Shoppers define customer service in a variety of ways, be it an unbeatable return policy, a helpful sales associate, or 24-hour shopping convenience. With Black Friday and the holiday season upon us, there's no better time to see which retailers measure up in this regard.
According to a survey of 9,400 shoppers by the National Retail Federation, these are the 10 best retailer companies in terms of customer service (in alphabetical order):
Amazon.com (NAS: AMZN)
Largest online general merchandise retailer with approximately $44 billion in sales over the trailing twelve months, or TTM.
J.C. Penney (NYS: JCP)
Primarily brick-and-mortar retailer of family apparel and footwear, accessories, jewelry, beauty products, and furnishings. TTM revenues of nearly $18 billion.
Kohl's (NYS: KSS)
Operates approximately 1,000 department stores selling apparel, footwear, and clothing accessories as well as soft home products such as sheets and pillows. TTM revenues of $18.6 billion.
Privately held clothing retailer based in Dodgeville, Wisconsin that specializes in casual clothing, luggage, and home furnishings.
Privately held mail-order, online, and retail company specializing in clothing and outdoor recreation equipment.
Privately held online retailer of computer hardware and software based out of City of Industry, California.
Nordstrom (NYS: JWN)
Fashion specialty retailer offering apparel, shoes, cosmetics, and accessories for men, women, and children. TTM revenues of $10 billion.
Overstock.com (NAS: OSTK)
Pioneering online retailer of surplus and returned merchandise. TTM revenues of $1 billion.
Online shoe and apparel retailer purchased by Amazon in 2009 for $1.2 billion.
On-air and online retailer known for its 24/7 television broadcasts that market products as diverse as computers, jewelry, and kitchen appliances. It's a wholly owned subsidiary of Liberty Media (NYS: LINTA) , operating under the Liberty Interactive Group.
Sources: National Retail Federation, Morningstar, and company websites.
While this list is debatable -- I, for one, think Costco (NAS: COST) should be included, given its amazing return policy -- it's a good reminder that retail fundamentals go beyond same-store sales and gross margin.
In Why We Buy, the retail industry's mainstay on the science of shopping, Paco Underhill identified the conversion rate as the single most important statistic in all of retail. This rate measures the percent of shoppers who make a purchase when they visit a store or a website relative to the ones that don't. For example, if 100 people entered a store or visited a website and only 60 of them made a purchase, then that store or website's conversion rate is 60%.
Needless to say, both the quality and quantity of customer service influence a company's conversion rate. In Paco Underhill's terminology, the best way to maximize said rate is to maximize the interception rate -- the percent of customers that have contact with an employee.
Think of the times you've been in a store or on a website, couldn't find what you were looking for, got frustrated, and stopped shopping without making a purchase. Had an employee helped you, the visit would have ended very differently -- with a purchase.
Now multiply this by thousands -- if not millions -- of times over, and you see how something as basic as customer service can dramatically impact a retailer's bottom line and thus the performance of its stock.
It's for this reason that I always take note of surveys like the one above. Because customer service is so important to conversion rates, and conversation rates are so important to sales, and sales are so important to growth... you get the idea. Good customer service can flow upward and spell returns for investors. Of course, you can't base your buy or sell decisions on this alone, but looking at companies which excel in this arena can give you a great springboard for long-term investments.
If you'd like to learn more about the changing face of retail, I urge you to check out our free report: "The Death of Wal-Mart: The Real Cash Kings Changing the Face of Retail." It details the handful of retailers that are growing despite what's going on in the economy around them. To get your free copy while it's still available, click here now.
At the time thisarticle was published Foolish contributor John Maxfield does not own shares in any of the companies mentioned in this article. The Motley Fool owns shares of Costco Wholesale.Motley Fool newsletter serviceshave recommended buying shares of Costco Wholesale and Amazon.com. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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