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Jun 09, 2020
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But while users have clearly been spending more time shopping on the e-commerce giant’s site, the sudden surge of new customers brought on by the virus has put a hurting on one of the company’s key metrics: customer satisfaction. And if left unaddressed, that could seriously hurt the company’s growth moving forward, Mahahey said.

Users are shopping online more than ever
According to RBC’s 8th annual U.S. Online Shopping Survey, online shopping accelerated from January through April, with the last month seeing a 22% year-over-year increase in ecommerce. It wasn’t just Amazon that benefited from the shift, though. Walmart (WMT), eBay (EBAY), and Etsy (ETSY) also saw a boost from the shift to online shopping brought on by the pandemic.

But according to Mahaney, that boost is unlikely to fall off must when physical stores reopen, as the move has created a sustainable shift in consumer behavior.

“We asked our survey respondents who had shopped online, if they believed the COVID-19 crisis will lead them to permanently increase their willingness to purchase Online vs. in-store and a majority (54%) of them said...Yes,” Mahaney wrote.

The logo of Amazon Prime Delivery is seen on the trailer of a truck outside the company logistics center in Lauwin-Planque, northern France, December 30, 2019. Picture taken December 30, 2019. REUTERS/Pascal Rossignol
The logo of Amazon Prime Delivery is seen on the trailer of a truck outside the company logistics center in Lauwin-Planque, northern France, December 30, 2019. Picture taken December 30, 2019. REUTERS/Pascal Rossignol
Proof of that comes in the increase in Amazon’s Prime customers. The service, which costs $119 a year, grew from 59% penetration in 2019 to 67% in 2020. That’s got Amazon on pace to hit 200 million Prime subscribers worldwide, up from 150 million in January.

Prime users are key for Amazon’s e-commerce arm because they provide a continuous stream of revenue for the company versus the revenue generated by one-off purchases by consumers.

What’s more, Amazon customers are also making larger purchases. According to RBC’s study, 64% of respondents said they made at least 2 to 3 purchases via Amazon per month in 2020. That’s up from 54% in 2019. On top of that, customers are spending more on the site than last year, with 45% of respondents saying they spent more than $200 this year versus 36% in 2019.

Customer satisfaction is falling
Despite the spike in sales and Prime subscriptions, Mahaney says RBC’s survey found that customer satisfaction with Amazon has hit an all-time low.

“Our survey results showed declining and record low satisfaction levels across Amazon customers,” he wrote in a research note.

According to the survey, 64% of the 2,800 respondents said they were extremely or very satisfied with Amazon’s service. That’s lower than Walmart, which sits at 70%, and Etsy which has 77% customer satisfaction. Ebay, on the other hand, has just 60% customer satisfaction.

On the flip side, 11% of RBC survey respondents said they were slightly or not at all satisfied with Amazon’s customer service.

Mahaney points to Amazon’s increased delivery times, and a shortage of products as the pandemic lockdowns went into full effect as reasons for customer dissatisfaction.

Customer satisfaction is a major metric for Amazon, and something that CEO Jeff Bezos regularly points to as a goal for the firm. It’s the reason Amazon burned so much cash for so long before it finally turned a profit in 2001 after going public in 1997.

It’s also why Bezos still regularly views customer emails sent to his account and the reason the company decided to offer 1-Day Prime shipping.

It’s clear that Amazon values customer satisfaction above all else as a means to ensure it can go toe-to-toe with competitors like Walmart, and while the coronavirus added unforeseen pressures to the company, it’s important that it address the issues before it could something the company can afford to ignore.

Got a tip? Email Daniel Howley at dhowley@yahoofinance.com over via encrypted mail at danielphowley@protonmail.com, and follow him on Twitter at @DanielHowley.

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