Ten retailers with the worst customer service

24/7 Wall St.
File photo of shoppers riding the escalator at Macy's Herald Square in New York
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Customer satisfaction with retailers in the U.S. is at an all-time high, up for the third year in a row. While the industry improved overall, not all retailers received accolades, according to the American Customer Satisfaction Index (ACSI). It was traditional brick-and-mortar retailers that set several customer records, while Internet retailers' ratings fell sharply -- a departure from the trend in recent years.

Despite strong gains in customer satisfaction in recent years, many traditional retailers’ scores remain below the average for their sector. In particular, some of the nation’s largest retailers had among the lowest scores. Based on ACSI data, 24/7 Wall St. examined the companies with the worst satisfaction scores in retail.

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In an interview with 24/7 Wall St., David VanAmburg, managing director of ACSI, lower sales for traditional retailers has actually improved customer experiences. “Brick-and-mortar [stores] didn’t have the most exciting holiday shopping period last year” as foot traffic declined and sales growth did not meet expectations. However, this led to customers finding shorter lines and more products in stock, he noted.

Eric Feinberg, senior director of product strategy at consumer experience analytics firm ForeSee, added that brick-and-mortar retailers are adapting to the new retail environment, where customers have far more shopping options than simply visiting a store. “Stores looked bleak last year, and the year before, and they’re coming out of it now. They realize they need to invest in a better customer experience to stay relevant,” Feinberg said.

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Declines in online retailer satisfaction were partially the product of high expectations. According to VanAmburg, expectations of internet retail have changed much more than brick-and-mortar stores. “I wouldn’t say its a victim of its own success this year, but certainly, it has some challenges to maintain that high quality experience that customers have come to have very high expectations of,” he said

Some of the companies that failed to impress consumers in 2013 have struggled with customer satisfaction for years. Safeway, which had among the lowest scores among all retailers last year, has underperformed both the grocery store sector and the overall retail industry in customer satisfaction every year for the past 11 years.

For many physical retailers, competition from online alternatives is not their only challenge. The sheer scale of many of the largest retailers makes good customer service harder to achieve. Eight of the 10 retailers with the worst customer satisfaction were also among the top 20 retailers in U.S. sales in 2012, according to the STORES Top 100 Retailers.

ACSI’s VanAmburg explained the challenges such large organizations face in consistently providing good, customer service in each store. “It's simply difficult to maintain the same type of quality across hundreds and hundreds of different individual physical store spaces.”

Employee dissatisfaction with their employers may also be playing a role with poor customer service. Large retailers often pay their employees fairly low wages, and they offer few benefits and insufficient hours to satisfy workers. As a result, most of these retailers received mediocre reviews from past and present employees, as reported by Glassdoor.com, a jobs and career community website.

To identify the 10 retailers with the worst customer satisfaction, 24/7 Wall St. reviewed the customer satisfaction scores published by the American Customer Satisfaction Index (ACSI) for e-commerce and retail trade companies. Additional information on corporate performance came from the U.S. Securities and Exchange Commission, corporate websites, and the STORES Top 100 Retailers report, published by the National Retail Federation (NRF) using figures from Kantar Retail. We also considered data from ForeSee on customer service, as well as employee-submitted reviews for information on worker satisfaction from Glassdoor.com.

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These are the 10 retailers with the worst customer service.

10. Winn-Dixie
> Customer satisfaction score: 77
> Industry: supermarkets
> 2012 U.S. retail sales: $9.0 billion (45th most)

Winn-Dixie is one of the largest supermarket chains in America, with stores throughout the Southeast United States. In late 2011, Bi-Lo, another regional grocery chain, announced plans to acquire Winn-Dixie. Both supermarkets had filed for bankruptcy in the years leading up to the merger. Winn-Dixie’s customer satisfaction has lagged that of overall supermarket sector since 2011. The chain’s ACSI score even dropped last year even as it rose within the sector. ACSI attributes the sector’s improvement to stable prices and improved customer service. Weak customer satisfaction scores have not deterred Southeastern Grocers, operator of the Winn-Dixie and Bi-Lo chains, from a planned $500 million initial public offering.

9. SUPERVALU INC. (SVU)
> Customer satisfaction score: 77
> Industry: supermarkets
> 2012 U.S. retail sales: $27.5 billion (16th most)

For the fourth year in a row, Supervalu underperformed the supermarket sector in customer satisfaction in 2013. Employees, too, had generally low opinions of Supervalu. Only one-third of workers who submitted a review of the company on job site Glassdoor.com said they would recommend it to a friend. The company’s move to shrink itself through the sale of a number of grocery chains does not appear to have improved customer satisfaction. The company still owns several regional supermarket chains, as well as the Save-a-Lot discount brand, and provides supply chain services to independent grocers.

8. Gap, Inc. (GPS)
> Customer satisfaction score: 77
> Industry: specialty retail
> 2012 U.S. retail sales: $12.0 billion (33rd most)

Gap owns a range of different brands, including Old Navy and Banana Republic -- and its namesake, Gap. Gap recently chose to increase its minimum hourly rate for workers from $7.25 per hour to $9 per hour. CEO Glenn Murphy noted this was not a political maneuver but a business decision to invest in the company's frontline workforce. Whether or not this helps the retailer, which had an ACSI score of just 77, tied for the worst in the specialty retail sector, remains to be seen.While Gap's ACSI score improved last year, it continued to lag the specialty retailer sector, which also improved in 2013. The company's same-store sales rose in recent quarters as it reshuffled its product mix.

7. Best Buy Co., Inc. (BBY)
> Customer satisfaction score: 77
> Industry: specialty retail
> 2012 U.S. retail sales: $34.4 billion (12th most)

Best Buy did little to dazzle customers in 2013. Its ACSI score of just 77 was far lower than wholesale giant Costco, which led the specialty retail sector with a score of 84 . Of course, Costco is not Best Buy’s primary competition, Amazon.com is. In recent years, the company has had to come to terms with its reputation as a “showroom” for products customers will eventually buy online. Despite the company’s recent marketing efforts to embrace its reputation as a display floor, holiday sales indicate problems remain. This last shopping season, Best Buy's same-store sales dipped slightly, even as customers rushed to buy new generation video game consoles, leading to a massive share price drop.

6. Safeway Inc.
> Customer satisfaction score: 76
> Industry: supermarkets
> 2012 U.S. retail sales: $37.5 billion (9th most)

Safeway had an ACSI score of just 76 in 2013. While the overall supermarket sector did not perform much better, Safeway’s score was still well below those of other grocers. Notably, Publix, an employee-owned supermarket with the bulk of its stores in Florida, earned an ACSI score of 86, while smaller-scale grocers collectively notched a score of 81. Not only have Safeway customers been unsatisfied, but many employees and investors have also voiced displeasure with management. Less than 40% of workers stated they would recommend the company to a friend, based on responses gathered by Glassdoor.com. Also, some investors have criticized the company's executive compensation practices.

5. Macy’s, Inc. (NYSE: M)
> Customer satisfaction score: 76
> Industry: department and discount
> 2012 U.S. retail sales: $27.6 billion (14th most)

Macy’s ACSI score was only 76, second-worst among major department stores or discount retailers for 2013. Despite weak consumer satisfaction, consumers continued to visit the company’s Bloomingdale’s and Macy’s stores. The company’s same-store sales rose by 3.6% during the 2013 holiday season compared with the same period a year before. This was higher than the 2.7% increase in all brick-and-mortar sales reported by ShopperTrak, as The New York Times reported. The company also laid off 2,500 employees as part of its plans to cut costs. Customers are not the only ones dissatisfied with Macy's, employees are too. The retailer has received relatively weak marks from employees as well, although two-thirds of reviewers approved of CEO Terry Lundgren’s performance.

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4. Walgreen Company (WAG)
> Customer satisfaction score: 76
> Industry: health and personal care
> 2012 U.S. retail sales: $65.0 billion (6th most)

Walgreens was one of three health and personal care retailers among the companies with the four lowest ACSI scores. Walgreens was also one of just a few brick-and-mortar retailers that didn't improve customer satisfaction since it was first reviewed by ACSI. Despite its unimpressive ACSI score, customer experience analytics company ForeSee ranked the company among the top retailers for customer retention. With more than $65 billion in sales nationwide, the drugstore was the nation's sixth largest retailer in 2012.

3. CVS Caremark Corporation (CVS)
> Customer satisfaction score: 76
> Industry: health and personal care
> 2012 U.S. retail sales: $63.7 billion (7th most)

Like competitor Walgreens, CVS -- another one of the nation’s largest retailers -- was also poorly rated by ACSI. Despite improving in the index in each of the last two years, CVS continued to underperform the drugstore sector. In fact, customers were far more satisfied when shopping at smaller drugstores than at giants CVS, Walgreens, and Rite Aid. Investors and health advocates, however, may find reasons to approve of the company. The company's earnings have frequently exceeded Wall Street’s expectations. It has also increasingly shifted away from simply dispensing drugs and moved further into providing basic health care services. In keeping with that goal, CVS recently announced plans to stop selling tobacco.

2. Rite Aid Corporation (RAD)
> Customer satisfaction score: 74
> Industry: health and personal care
> 2012 U.S. retail sales: $25.4 billion (18th most)

Rite Aid's customer satisfaction was the worst among U.S. drugstore chains last year, underperforming even the already low ACSI scores of primary competitors Walgreens and CVS Caremark. Employees give the company a lower rating than its competitors, as well, according to Glassdoor.com. Just 34% of reviewers stated they would recommend the company to a friend. The company was far smaller than its major rivals, despite its impressive more-than $25 billion in domestic sales in 2012. CVS’ expansion into health services has come at Rite Aid’s expense, according to ACSI.

1. Wal-Mart Stores, Inc  (WMT)
> Customer satisfaction score: 71
> Industry: department and discount
> 2012 U.S. retail sales: $328.7 billion (the most)

No retailer had a worse ACSI score than Wal-Mart's 71 for customer satisfaction. Not only did the company have the lowest score of any department or discount store, but it also scored just 72 when graded as a supermarket -- the lowest in that sector as well. ForeSee also rated the giant retailer’s relationship with customers poorly, despite high customer satisfaction for mobile and web business. Although employees and advocates continue to clamor for better benefits and higher minimum wage, Wal-Mart remains a retail powerhouse. In 2012, the company’s U.S. sales totaled nearly $329 billion, more than three times the second highest selling retailer, Kroger.

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