Online retail may be outperforming brick-and-mortar rivals amid the U.S. recession, but that’s no reason to get complacent.

In a wake-up call to the industry, a new survey shows that customer satisfaction with online retailers declined 3 percent from last year.

The slipping satisfaction level uncovered in ForeSee Results’ Top 100 Online Retail Satisfaction Index is a “remarkable trend,” according to its author.

The report — which surveyed 22,000 respondents to measure customer satisfaction at the top 100 online retailers by sales volume — found that the top performers were outweighed by more bottom performers, with 55 online retailers seeing their scores drop from last year.
 
“Customer satisfaction, when measured scientifically, is not just a number or a beauty contest. It is a direct precursor of customer behaviors that have a measurable and quantifiable ability to impact sales and profitability,” warned author Larry Freed.
    
A 1 point increase in customer satisfaction is equivalent to nearly 9 percent growth in online sales, the report found, while a satisfied shopper is 71 percent more likely to buy than a dissatisfied one. 
    
First, the good news: Netflix.com is still No 1, followed by Amazon.com, with the top two companies maintaining their spots for five years in a row.  Avon.com came in third.

While a score of 80 or above represents a superior job, those logging lower than a 70 need some help.

That group includes 1800Flowers.com, BlueNile.com, JCrew.com, UrbanOutfitters.com and RestorationHardware.com.

The biggest year-over-year declines in customer satisfaction came from discounter Etronics.com and book retailer efollett.com, both also among the worst performers.
    
“It is surprising that any of the top 100 retailers could get away with scores in the 60s and maintain any kind of market dominance for very long,” wrote Freed.
    
While not in the bottom group, sites including CVS.com, NeimanMarcus.com, Apple.com and Blockbuster.com all saw their ratings fall over 6 percent from the prior year.

The biggest year-over year improvement came from Kohls.com, which improved nearly 6 percent.

Blockbuster got into the set-top box game right in time for the holiday season with a new digital media player that brings fewer but newer titles from the Web to TV six months after arch rival Netflix launched its $99 Roku set-top box. Netflix followed that launch with similar partnerships with Tivo, Samsung, LG Electronics and Microsoft.

And that's just the tip of the iceberg. While the number of people who watch movies or TV via the Web is still small, media and technology executives believe a host of new technologies will make Web to TV a mainstream staple. Vudu already sells a $299 set-top box that lets users download TV shows, while Microsoft's Xbox 360 and Sony's PS3 game consoles can also be used to download programming from the Web for TV viewing.

Apple of course is trying to take a bite of the market with its Apple TV device that lets viewers download shows from their computers onto their TVs.

This could save consumers a lot of money-- bypassing the need to pay hefty cable fees -- and a lot of time when you factor in all the hours spent watching commercials. These devices do require fast Web connections, but market researcher Gartner forecasts there will be 499 milion residential broadband subscribers globally by 2012, up from 323 million at the end of 2007.

Blockbuster said its MediaPoint set-top box, made by broadband device maker 2Wire, allows customers to download high-definition quality movies to their TVs via broadband lines for $1.99 apiece, after an initial $99 for the box and 25 films.

Consumers have 30 days to watch a film once it is downloaded to the set-top box, and must finish watching it within 24 hours of pushing the "play" button. The service, called Blockbuster OnDemand, can be ordered at http://www.blockbuster.com beginning on Tuesday.

Unlike Netflix's "Watch Instantly" feature, which streams movies to subscribers' TVs or personal computers, the Blockbuster on-demand service will be open to customers who do not subscribe to its DVD-by-mail service, Blockbuster Online. Blockbuster Chairman and Chief Executive Jim Keyes said the company's longtime emphasis on new releases draws different consumers than Netflix subscribers, who are directed by its Web site to older catalog titles.

The service is essentially a rebranding and expansion of Blockbuster's Movielink.com Web site, which offers about 10,000 on-demand movies for download to personal computers. About 2,000 of those titles, such as recent DVD releases "Forgetting Sarah Marshall", "Sisterhood of the Traveling Pants 2" and "Get Smart", can be downloaded to TVs via Blockbuster OnDemand, the company said.

Blockbuster's also looking into packaging the new service with Blu-Ray DVD players and is considering alliances with video game console makers, but is not ready to disclose the details.

Frozen yogurt is hot — again.

Pinkberry and Red Mango revived the segment and are breaking away from the pack with help from venture capital funding.

While the last generation of frozen yogurt sellers offered ice cream-flavored swirls, next-gen “fro-yo” shops peddle a tart and tangy product that tastes closer to unadulterated yogurt — boosting its appeal as a healthy snack.

The new stores are bright and modern, but they’re not the only place where groupies can congregate — Pinkberry and Red Mango invite their tech-savvy fans to meet up online.

Pinkberry is working with $27.5 million in venture funding from Maveron, a Seattle-based venture capital firm co-founded by Starbucks CEO Howard Schultz. The chain expects to finish the year with more than 75 stores, primarily in California and New York.

Pinkberry’s following includes stars like Paris Hilton. Its founders Shelly Hwang and Young Lee have achieved celebrity status  of their own — they’re being featured in an ad for American Express.

Red Mango last week announced $12 million in venture capital funding from Dallas-based CIC Partners and former Blockbuster CEO John Antioco.

It has 35 U.S. stores in California, Illinois, Nevada, New Jersey, New York, Oregon, Utah and Washington and operates independently from the original Red Mango chain that has more than 100 stores in South Korea.

Red Mango CEO Dan Kim plans to have 50 U.S. stores by year end, with most of the new additions in New York and Los Angeles.

While imitators are springing up by the dozens, Kim expects that just a few national chains will be left standing.

“I think over the next 24 months you’ll probably see a shakeout of the smaller players,” Kim said.

(Pinkberry photo: Reuters; Red Mango photo: company)

Check out the 50 percent drop in quarterly profit at JC Penney.

The mid-tier department store operator had warned in late March that its first-quarter profits would be hammered after a drop in store traffic and dismal Easter sales forced it to cut prices to clear out unsold merchandise.

Penney shoppers can expect more price cuts on future visits to the retailer. 

The department store operator said it is now trying to get inventory in its stores to better match the weak sales environment, meaning it will roll out more promotions and cut future merchandise orders.

Based on its forecast, Penney is expecting profits to decline yet again in its second quarter.

It forecast earnings per share of 38 cents–a dramatic drop from the 78 cents per share of earnings from continuing operations it reported a year ago.

Also in the basket:

Tiffany ups payout, sees 1st-qtr topping estimates

Tyson sees less, but more expensive, chicken

Blockbuster swings to profit in first quarter 

(Photo: Reuters)