Retail wars: How does brick and mortar stack up in a battle against its online retailer?

If the Retail Trade sector were a kingdom, then online would sit firmly on the throne.

According to our most recent Retail and Consumer Shipping Report, while the sector evens out following two years of decline, only one industry sees its customer satisfaction soar: internet retail, up 1.3% to a score of 81.

Customers continue to chase the best, most convenient shopping experience available, and right now online is king. Customers can find what they need more easily and aren’t pestered by salespeople. When you look at online versus brick and mortar head-to-head, online wins every time.

Given this idea that “online wins every time,” we decided to compare three online retailers with their brick-and-mortar counterparts to see how well this held up. Here’s what we found.

Target.com vs. Target: Same score, different story

Despite dropping 3% year over year, Target.com maintains the same score as its counterpart in the department and discount category, both at 78.

Among internet retailers, ease of checkout and payment process (86) is the highest individual benchmark. On the contrary, this metric finishes dead last among department and discount stores with a score of 71. This trend holds true when comparing Target.com and Target.

Target.com is near the high end of internet retailers in store speed. The physical store, however, while among the better performers in the department and discount store space, still trails its online counterpart by a wide margin.

Although customers agree that online retailers possess a stronger variety of merchandise (84 to 77) and availability of inventory (82 to 75) than department and discount stores, Target.com and Target buck the trend, sharing the same score in both respects.

In the end, despite trailing internet retail leader Amazon (83), Target is making a concerted effort to boost its online presence. Target.com is expanding its same-day delivery service and creating its own “Deal Days” online event in the vein of Amazon Prime Day.

Nordstrom.com vs. Nordstrom: Traditional retail gets online bump

Only three companies boast scores above the internet retail industry average. The one traditional retailer? Nordstrom.

Nordstrom.com improves 1% to a score of 82, besting its brick-and-mortar counterpart, which remains unchanged at 79. Nordstrom.com outpaces Nordstrom in most individual benchmarks, including variety and inventory.

One of the biggest disparities between the physical store and its online counterpart is the ease and speed of the checkout process. Both thrive within their respective categories, but Nordstrom.com is significantly better than Nordstrom. In fact, Nordstrom.com is tied for the top score among all internet retailers.

Sears.com vs. Sears: Started at the bottom …

… and they’re both still there. Sears.com and Sears each have the lowest customer satisfaction scores in their respective categories.

Although Sears rose 1% among department and discount stores to a score of 71, it still sits below internet retail bottom dweller, Sears.com, which stayed put at 73. Sears.com also remains higher than Walmart’s department and discount store, which dropped 1% to 71 as well.

Sears.com offers slightly better variety than the brick-and-mortar store and stocks a greater inventory. Customers also give Sears.com the edge in speed and ease of checkout.

One area where Sears outshines its online brethren is with its support. Customers find Sears’ in-store staff more helpful and courteous than that of online customer support. This is interesting considering the opposite holds true for the two categories – internet retail and department and discount stores – as a whole.

The big picture is clear

The Retail sector experienced widespread declines last year. Just one year later, the message is crystal clear: Online shopping is the focus.

While traditional retailers aren’t falling by the wayside, more and more companies recognize their customers continue to shift toward the internet. The online shopping experience is easy, convenient, fast, and there’s no salesperson physically chasing you around the store trying to get you to buy something.

The retail battle may wage on as brick and mortar isn’t going away. But as it stands, this is a pretty one-sided affair.

Good for business, bad for customers? The double-edged sword of M&A

There were 43 mergers and acquisitions (M&A) of over $10 billion in 2019 – an 8% increase from 2018. There were another 21 deals worth more than $20 billion a piece.

This is just the start.

The worldwide value of M&A transactions reached a total value of $3.9 trillion in 2019. While that’s 3% less than 2018, it’s the fourth-strongest year ever recorded.

This is good news for investors. The same cannot be said for customers.

The American Customer Satisfaction Index shows that large M&A deals commonly have a negative effect on customer satisfaction. On average, the acquiring company experiences a 3% drop in customer satisfaction over the initial two-year period post-merger.

Why is that? There are a few major reasons – but sometimes it depends on the industry.

1. It’s not about customers

M&A often has a negative effect on customer satisfaction because it isn’t done on behalf of customers; it’s done on behalf of shareholders.

Typically, in an acquisition, companies aren’t trying to grow their customer base by improving how they provide goods and quality services. They’re literally buying another customer base.

The goal for these companies is delivering value to shareholders. In the process, they can alienate consumers, ultimately working against their own goal.

2. Customers in service-related industries suffer the most

Customers of manufacturing-related industries usually don’t notice a difference following M&A. If a company buys a line of canned food, for example, and keeps putting it out with the same label and the same quality, the customers who purchase that product aren’t really affected. They still receive the same product, made the same way. The only difference is the organization behind the scenes that now owns the brand – and customers might not even know that’s changed.

For customers of service-related industries, however, the change in ownership is felt in a big way.

Banking, retail, airlines, utilities, and anything else involving services, is where you typically see a significant customer satisfaction drop in the wake of a merger up through the first two years of the union.

For example, back in 2005, US Airways fell 8% to an industry low after merging with America West. And just one year after purchasing Northwest, Delta Airlines’ customer satisfaction plummeted 10%.

When two companies merge, both sides begin shedding costs. These costs are usually customer-service focused. For example, a handful of branches might close following one bank’s purchase of another. In this event, customers may no longer receive the same level of service they’re used to.

There’s also the possibility of unexpected snafus. Maybe your frequent flyer miles get lost when two airlines merge and you’re arguing with customer service over how to get them back. Or maybe you get double-billed for cable services or wireless networks.

T-Mobile and Sprint are suggesting their merger will benefit customers. But a lot can go wrong when you combine large customer bases.

Perhaps Sprint customers will experience an uptick in customer service if the provider merges with T-Mobile, as they’ll move from an organization with the lowest American Customer Satisfaction Index score (65) among mobile network operators to the one with the highest mark (76) in the same sector. Then again, customers may have such high expectations for T-Mobile that the service they receive fails to live up to it.

3. The bargain basement

The best companies aren’t typically going out and acquiring other top companies. What usually happens is that subpar companies go out and purchase even worse companies. It’s a weird strategy.

Sure, they can acquire these low-end companies on the cheap, but is it really in their best interest to purchase another bottom-dweller? Probably not.

These companies already have dissatisfied customer bases. If the purchaser is not interested in improving satisfaction levels, then those customers might end up even less satisfied than they were before the merger – especially if they had high expectations for this union.

A lesson for the age of the large acquisition

The numbers don’t lie: Major M&A deals were on the rise in 2019. Global Payments bought TSYS for $21.5 billion. London Stock Exchange Group acquired Refinitiv for $27 billion. United Technologies agreed to purchase Raytheon for $86 billion. These are just a few of the transactions over $20 billion.

While the total number of global mergers was down in 2019, M&A value still exceeded $3 trillion every year since 2014. The merger market is expected to thrive in 2020 thanks to low interest rates and a better economic environment.

But before these organizations – particularly service-related companies – make decisions that are clearly geared toward influencing their balance sheet and adding to their portfolio, they might want to think about what this decision means for their customers.

You might be able to buy a customer base, but that doesn’t mean you’re buying its loyalty or you’re able to improve its satisfaction.

Do these automakers’ Super Bowl ads leave customers satisfied for the right reasons?

People tune into the Super Bowl for all sorts of reasons.

For some, it’s all about the big game itself. For others, it’s the extravagant halftime show.

But one thing that gets everyone hyped on Super Bowl Sunday is the commercials. This is the day brands break the bank and go all out.

According to AdAge, 30 seconds of airtime during this year’s game cost $5.6 million. While this seems like a ridiculous amount of money – and it is – this is a price companies were more than happy to pay.

One industry usually well-represented in Super Bowl commercials is the automobile industry. This year was no exception, as millions of screens across the world were plastered with funny, nostalgic, and inspirational auto commercials.

But you have to wonder, did automakers take full advantage of their airtime?

It’s one thing for the commercials to be entertaining – most usually are – but are they also informative? Are automakers listening to what their customers want and appealing to these needs?

Using our Automobile Report as a guide, we examined the commercials of three major automakers to find out.

Hyundai gets ‘smaht’

With the help of Chris Evans, Rachel Dratch, and John Krasinski, Hyundai used its Super Bowl airtime to plug its new Smart Park self-parking system. While these Bostonites laid the love on a little thick (and we’re not just talking about their accents), the move by Hyundai was wicked “smaht.”

Customers care about in-car technology, and the automobile industry is not meeting their high standards.

According to our report, satisfaction with technology is down 3% year over year and is toward the bottom of all industry benchmarks – tied with warranties for second-to-last place – with a score of 78.

Hyundai, for its part, also has room for improvement in this area. It scores above industry average, but compared to individual automakers, it’s merely middle of the road. By drawing attention to the new Sonata’s “Smaht Pahk” capability, Hyundai shows it understands customer needs and that it’s making a concerted effort to meet them. Like we said: smaht.

Toyota has room for all heroes

Cobie Smulders of “How I Met Your Mother” and “Avengers” fame is a super mom speeding around rescuing selfless superheroes who chose to stay behind after saving others from various catastrophes.

How does she save these heroic individuals? She picks them up in her roomy Toyota Highlander.

Interior design isn’t on the bottom rung of industry benchmarks, but it falls 1.2% over the past year to 82. Toyota scores just above average, so it too has plenty of room (pun intended) for growth.

Toyota uses alien attacks, chemical disasters, and a wild west showdown as backdrops to point out a simple fact that most car owners can agree on: Space matters. Bonus points for the final shot on the dashboard navigation screen. As we mentioned, customers crave enhanced technology.

Jeep shows there’s nothing mundane about ‘Groundhog Day’

Unlike in the cinematic classic, Bill Murray didn’t go down a rabbit hole of despair in Jeep’s commercial reenactment of “Groundhog Day.” This time, he had a Jeep Gladiator at his disposal.

Although driving performance (tied for first at 84) and exterior (82) rank highly among customer experience benchmarks, Fiat Chrysler’s Jeep struggles to keep up with the competition. The automaker falls below industry average in both areas.

With a commercial featuring Murray and Punxsutawney Phil tackling tough terrains in a sleek Gladiator, Jeep shows this vehicle is easy on the eyes and can handle any adventure life throws at you. Not only that, you look forward to it.

This ad played well with the press. Jeep can only hope it has the same effect on its customer base.

Commercials can offer more than just commercial appeal

As entertaining as these ads can be, remember that commercials and customer satisfaction are not the same thing.

Super Bowl commercials aren’t going to be successful if they’re not creative and memorable. But that doesn’t mean automakers should skip out on a golden opportunity to show they’re paying attention to things their customers want.

Customer satisfaction in the automobile industry fell 3.7% to a score of 79 over the last year. If automakers want to see those scores climb, they might want to take a page out of playbook of the companies tailoring their message to what’s really driving their customers.