Special Report

America's Best (and Worst) Online Retailers

As a larger and larger portion of retail sales in the U.S. move online, customer service has become essential to e-commerce businesses that want to attract shoppers and keep them. E-commerce also has become critical to the profits of brick-and-mortar operations like Wal-Mart Stores Inc. (NYSE: WMT) and Best Buy Co. Inc. (NYSE: BBY). Research firm comScore reports that from the start of November through December 21, e-commerce sales reached $38.7 billion — up 16% from the same period in 2011. Very few retailers can ignore the growth in online shopping and the need for the e-commerce customer to believe he or she is being treated well.

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Research company ForeSee recently released its “E-Retail Satisfaction Index (U.S. Holiday Edition),” which is based on more than 24,000 customer surveys conducted between Thanksgiving and Christmas. The companies covered by the study are 100 of the largest online retailers based on revenue. On a 100-point scale, the average retailer in the survey scored a 78. The benchmark against which all other e-tailers should be measured is Amazon.com Inc. (NASDAQ: AMZN), which also happens to be the largest e-commerce company in the world. ForeSee reports that Amazon’s 88 rating this year is “the highest score ever attained by any retailer measured in the holiday Index since 2005.” It is not clear whether Amazon is large because its customer service is so excellent, or whether its customer service is excellent because it is so large.

Some of the  retailers included in the study have sales presences outside the internet — unlike Amazon. A number have brick-and-mortar or catalogue businesses, so online sales are only a portion of their total revenue. And, for some large retailers, their online sales efforts are still in the infancy. As measured by comScore, Walmart has the second most visited e-commerce site in America after Amazon. But online sales are only 2% of Walmart’s U.S. revenue. Online revenue may be important to the future of large retailers, but e-commerce results are not crucial now. L.L.Bean ranks second on the Foresee satisfaction list, but it has physical stores in 10 states. Crate & Barrel is very near the bottom of the Foresee ratings, and it has more than 100 stores. Online-only retailers obviously have more riding on online customer service than retailers that operate stores or catalogues.

One final observation worth making is that the number of visitors an e-commerce site has does not appear to be related to its customer service rating. Companies appear to hold their own fates based on their retail practices and not their visitor count. Amazon.com is among the top sites for customer satisfaction, with 119.8 million unique visitors last month. 1800Contacts.com is also among the top-rated sites and had only 489,000 unique visitors.

24/7 Wall St. began its analysis  with Foresee’s rankings, which are based on grades for content, website functionality, price and merchandise. We added the number of visitors to each website based on research firm Compete’s data and then provided analysis about what each company sells online and how e-commerce is related to the balance of its operations.

These are the 24/7 Wall St. Best (and Worst) Online Retailers.

The Best

1. Amazon.com
> Rating: 88
> Type: Online superstore
> Audience: 119.8 million unique visitors

Amazon is, by most measures, the largest e-commerce website and company in America. Amazon reported revenue of $13.8 billion in its last quarter and expects sales in the current holiday quarter to be as much as $22.7 billion. To add to its already huge range of products, Amazon recently opened a wine store.

2. LLBean.com
> Rating: 85
> Type: Outdoor apparel
> Audience: 6.7 million unique visitors

The retailer of outdoor apparel and equipment celebrated its 100th anniversary this year. The private company claims its annual sales reached $1.44 billion. L.L. Bean sells clothing for men, women and children and specializes in outdoor equipment, including cross-country skis, snowshoes, camping products and hunting and fishing gear

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3. (tie) QVC.com
> Rating: 84
> Type: Fashion and accessories
> Audience: 13.4 million unique visitors

QVC, which stands for “Quality, Value, and Convenience,” has both a television and an online shopping business. The company claims its broadcasts reach more than 200 million homes worldwide. QVC’s 2011 revenue was $8.3 billion, $2.6 billion of which came from e-commerce. The company offers an extremely large array of products, including  clothing, electronics, jewelry and beauty aids. QVC is owned by Liberty Interactive Corp. (NASDAQ: LINTA).

3. (tie) Vitacost.com
> Rating: 84
> Type: Discount vitamins and health foods
> Audience: 1.4 million unique visitors

Vitacost says it “takes the cost out of healthy living.” It has the inventory to back keep up part of that promise. The company sells a large number of vitamins and supplements. It also has product selections in the sport fitness and weight loss category, beauty care, natural pet food, herbs and sexual health products, which include contraceptives. The company claims it sells more than 35,000 products.

5. (tie) Vistaprint.com
> Rating: 83
> Type: Online printing and marketing
> Audience: 5.6 million

Vistaprint is a French-based online printing and business graphics company that began its Internet business in 1998. Vistaprint claims it “has over 25 localized websites.” The great majority of the services offered at the site involve instant printing, whether it is business cards, invitations or promotional items. The company also offers help to small businesses that need websites and help marketing, traditionally or through social media.

5. (tie) Esteelauder.com
> Rating: 83
> Type: Cosmetics
> Audience: 258,000

Estée Lauder founded the beauty company in 1946. Its products are sold in department stores, and management claims they are available in more than 150 countries and territories. The Estée Lauder Companies Inc. (NYSE: EL) reported revenue of $2.55 billion in its most recent quarter. The company has a number of well-known brands, including Clinique, Prescriptives, M-A-C,Tommy Hilfiger, Donna Karan, Michael Kors and Ermenegildo Zegna.

7. (tie) 1800Contacts.com
> Rating: 82
> Type: Contact lenses
> Audience: 489,000

1800Contacts allows people to buy contact lenses online instead of from a doctor’s office or a specialty store. The operators of the website get prescription data from eye doctors, along with brand information, and will even send customers a reminder before a prescription runs out. The company claims that it has filed over 15 million orders for five million customers over the past 11 years.

7. (tie) Keurig.com
> Rating: 82
> Type: Coffee products
> Audience: 1.2 million

Keurig makes and sells coffee brewing machines and the single serving beverage K-Cups that work in the machines. This puts it into competition with companies like Starbucks Corp. (NASDAQ: SBUX) and Nestle, which markets the Nespresso product line. Keurig claims it has over 250 varieties of coffees, teas and cocoa. The cost of the brewing machine runs as high as $229.99 for the high-end Professional Brewing System. Keurig sells products for both home and work. Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) took control of Keurig in 2006.

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7. (tie) Scholastic.com
> Rating: 82
> Type: Children’s reading
> Audience: 4.4 million

The site is operated by Scholastic Corp. (NASDAQ: SCHL), which reported revenue of $616.2 million in the most recent quarter. Scholastic has an education division, but most of its revenue comes from children’s books. The company claims it has more than 90% penetration of the  U.S. schools market. The website is split into sections so that Scholastic can market separately to students, teachers, parents and librarians.

The Worst

6. (tie) FTD.com
> Rating: 74
> Type: Flowers
> Audience: 1.1 million unique visitors.

FTD  — or Florists’ Transworld Delivery Inc. — was founded in 1910. Today it is a unit of United Online Inc. (NASDAQ: UNTD). Customers can order flowers via an 800 number or online, which can be delivered to many nations around the world. FTD also operates through a number of independent florists. The FTD website shows a broad array of flowers and flower arrangements, along with candy, jewelry and plants.

6. (tie) PCConnection.com
> Rating: 74
> Type: Computers and accessories
> Audience: 80,000

PCConnection.com is a small competitor to major PC and electronics sites, including TigerDirect and NewEgg, one of the most highly rated sites by Foresee. The PCConnection website is owned by PC Connection Inc. (NASDAQ: PCCC). The company claims that it offers 300,000 products from more than 1,600 manufacturers. A large part of PC Connection’s revenue comes from its divisions that work with the government, small and mid-sized businesses, and companies that need IT consulting. It its most recent quarter, the firm reported revenue of $561.3 million. PCConnection.com offers thousands of PC products, including  monitors, printers and scanners, as well as Apple Inc. (NASDAQ: AAPL) hardware.

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6. (tie) Shop.com
> Rating: 74
> Type: Comparison shipping
> Audience: 650,000

Shop.com is owned by Market America, which describes itself as a shopping comparison site business and a supplier of services to its network of entrepreneurs that “allows them too create ongoing income, while providing consumers worldwide with a better shopping experience.” Market America bought Shop.com in January 2011. Shop.com runs an online auction service and has e-commerce sections for most off the products that a general merchandise site would — clothing, electronics, consumer goods. It also has a travel section powered by Travelocity.

3. (tie) CrateandBarrel.com
> Rating: 73
> Type: Furniture, home goods
> Audience: 2.2 million unique visitors

Crate & Barrel has over 100 stores and a catalogue business. The retailer, founded in 1962, sells a full line of furniture for both homes and offices. It also has a large inventory of dining room furniture and dining accessories and several lines of bed and bath supplies.

3. (tie) Nutrisystem.com
> Rating: 73
> Type: Diets
> Audience: 200,000

The website is part of Nutrisystem Inc. (NASDAQ: NTRI), which went public in 1999. It offers special diet programs for men, women and diabetics. The diet programs are complemented by online and telephone counseling. The company also offers a community center to encourage people who are trying to lose weight to tap into support groups. Since 2001, it has marketed some of its products and services on QVC.

3. (tie) RueLaLa.com
> Rating: 73
> Type: Personal shopping
> Audience: 1.5 million unique visitors

RueLaLa.com’s online traffic has grown considerably as it reaches into the online personal shopping business. To shop on the site, a customer must be a “member” and provide information such as e-mail address and gender. The member then gets access to several “boutiques” that each have a small selection of products. Some of these are open for only a limited number of days. Unlike many sites, RueLaLa.com makes certain to tell customers when items are sold out  The site also does marketing for local “hot spots” and restaurants in seven cities, including New York, Los Angeles and Chicago.

1. (tie) Fingerhut.com
> Ranking: 72
> Type: General merchandise
> Audience: 5.6 million unique visitors

Fingerhut, founded in 1948, describes itself as “a nation-wide direct retailer.” The company uses direct mail, affiliates who refer shoppers and the Web to drive revenue. It also offers customer financing directly through WebBank/Fingerhut Credit Accounts. Fingerhut.com is similar to most other general merchandise sites. The departments are set up like a “mini-Amazon,” with products and services as diverse as consumer electronics, furniture, home supplies, health and beauty, and jewelry.

1. (tie) Gilt.com
> Rating: 72
> Type: Personal shopping
> Audience: 796,000 unique visitors

Gilt.com offers high-end clothing, home furnishing, food and travel to “members” who have signed up for the Gilt service. The company promises discounts of as much as 60% of retail price. Beyond whatever advantages membership offers, the site’s products are relatively normal clothes and accessories. Well-known online entrepreneur Kevin Ryan founded the company in 2007 as an “opportunity to start online flash sales.” Its customer service ranking may make it difficult to retain well-to-do clients.

Douglas A. McIntyre

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