Retailers Take a Tip from MySpace

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Petco also noticed that customers are drawn to top customer-rated pet toys and items, even if they weren't necessarily planning to buy them. "Clearly people trust someone else's opinion that is independent of the manufacturer or the retailer," says John Lazarchic, vice-president of e-commerce at Petco, which soon made the customer-rated feature the default search button at the site.

Petco's experience isn't unique. According to a study conducted by eVoc Insights, a customer experience consulting firm, 47% of consumers need to consult reviews before making an online purchase. And 63% of shoppers are more likely to purchase from a site if it has ratings and reviews.

The Good, the Bad, and the Ugly

One reason that most retailers dragged their feet in letting customers post comments and reviews was fear of negative feedback. But Sucharita Mulpuru, a senior retail analyst at Forrester Research (FORR), found that 80% of all customer reviews on e-commerce sites are positive.

What's more, Petco's Lazarchic says negative reviews not only help the retailer quickly address a defect or a poorly manufactured item, they also help decrease the number of returns. "Customers have lofty ideas of what certain expensive products will do for their pets, and if it doesn't meet their need, they return it," says Lazarchic. "But reviews give a realistic view of a product and its attributes, and people are less likely to return if it doesn't meet imaginary expectations."

Another concern that slowed retailers from getting into the game: They were worried about hiring the staff to manage the surfeit of reviews and the content. "You do want to see the good, bad, and the ugly out there, but most consumers don't want to see profanity or rants," says Patti Freeman Evans, senior retail analyst at Jupiter Research in New York. In the past 18 months, companies like BazaarVoice and PowerReviews have emerged as leaders among companies that build review functionality for these sites and manage the process for retailers. "These new outfits offer what is essentially plug-and-play," says Evans.

Sometimes, the reviews contain small surprises. For years, outdoor fishing and hunting gear retailer Bass Pro Shops has sold a holder that stores a fish hook when you're not fishing. At $3.99 for a pack of four, the XPS hook holder wasn't an item the company heard much about. Then Bass Pro Shops opened its Web site to customer feedback and got dozens of complaints about the product with specific details, including one spot where the hook holder tends to crack and how it barely lasted a week for some buyers.

Putting a Face to the Name

It quickly became the worst-rated product on the site. "It was such an inexpensive item that when it broke, people just didn't bother bringing it back or even telling us about the problem, so we never knew about it," says David Seifert, director of operations at Bass Pro Shops in Springfield, Mo. The manufacturer of the hook holder is now fixing the faulty product and will replace it with a new one this summer.

Some online retailers are pushing into MySpace (NWS) territory. Evogear, which sells snowboards and sports equipment, started letting customers post photos of themselves along with their reviews of the product they were showing off. Now, 25% of the reviews include images.

"Once the photos get published on our Web site, customers pass links to their friends, and it takes on its own viral-marketing aspect," says Nathan Decker, director of e-commerce at Seattle-based Evogear. Others, such as Golf Smith, one of the largest golf retailers on the Internet, are in the process of introducing video uploads on their sites, so customers can share their experience with products they buy, à la YouTube.

Back to Print

These online reviews are having quite an effect offline, too. Canadian supermarket chain Loblaw, which started gathering online reviews a year ago, is using the Internet customer ratings and reviews for in-store signs. For instance, the store's in-house President's Choice Vegetable Lasagna was one of the highest-rated frozen foods on its Web site. Now, its stores promote the fact that 160 out of 177 customers gave it 4.5 out of 5 stars, and that 90% of the customers would recommend the product to a friend. The sign also quotes a customer's review: "Even my vegetable-hating 17-year-old son enjoyed it."

Petco's Lazarchic says that his company's physical stores will also soon show the online customer ratings. "Why should a customer in the actual store be left out of ratings?" he asks. After seeing a 500% increase in click-throughs from e-mail that promoted the ratings, Petco now plans to add them to the Sunday circulars that go out with newspapers. Now that's consumer-generated content at its most influential.

Gogoi is a contributing writer for BusinessWeek.com.