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Retailers Ranked as Tops at Customer Service Don't Need Stores

Look at the list of retailers picked by consumers as tops at customer service in the National Retail Federation/American Express (AXP) Customer's Choice Survey, and some things immediately jump out, particularly the fact that it's dominated by Internet-based retailers and that J.C. Penney (JCP) beat and Kohl's (KSS) tied Nordstrom (JWN).

When you stop to think about the list, though, something else becomes evident. It demonstrates that consumers define customer service today in a way that's a good deal different than the traditional characterization would have it.

Once retail customer service meant employees behind counters providing personal attention to shoppers who were pampered and prodded on the way to a purchase.

Yet only one retailer that landed in the top 10, the aforementioned Nordstrom, makes that kind of service a focal point of its operation. Sure, top ranked L.L. Bean has lots of knowledgeable hands in the store ready to serve customers, but its sales floors are largely self-service environments where customers only have to interact with employees at the actual moment of purchase.

Service counters aren't necessarily necessary at most of the Top 10 retailers, who are:

1. L.L. Bean
3. Zappos
4. Amazon
5. QVC
6. Coldwater Creek
7. HSN
8. Lands' End
9. J.C. Penney
10. Nordstrom
10. Kohl's

Numbers two, three and four are Internet-only operations and numbers five and seven combine broadcast and online selling. So five of 10 top retail service providers don't operate any stores. Rather, they allow customers to purchase from home. The service they provide enables consumers to do so conveniently and comfortably.

Consider also that two of the other five, L.L Bean and Land's End, although they operate stores, also run big and well-established catalog businesses. The operation of those catalogs has been shifting to the Internet over time. Yet, even in the case of those customers who prefer old-fashion paper catalogs, those retailers, rated number one and eight respectively, put a good deal of effort into allowing customers to avoid stores and still shop. Finally, it's noteworthy that J.C. Penney has an extensive and particularly well-regarded web retailing operation, so some of the credit given it by participants in the NRF/AmEx survey must reflect its online selling function.

Given the strength of E-commerce in the holiday season and the strong service scores that Internet retailers generated in a recent study isolated to them, it's fair to conclude that the online operators have been able to give consumers what they want. These days, E-commerce enthusiasm even is spreading to those retailers who were once reluctant to invest in online sales.

Add it all up, and you can see an acceleration of E- commerce operations coming. And why shouldn't retailers want to push their Internet businesses? In the long run, retailers who chose to expand online sales don't have to worry about whether new stores will provide a return over the course of their operational lives sufficient to justify the costs associated with real estate acquisition, construction, staffing, etc. If things go sour on the Internet, a retailer forced to pull the plug might accrue some losses around inventory clearance and shifting staff. But those pale in comparison to the problems generated by dealing with unprofitable stores.

Right now, something else begs consideration. When they launch new initiatives, retailers usually have to worry about consumer acceptance. Recent evidence suggests that E-commerce acceptance already exists and is growing, which means sales should follow as consumers become more confident in spending as the economy improves.