American Customer Satisfaction Index

Annual E-Commerce Report

February 16, 2010

by Larry Freed
President and CEO, ForeSee Results

© 2010 ForeSee Results

Annual ACSI E-Commerce Report, February 2010

Executive Summary: Customer Satisfaction with E-Commerce Rebounds

After a slight decline last year, customer satisfaction with the e-commerce sector has begun to re-
bound, with a year-over-year increase of nearly 2%. This increase brings the aggregate score for the
sector to 81.4, nearly matching its 2007 pre-recession high of 81.6. All scores are reported using the
100-point scale of the American Customer Satisfaction Index (ACSI).

Because the ACSI is predictive of future financial success on both the macro- and micro-economic
level, the rebounding score is good news for a troubled industry plagued by recessionary concerns.
While economists debate whether or not the recession is truly over, and whether the economy will
get better or worse, the increase for the e-commerce sector bodes well for all companies concerned.
(Visit www.theacsi.org for extensive academic research about the link between ACSI and stock pric-
es, GDP, and consumer spending.)

The e-commerce sector (measured by the ACSI every fourth quarter for the past ten years) is com-
prised of the following three industries, chosen because they offer the greatest GDP contribution in
the sector: e-retail, online brokerage, and online travel companies. The e-business sector report, which
includes online portals, search engines, and news and information sites, is released every August.

Key findings of the February E-Commerce Report Include:

• Satisfaction with e-commerce is up nearly 2% since last year to 81.4

• The increase in the overall e-commerce sector score is clearly driven by the rebounding online
brokerage industry, up 5.4% to 78. E*Trade saw the biggest year-over-year increase.

• The e-retail industry, always the strongest within the e-commerce sector, gains one point with a
score of 82. Netflix slips past Newegg for the top spot.

• The online travel industry ties its all-time high aggregate score of 77, not seen since 2005. Pric-
eline has the biggest year-over-year increase, but Expedia takes the top spot.

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Annual ACSI E-Commerce Report, February 2010

The Decade in Review: Ten Years of Measuring E-Commerce

The ACSI, which has measured customer satisfaction with goods and services at more than 200 com-
panies since 1994, first started measuring customer satisfaction with the e-commerce industry in
2000. The 2009 report marks the tenth report on e-commerce, affording a broader look at e-com-
merce trends over the last decade.

Customer Satisfaction With E-Commerce Over Time

82
80.8
81 81.6 81.4
Customer Satisfaction (100-point scale)

80 79.6
80.0 80.0
79
78 78.6
77.6
77
76 75.2
75
74 74.3
73
72
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Customer satisfaction with the overall e-commerce sector has increased more than 8% since it was
first measured at 75.2 in 2000. Several setbacks occurred along the way, including substantial dips
in 2001, 2004, and 2008. These fluctuations follow the normal recessions and contractions of the
economic cycle that define trend growth, and, when examined from a bird’s eye view, illustrate the
progressive competence of the market as a whole. The trending course was always toward escalation.
This shows that companies can increase their long-term vitality even during short-term bursts by
taking the lessons of customer satisfaction to heart.

As shown in the graph below, when the ACSI first began measuring the e-commerce sector in 2000,
there was a 12-point gap between the highest and lowest scoring industries (retail and travel, re-
spectively). Over the years, that gap has been cut in half, usually a sign of increased maturity and the
improvements that come with implementing industry-wide best practices.

 
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
 
E-Commerce Sector* 75.2 74.3 77.6 80.8 78.6 79.6 80.0 81.6 80.0 81.4

 Retail 78 77 83 84 80 81 83 83 82 83

 Brokerage 72 69 73 76 75 76 78 79 74 78

 Travel 66 69 77 77 76 77 76 75 75 77
*E-Commerce is the sector; e-retail, online brokerage, and online travel are the measured industries within the e-commerce sector.

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Annual ACSI E-Commerce Report, February 2010

Online Brokerage: Scores Rebound

The online brokerage industry, up more than 5% to a score of 78, sees the highest year-over-year
increase of any of the industries measured within the e-commerce sector. The massive dip last year
is understandable given the state of the economy, and the industry has not yet regained its previous
2007 high of 79. Overall, customer satisfaction with the online brokerage industry has increased six
points and 8.3% since the ACSI first started its measurements in 2000.

10 Years of Satisfaction with Online Brokerage

80

79
Customer Satisfaction (100-point scale)

78
78 78
76
76 76
74
75
74
72
72 73

70

68 69

66
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

The aggregate industry score is made up of the scores of several of the biggest players in the online
brokerage field.

Individual Company Scores

% %
change change
  2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 since since
last first
year year

Brokerage 72 69 73 76 75 76 78 79 74 78 5.4% 8.3%

Fidelity NM NM NM NM NM NM 80 84 80 79 -1.3% -1.3%

The Charles Schwab

76 72 76 75 71 74 80 82 78 79 1.3% 3.9%
Corporation

All Others 70 65 73 77 78 79 77 78 74 78 5.4% 11.4%

TD Ameritrade NM NM NM NM NM NM 77 80 71 76 7.0% -1.3%

E*TRADE Financial
66 66 69 71 70 71 74 73 69 74 7.2% 12.1%
Corporation

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Annual ACSI E-Commerce Report, February 2010

The online brokerage category dropped 6.3% in 2008 to a score of 74, the lowest level since 2002, but
rebounded in 2009 to close at its pre-recession level, up 5.4% to 78. Customer satisfaction with on-
line brokerage services suffered in 2008 due to a drop in equity prices and great concerns by consum-
ers to the stability of the financial system. The rebound in 2009 is driven by a renewed confidence in
our financial systems and a rise in equity prices.

While large, full-service investment brokers like Fidelity and Charles Schwab did not fall as hard in 2008
as some of their smaller competitors, their recovery was also less dramatic in 2009: Schwab’s score
improved only 1%, while Fidelity slipped the same percentage point to tie with Schwab as the industry
lead at 79. The reverse was true for TD Ameritrade and E*Trade, which plunged at the end of 2008 but
significantly recovered in 2009. In fact, while TD Ameritrade suffered one of the largest single-year
drops ever in 2008 (falling 11% to a score of 71), it gained 6% back in 2009. Although it still trails every
other brokerage service analyzed, E*Trade has the biggest year-over-year increase (5 points and 7.2%),
as well as the largest increase over time (12.1% increase since first being measured in 2000).

E-Retail Regains Last Year’s Losses

After a dip last year at the height of the recession, the e-retail industry rebounds one point to match
its 2007 score of 83. E-retail is still slightly short of its all-time high of 84 seen in 2003, but it is five
points and 6.4% higher than when the ACSI first started measuring the industry in 2000.

10 Years of Satisfaction with Online Retail

85

84
Customer Satisfaction (100-point scale)

83
83 83 83 83
82
81
81
80
79

78
77
77

75
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Customer satisfaction with online retail continues to vastly outpace satisfaction with traditional retail
channels. As reported in a concurrent ACSI study, satisfaction with offline retail is up only a point to
76.2. However, e-retail, which long ago ceased being a novelty and faces ever-increasing expectations
from online shoppers, is doing a substantially better job of satisfying customers than offline retail.
As measured by the American Customer Satisfaction Index, customer satisfaction with e-retail is 9%
higher than satisfaction with the overall retail industry. Overall retail scored a 76.2 in fourth quarter
2009, while the aggregate satisfaction score for e-retail rebounded to 83.

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Annual ACSI E-Commerce Report, February 2010

In the early days of e-retail, online stores struggled to compensate for customers’ inability to touch
and feel products as they might in a traditional, brick-and-mortar store. Today’s online stores have
evolved significantly and now offer enhancements, such as 360º views of the product, tools that en-
able shoppers to dress virtual models, and extensive product information and specifications that
often exceed what is available at a store or in a catalog. These features, combined with the 24/7
convenience and ease of use of nearly all e-commerce stores, have contributed to high customer satis-
faction with the online channel. In fact, the Top 40 Online Retail Satisfaction Index, a study by ForeSee
Results, shows that Internet pure plays in general enjoy even higher customer satisfaction scores
than the websites of multi-channel retailers.

The aggregate e-retail industry score is made up of the scores of several of the largest online-only
retailers in the field.

Individual Company Scores

% %
change change
  2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 since since
last first
year year

Retail 78 77 83 84 80 81 83 83 82 83 1.2% 6.4%

Netflix NM NM NM NM NM NM NM 84 85 87 2.4% 3.6%

Newegg NM NM NM NM NM NM NM 87 88 86 -2.3% -1.1%

Amazon.com, Inc. 84 84 88 88 84 87 87 88 86 86 0.0% 2.4%

All Others 77 75 82 83 79 80 82 82 82 83 1.2% 7.8%

Overstock.com NM NM NM NM NM NM NM 80 82 82 0.0% 2.5%

eBay Inc. 80 82 82 84 80 81 80 81 78 79 1.3% -1.3%

Long at the top of the e-commerce heap, Amazon has been tied or overtaken by Newegg and Netflix
in the last two years. While video-on-demand and movie rentals have never been Amazon’s core
business model, Amazon should take heed when any company selling similar products or services
surpasses them in customer satisfaction. Netflix and Overstock have higher online satisfaction today
than they did before the recession, two years ago. The other three retailers measured have not yet
recouped their recession-year losses.

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Annual ACSI E-Commerce Report, February 2010

Online Travel: Small Increases for Aggregators

The online travel category is up 2.7% and two points to 77, regaining its previous high-water mark
from 2005. While it’s good news that they have regained their pre-recession customer satisfaction
levels, they still haven’t made any progress since 2002, the first year the ACSI started measuring the
travel aggregators.

8 Years of Satisfaction with Online Travel

79
Customer Satisfaction (100-point scale)

77
77 77 77 77
75 76 76
75 75
73

71

69

67

65
2002 2003 2004 2005 2006 2007 2008 2009

Individual Company Scores

% %
change change
  2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 since since
last first
year year
Travel 66 69 77 77 76 77 76 75 75 77 2.7% 16.7%

Expedia, Inc. NM NM 80 78 76 79 78 75 77 79 2.6% -1.3%

All Others NM NM 77 77 77 79 76 79 77 78 1.3% 1.3%

Orbitz, LLC
(Cendant NM NM 76 77 75 74 75 73 74 76 2.7% 0.0%
Corporation)
Priceline.com
66 69 71 71 73 72 72 73 72 76 5.6% 15.2%
Incorporated
Travelocity.com
L.P. (Sabre Hold- NM NM 76 76 76 75 74 73 75 75 0.0% -1.3%
ings Corporation)

Expedia saw an increase of two points for a score of 79, keeping it ahead of its travel aggregator com-
petitors again this year. The “all others” category, made up mainly of airline and hotel websites along
with a few other discount travel aggregators, outperformed Orbitz and Travelocity in terms of online
customer satisfaction. A customer is probably not going to go to an aggregator if the experience is less
satisfying than with the direct source.

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Annual ACSI E-Commerce Report, February 2010

About the Author

Larry Freed is an expert on web effectiveness and web customer satisfaction. He is President and CEO
of ForeSee Results, a market leader in customer satisfaction measurement on the web, which utilizes
the methodology of the American Customer Satisfaction Index (ACSI).

About ForeSee Results

As the leader in online customer satisfaction measurement, ForeSee Results captures and analyz-
es online voice of customer data to help organizations increase sales, loyalty, recommendations and
website  value. Using the methodology of the American Customer Satisfaction Index (ACSI), Fore-
See Results  identifies the improvements to websites and other online initiatives with the greatest
ROI. With more than 44 million survey responses collected to date and benchmarks across dozens
of industries, ForeSee Results offers unparalleled expertise in customer satisfaction measurement
and management, particularly in the retail category, with more than 140 retail measures in ForeSee
benchmarks.

ForeSee Results, a privately held company, is headquartered in Ann Arbor, Michigan, has offices in
London and Toronto, and can be found online at www.ForeSeeResults.com. ForeSee Results is the
ACSI’s e-commerce and e-business partner.

About the ACSI

The American Customer Satisfaction Index is a national economic indicator of customer evaluations
of the quality of products and services available to household consumers in the United States. It is
updated each quarter with new measures for different sectors of the economy replacing data from
the prior year. The overall ACSI score for a given quarter factors in scores from more than 200 com-
panies in 44 industries and from government agencies across the previous four quarters. The Index
was founded at the University of Michigan’s Ross School of Business and is produced by ACSI, LLC.

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