A survey published by PYMNTS, which measures the level of satisfaction of American consumers, pointed to the decline in Amazon’s customer satisfaction, reaching one of the lowest levels in the retailer’s history.
This blow to the company’s empire, which for nearly three decades has been defined by its obsession with customers, comes as no surprise to the retailer, which last year had its record low on the index – 78 out of 100 – being its worst ever performance since 2000, the year in which the index started tracking company data.
The report also showed that the number of Amazon customers who said they were “extremely satisfied” or “very satisfied” with the retailer dropped to 79% this year. That number was slightly higher than during the pandemic – 65% – but it was still below the company’s peak 10 years ago, which had already reached an 88% satisfaction rating.
Why is this happening and what lessons can marketers learn from this situation? Let’s answer these questions in this article!
Even with falling numbers, Amazon remains in the lead…
Even with the indices showing clear signs of growing customer dissatisfaction with the company, Amazon still dominates the retail scenario, being ahead of its biggest rival – Walmart – and leading with nearly 45% of the US e-commerce marketin the second quarter of the year.
One of the reasons given by experts for Amazon to continue leading this market is the quality of the products offered by the company. According to PYMNTS, “e-commerce retailers such as Amazon provide detailed product information and reviews so consumers can confidently buy durable goods online without having to visit brick-and-mortar stores to obtain this information.”
The company also held the lead in sporting goods, hobby items, music and books (56%), electronics and appliances (54%) and health and personal care (43%). Remaining as the largest online retailer in the country, with more than 200 million users worldwide who pay for Amazon Prime subscriptions – a service that offers subscribers faster shipping of products, discounts and access to first-hand promotions, and access to the company’s streaming service.
PYMNTS data makes this leadership clear for Amazon which, as of the fourth quarter of 2022, held a 15% share in this segment, slightly above the same period of 2021, while its competitor, Walmart, saw its share fall.
Thus, research shows that Amazon remains the top destination for American consumers, accounting for nearly half of all online transactions in the second quarter of 2021 and 2022 in the United States.
The pandemic was a key factor in increasing Amazon’s dominance in online commerce
Although Walmart has long had a dominant share of consumer retail spending, that number has been falling over the years. Amazon peaked at 8.1% in the fourth quarter of 2021 on retail consumer spending, while Walmart took a dip in its share, falling to 8.2%.
In terms of total consumer spending, Amazon is slightly ahead of Walmart with a 3.1% share in Q2 2022 versus 3% for its main competitor.
These changes are very symbolic, as it was during the 2020 pandemic that Walmart suffered and Amazon found itself thriving, as consumers began to make more online purchases, driving the company’s growth in these last two years.
Another key factor for Amazon’s growth and its dominance in the online market is its wide service capacity, ease of payment and vast resources related to the logistics of product shipments – Amazon controls all shipping, ordering, packaging and delivery of its products, leaving well ahead of Walmart in the competition to gain market share and more consumers in the online environment.
Some data can help you to see the strength that the pandemic scenario had in the rise of Amazon over Walmart:
- In the first quarter of 2019, Amazon held 8.7% of consumer discretionary spending. In the second quarter of 2022, this share increased to 14% and peaked (17%) during the pandemic in the fourth quarter of 2020;
- Amazon continues to gain ground in the furniture market, achieving its highest share of 11.8% during the fourth quarter of 2020, while Walmart held 7.9%. As of Q2 2022, Amazon’s current market share is 10%, while Walmart stands at 7.3%.
And once again, this dominance of the market is attributed to the growing interest of consumers in online shopping, driven by the pandemic, and also by the convenience of the Amazon Prime service – for subscribers – which makes the free delivery of several products to buyers.
Walmart also leads in some segments
While Amazon leads in some segments, and in consumer discretionary spending, Walmart, which is known for its lower prices, continues to maintain its leadership in the grocery, personal care and health segments, in addition to have a greater share of the food and beverage market, with around 15.6% share – against 2% for Amazon – leading when it comes to grocery sales.
Not everything is a bed of roses…
The result of this research comes at a time when Amazon has just announced a wave of job cuts and a freeze on new hires that should extend until 2023.
It is a fact that the pandemic has accelerated widespread adoption of e-commerce and buying products online, favoring Amazon, but in 2022 the economy began to lose its strength, reaching record levels of inflation in the US and causing a market downturn.
… and Amazon customer satisfaction continues to decline
According to an Amazon spokeswoman, customers are not very satisfied with the experience offered by the company. Among the various complaints from consumers, customer service, for example, has been highlighted as a problem at the retailer.
While the company has worked in recent years to improve how customers find products on the site, search results have also been frustrating for consumers as Amazon has increased the number of third-party sellers using its platform, embracing advertising to appear at the top of search lists, affecting the clarity of search results
“For 20 years, it was the customer obsession at any cost”, now it’s the customer obsession with the right cost.” Said Guru Hariharan, a former Amazon manager who is chief executive of e-commerce service provider CommerceIQ.
According to the WSJ, in interviews, some Amazon shoppers have expressed disappointment with their shopping experiences with the retailer, even as they continue to see it as an essential part of their lives.
One of those interviewed is 48-year-old Ken Higgins, who has been an enthusiastic member of Amazon Prime since the service launched in 2005, but several current experiences with the company are leaving him frustrated.
He recently tried to repurchase a door closer from Amazon, but when he looked for the item on the site, he couldn’t find it, despite typing in the model number and finding it at other stores.
After a different search for a baby walker, he bought one with a promise of two days shipping, but it took a week to deliver.
“Amazon is so big now that they have the power to say take it or leave it,” said Higgins, who lives in Tallahassee, Florida. “Looks like they used to care more.”
Another WSJ interviewee, Jackie Guerrero, an Amazon customer in the San Francisco area, said that she recently waited about two weeks for a watch she ordered and then Amazon emailed her to say it was impossible to deliver, taking several tries to get through to someone at the company for a refund.
The company is aware of this worsening of customer satisfaction levels and has been working to improve the user experience on the site, delivering more personalized algorithms, aiming at more satisfactory search results for the consumer.
According to an Amazon spokesperson, the company spent nearly $1 billion last year to combat counterfeiting, product review and other issues within its platform, and is also looking to exceed its customer service goals via chat – responding to 80% of chat support requests within 30 seconds or less – and phone calls, aiming to answer at least 80% of phone calls within 60 seconds.
What brands can learn from this story?
It seems that when it comes to customer satisfaction, we can’t ever take it for granted, no matter the size of your business. If your company grew a lot in the last few years, it’s because your customers helped you achieve it. So, you need to keep giving back to those people who are an important part of your brand’s success.
Huge companies like Amazon and Walmart seem to have so much power that they don’t need to care for individual customers. But, as we saw, it takes just a bunch of customer complaints for it to become a snowball of criticism.
So, yeah. You need to deeply care about your customers. Especially post-purchase. You need to make sure they feel respected and that they have a personalized experience. After all, you want them to come back for more purchases.
And we didn’t even talk about customer reviews. If you manage to create such a good customer experience that people will voluntarily say amazing things about your brand, you are generating valuable content for yourself. And people tend to trust the opinion of other people rather than just plain marketing.
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