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Which Discount and Department Stores Do Americans Love Most?

Americans love a discount as well as a treasure hunt. That's why warehouse clubs dominate the newly released 2019-20 American Customer Satisfaction Index (ACSI) Retail and Consumer Shopping report.

According to the report, in a broad sense, department and discount stores have stopped a two-year drop in customer satisfaction. The category posted an overall rating of 76 on the 100-point ACSI scale, the same as it put up in 2018. That may be because brick-and-mortar chains have become more like their digital rivals.

"While the industry's customer satisfaction has stabilized for now, many companies are adopting an omnichannel approach to doing business," the ACSI wrote. "Major players like Walmart [(NYSE: WMT)] and Target are expanding online order fulfillment capabilities, as well as going head-to-head with Amazon in the one-day shipping space."

Consumers clearly like department stores. Image source: Getty Images.

These are the top department and discount stores

Warehouse clubs offer a model that consumers like. Even though Costco (NASDAQ: COST), Walmart's Sam's Club, and BJ's Wholesale (NYSE: BJ) offer very few frills and limited customer service, they came in first, second, and third on the ACSI report. That suggests consumers prize value and the entertainment aspect of these stores.

BJ's, it should be noted, tied with Kohl's and Nordstrom for third with a ranking of 79. That was only one point better than Belk, Dillard's, Macy's, Target, and J.C. Penney.

The surprise on this list may be J.C. Penney because the retailer has seen steady sales declines. This study suggests that consumers still like the department store even though they're not shopping there as much.

Image source: ACSI.

What does this mean?

Scoring well on the ACSI does not necessarily equal success unless you're a warehouse club. J.C. Penney, Kohl's, and Macy's all scored well while struggling to connect with consumers.

At the bottom of the list, Walmart and Dollar General (NYSE: DG) show the opposite. Both chains have delivered strong growth and sales, but consumers don't appear to like shopping at either chain all that much. This suggests both retailers lure shoppers because they offer good prices. Consumers, it appears, will overlook poor service in exchange for value.

This is a somewhat confusing list because the warehouse clubs that rank the highest generally skimp on customer service. Costco, Sam's Club, and BJ's have models that involve customers largely serving themselves.

That may work because the agreement is explicit; shoppers know they're going to pay less in exchange for limited customer service.

At Walmart and Dollar General, consumers get good prices but are not as forgiving when it comes to service. That has not stopped them from shopping there, but they do so holding their noses a bit. That suggests both of those retailers could be toppled by a rival that offers the right mix of service and value.

It's very clear that consumers prize value over everything else. That suggests chains should focus on lowering prices first and serving customers second. That's not to say keeping customers happy doesn't matter, but it's clearly not the most important thing.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends Costco Wholesale and Nordstrom. The Motley Fool has a disclosure policy.


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