Too many five-star product reviews can hurt retailers' bottom lines

Reviews that set the bar too high may be causing some online retailers to suffer.

According to a new study, receiving more positive feedback for a product may actually lead to a net negative profit for the seller.

The study, which is set to be published in the September issue of the Journal of Retailing, looked at more than 630,000 transactions for 2,164 different products in the electronics and furniture categories from a major European retailer.

In particular, the researchers analyzed the online reviews that were available at the moment of purchase and tracked them alongside the long-term return decisions.

Through a series of simulations, they found that products with a glut of glowing reviews have elevated sales –as one might expect – but, if they’re not offset by less positive comments, also have more returns. And, furthermore, the costly expense associated with returns leads to lower profits in the end.

The researchers believe that when products have overwhelmingly positive feedback it creates sky-high expectations that simply can’t be met once the customer gets their hands on them. They added that this disappointment is less likely to happen when customers can physically inspect a product.

The study said this buyer’s remorse is magnified among “novice” buyers, or those who don’t have experience making purchases online, and with cheaper products.

Returns are a major issue for online retailers, given that an estimated 30 per cent of products are sent back, which costs them between $6 and $18 per transaction.

In order to lower the rate of return and this feeling of disappointment among consumers, the authors suggest that retailers should get a sizeable amount of reviews that present an honest depiction of their products.

“Our findings encourage retailers to get a large review base that adequately reflects the performances of the products,” the authors said in a press release.

“Thus, retailers should actively stimulate customers to write a review after purchase.”

However, they stress that these need to include both good and bad comments.