Retailers Take a Tip from MySpace

E-commerce sites are letting customers post comments, reviews, and even photos—and finding out a lot about their products in the process

by Pallavi Gogoi

It has been six months since Macy's opened its Web site to customer comments and reviews, and Peter Sachse, the chairman and chief executive of macys.com, regularly finds himself surprised by what the company is learning from its clientele. The site now gets upward of 350 reviews a day, some full of praise, others with serious concerns.

"ChicChix" tells other shoe buyers that the Jessica Simpson Ladonna pumps run a half-size small, while "jcamp" says Calvin Klein sheets and duvet covers don't need fabric softeners. "Our site has become like a social network. It's the ultimate word of mouth," says Sachse, whose macys.com is a division of Federated Department Stores (FD).

Retailers are taking a page from MySpace. They know that customers, especially the younger and more Net-savvy, want to be heard, and they also want to hear what others like them think. So increasingly, retailers are opening up their Web sites to customers, letting them post product reviews, ratings, and in some cases photos and videos. The result is that customer reviews are emerging as a prime place to visit for online shoppers.

Marketing companies have longed for years to have a window on how consumers use their products, in order to develop product innovations and improve marketing. Procter & Gamble (PG), for example, follows mothers for weeks at a time to see how they use Tide detergent and Olay skin-care creams. P&G has even had women strap video cameras to their heads to see what they do moment by moment.

More Likely to Buy

Now, as more and more retailers have opened up their sites over the past year, they have been able to listen in on conversations that couldn't even take place before. Customer feedback is opening the eyes of the industry, changing the way they market, manufacture, and merchandise. In one recent example from Macy's, consumers complained that a metal toothbrush holder was rusting countertops. Sachse and his staff took notice—and promptly pulled the item from the site.

Customer reviews have long been part of cutting-edge sites like Amazon.com (AMZN) and Netflix (NFLX), but the practice is spreading dramatically these days to a broader array of retailers. By the end of 2006, 43% of e-commerce sites offered customer reviews and ratings, almost double the 23% figure at the end of 2005, according to New York research firm MarketingSherpa.

In a survey of more than 1,300 people, MarketingSherpa also found that as much as 50% of customers aged 18 to 34 have posted a comment or a review on products they have bought or used. "That's substantially more than the 34% who said they have downloaded music files," says Stefan Tornquist, the firm's research director.

A huge part of the reason for this success is the confluence of social computing and the success of sites such as FaceBook, MySpace, and YouTube. People obviously love to chat and share details and snapshots of their lives. And customer reviews let folks do just that. What's more, the reviews empower customers to influence how another person sitting in another corner of the world shops.

Ruled by Ratings

"In the past, people could just share information with their neighbors, but now people can influence the global village by sharing their experiences on the Internet," says Brett Hurt, founder and CEO Austin (Tex.)-based Bazaar Voice, which manages customer reviews for several retailers.

The results have taken many retailers by surprise. Take Petco, which operates 800 pet-supply stores nationally. The site launched customer reviews in October, 2005, and within weeks noticed that folks who clicked on the highest customer-rated products were 49% more likely to buy something. And they spend 63% more than shoppers who clicked on options like "top-sellers" or "lowest-priced."