Recovery Will Lose Energy Unless Consumers Start Spending

By Claes Fornell

Despite a flurry of good economic news, the U.S. recovery, while better than just about any other country at the moment, will not gain much momentum unless there is a substantial increase in consumer demand.

Following the February jobs report, which showed better-than-expected employment growth, many economic commentators contend the economy is poised for sizable expansion in the near future, perhaps by as much as 4% or better.

The stock market seems to agree. Share prices fell on the news, fearing an increase in interest rates.

But neither is likely unless consumer spending strengthens substantially. In fact, spending growth probably needs to double in order for the economy to take off.

This is what the numbers indicate: Last year, consumer spending increased by 2.5% and GDP grew by 2.3%. In the late ’90s, when the economy last grew by 4%, consumer spending increased by more than 5% per year.

Since consumers represent about 70% of GDP, the arithmetic is straightforward: The economy cannot expand much without more consumer demand. Retail sales actually dropped in December and barely moved in January.

Why is consumer demand in short supply? The recession ended a long time ago. There are two main reasons: continued meager wage growth and a decline in buyer satisfaction.

Read ACSI Chairman and founder Claes Fornell’s perspective in Investor’s Business Daily »

Consumers Agree: Wal-Mart Least Satisfying for Merchandise, Food, or Pharmacy

Based on consumer evaluations across various retail categories, Wal-Mart provides the least satisfying customer experience—three times over. According to the American Customer Satisfaction Index’s annual report on retail, Wal-Mart consistently ranks at the bottom among competing stores in three categories: department & discount stores, supermarkets, and drug stores. Compared with industry averages in these categories, the mega-retailer receives its best rating for groceries, but Wal-Mart’s customer satisfaction score of 71 (100-point scale) remains a far cry from the supermarket leaders: Trader Joe’s and Wegmans at 85.

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The ACSI report is based on survey data collected in the critical fourth quarter of the year, which encompasses the holiday shopping season. The best of the best in 2014 includes upscale department store Nordstrom and perennial ACSI leader Amazon.com, which tops the Internet retail category at 86. But even among rivals on the discount side, Wal-Mart lags far behind. Target and Dollar Tree earn ACSI scores of 80 and 79, respectively, while Family Dollar and Dollar General tie at 75.

A year ago, Wal-Mart scored 71 in the department and discount store category, but now tumbles down 4% to 68—its lowest score since 2007. In the supermarket category, Wal-Mart’s customer satisfaction also declines, but by a scant 1%. 2014 marks Wal-Mart’s debut in ACSI’s drug store category. At 68, Wal-Mart’s pharmacy services are no more highly regarded than its overall merchandise or groceries.

This dismal customer satisfaction picture for Wal-Mart coincides with the company posting its weakest sales growth in five years. As reported by the Associated Press, Wal-Mart recently announced its intention to raise worker pay. While there is a connection between highly satisfied customers and happy employees, Wal-Mart clearly has a long way to go to reach a level of satisfaction that matches—let alone exceeds—retail sector averages.

24/7 Wall St.: Customer Satisfaction Lowest at Wal-Mart, Highest at Nordstrom and Amazon »

CBS MoneyWatch: Meet America’s Most Hated Retailer »

Marketplace Radio : Walmart’s way to growth »

MarketWatch: 4 Reasons Walmart is the Most-Hated Retailer in America »

Great Customer Service Harder to Find in Federal Agencies

Just two years ago, customer service was a strong point for the U.S. federal government, with citizens giving the courtesy and helpfulness of staff a rating of 80 out of a possible 100 points. The American Customer Satisfaction Index—which applies the same rigorous, scientific methodology to measuring satisfaction with both private and public sector organizations—deems scores of 80 or above as excellent.

This once-excellent customer service has diminished since 2012, down 6% according to the ACSI’s annual report on citizen satisfaction with government, but without the benefit of other aspects of agency performance—such as the critical website channel—improving to anywhere near the 80 mark. In fact, website satisfaction has failed to improve at all—staying flat at a benchmark of 72 in 2014, or 3% below its 2012 level. Other aspects of the citizen experience have downgraded further. The process of applying for and receiving services falls to a low score of 68, while the clarity and accessibility of information provided by agencies drops to 69.

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As in the private sector, customer service is often the first casualty of cost-cutting and poor service leads to less satisfaction. The overall score for citizen satisfaction with federal government is down for a second year, reaching a new low of 64.4.

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The downturn in citizen satisfaction comes amid cutbacks in agency budgets and fewer federal workers. As reported in January, reduced funding for the IRS could mean longer wait times for callers this tax season, delays in refunds for paper filers, and perhaps even a total agency shutdown later in the year.

If cuts are going to be made to the people delivering the services, then part of the solution is paying more attention to websites. ACSI data show that citizens are much happier when services are offered electronically. In the case of the Internal Revenue Service, satisfaction is dramatically higher for taxpayers who file electronically (76) than for those who file on paper (56).

Read more »

Federal Computer Week: Satisfaction With Fed Customer Service Worst Ever »

The Washington Post, Federal Eye: Index Shows Americans Increasingly Unsatisfied
With Federal Services »

MarketWatch: Americans Hate the Federal Government Now More Than Ever »

Federal Times: Satisfaction With Agency Services Continues to Fall »