customer satisfaction, 24/7 Wall St. reviewed the customer satisfaction scores published by the American Customer Satisfaction Index (ASCI) for e-commerce and retail trade companies. Additional information on corporate performance came the U.S. Securities and Exchange Commission, and from corporate websites. More information on customer service ratings came from the MSN Money/JZ analytics 2012 Customer Service Survey.

These are the nine retailers with the worst customer service.

9. Walgreens

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AP Photo/Richard Drew

> Customer satisfaction score: 76
> 12-month revenue: $70.79 billion
> One-yr. share price change: 22.42%
> Industry: Health and personal care stores

Walgreen Co. (NYSE: WAG) is the operator of drugstore Walgreens and one of the nation’s largest companies. As of December 2012, the company had more than 8,500 locations. But its wide reach has not helped the company appeal to consumers. In 2012 Walgreen received an ACSI score of just 76. However, not all measures of customer satisfaction were as negative for the company. A 2012 poll from MSN Money and JZ Analytics showed that more than 30% of customers thought the company’s service was “excellent,” while another 49.4% described service there as “good.” Whether customer service was actually any good, the company was struggling to attract consumers. Sales at stores open at least a year declined 2% in the most recent quarter, while revenue for the company declined 4.6% and earnings declined 25.5%.

8. TJX Companies
> Customer satisfaction score: 76
> 12-month revenue: $25.88 billion
> One-yr. share price change: 20.18%
> Industry: Specialty retail stores

The TJX Companies Inc. (NYSE: TJX), which owns discount retail stores T.J. Maxx, Marshalls and HomeGoods, has underperformed the specialty retail store sector’s ACSI score in five of the past six years. According to the MSN Money/JZ Analytics 2012 Customer Service Survey, less than 18% of consumers described service at the company’s T.J. Maxx chain as “excellent” — among the lowest of all businesses surveyed. But mediocre reviews did not hurt the company’s bottom line. Sales at The TJX Companies were up 12% in the most recent year from the year before, while net income for the retailer rose from $1.5 billion in the previous year to $1.9 billion in 2012.

7. The Gap

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AP Photo/Elise Amendola

> Customer satisfaction score: 76
> 12-month revenue: $15.65 billion
> One-yr. share price change: 45.84%
> Industry: Specialty retail stores

Gap Inc. (NYSE: GPS) owns a number of well-known retail chains, including the Gap, Banana Republic and Old Navy. In the most recently available 12 months, the company was extremely successful. Gap reported a net income of $1.1 billion, up from $833 million the year before. But consumers were likely less satisfied with Gap than investors. Of the 10 distinct specialty retailers rated by the ACSI, Gap rated as the worst for customer satisfaction — tied with TJX. Additionally, 2012 marked the fifth consecutive year in which Gap has underperformed the average specialty retail store in terms of customer satisfaction.



6. Supervalu
> Customer satisfaction score: 76
> 12-month revenue: $34.77 billion
> One-yr. share price change: -35.60%
> Industry: Supermarkets

Supervalu Inc. (NYSE: SVU) is a grocery retailer operating discount store Save-A-Lot as well as a list of grocery chains that includes Albertsons, Jewel-Osco and Shop ‘N Save. In addition, the company also operates a supply chain logistics business. Supervalu was among the consumers’ least favorite retail companies, according to the ACSI. The company received one of the lowest supermarket ratings, at 76. Not all supermarkets performed poorly. Publix received one of the highest ACSI scores at 86, while Whole Foods received an 80. The company also has struggled financially. After years of stock price declines, Supervalue has begun trimming its operations, planning the sale of five of its supermarket chains.

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5. Sears

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AP Photo/Amy Sancetta

> Customer satisfaction score: 75
> 12-month revenue: $39.85 billion
> One-yr. share price change: -34.60%
> Industry: Department and discount stores

Sears Holdings Corp. (NASDAQ: SHLD), owner of Sears and Kmart, had one of the lowest customer satisfaction scores of the department and discount stores reviewed by the ACSI. Since the start of February 2013, The Consumerist published many of the consumer complaints describing Sears’ coupons as highly restrictive, its rewards program as limited and its delivery service as poor. But low customer satisfaction is nothing new for Sears Holdings. Since 2007, the company has consistently had low ACSI scores relative to other department and discount retailers. Additionally, in J.D. Power’s 2012 Online General Merchandise Retailer Satisfaction Report, both Sears and Kmart’s websites were among the worst performers. Customers are not the only people unhappy with the company. In the past year, the company recorded revenue of $39.85 billion, down from $41.57 billion the year before, while domestic sales declined by 2.5% from the year before at stores open at least 12 months.

4. CVS Caremark
> Customer satisfaction score: 75
> 12-month revenue: $123.13 billion
> One-yr. share price change: 15.95%
> Industry: Health and personal care stores

 
CVS Caremark Corp. (NYSE: CVS) is one of the nation’s largest businesses in any industry, ranking 18th in the Fortune 500 for 2012. But its size has not brought the company the appreciation of customers. In each of the past three years, the company’s customer satisfaction rating has trailed those of rivals Rite Aid and Walgreens. However, not all customer service indicators reflect as negatively on the company. More than 75% of respondents to a poll by MSN Money and JZ Analytics rated customer service at CVS Caremark stores as “excellent” or “good.” Investors might also rate the company’s stock well with shares up 15.95% in the last year.

3. Safeway

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REUTERS/Rick Wilking

> Customer satisfaction score: 75
> 12-month revenue: $44.21 billion
> One-yr. share price change: 13.60%
> Industry: Supermarkets

Supermarket operator Safeway Inc. (NYSE: SWY) is among the nation’s largest retailers. At the end of December, it had more than 1,600 stores. Its size, however, has not helped it satisfy customers, with many consumers finding shopping at Safeway to be tedious. In each of the past 10 years, Safeway has underperformed supermarkets as a whole in the ACSI. One major complaint Safeway has faced has been accusations of inaccurate pricing, which led the state of California to sue the company twice. According to The Consumerist, a court order required Safeway to refund customers $5, or give them the product free-of-charge, if they are charged more than the advertised price. But a report by CBS5 in San Francisco showed that the company still often overcharged consumers last year.

2. Netflix
> Customer satisfaction score: 75
> 12-month revenue: $3.61 billion
> One-yr. share price change: 70.80%
> Industry: E-commerce

While most online retailers have scored well on the ACSI, with an average score of 82 in 2012 versus an average of just 76.6 for all brick-and-mortar retailers, Netflix Inc. (NASDAQ: NFLX) was an outlier. It received a score of just 75 in 2012, and just 74 in 2011, when the overall score for online retailers was an 81. This was a dramatic reversal from past years. In each year from 2006 through 2010, the company exceeded its benchmark, and in 2009 it was the top-scoring company of all those tracked by the ACSI for e-commerce. Netflix famously enraged customers in late 2011 when it increased prices and announced plans to separate its DVD rental and streaming platforms. But after a considerable hit to its image – consumers were outraged at the prospect of having to pay bills for two platforms that would not be coordinated — the company pulled the plug on the service split.

1. Walmart

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REUTERS/ Mike Cassese

> Customer satisfaction score: 71
> 12-month revenue: $469.16 billion
> One-yr. share price change: 22.65%
> Industry: Department and discount stores; supermarkets

Among all retailers rated by the ACSI for customer satisfaction, none received a worse score than the 71 for Wal-Mart Stores Inc. (NYSE: WMT), which it received from the ACSI when it was graded as a department and discount store. When graded for customer satisfaction as a supermarket, Walmart’s ACSI score was not much better, at just a 72. This was by far the worst in that category. This is hardly new territory for the company. Walmart has been the lowest rated department or discount store in the nation every year between 2007 through 2012. Worse, it has been the lowest rated supermarket every year since 2005. And the company’s performance in e-commerce is not particularly impressive either. According to ForeSee’s E-Retail Satisfaction Index, Walmart received a grade of 78 on a 100 point scale during the 2012 holiday season, while rival Amazon.com led all e-retailers with a score of 88.

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