Study: Overly positive reviews driving product returns
There may be something to the adage, “Under promise and over deliver.” According to a new university study, overly positive online reviews may be a reason why merchandise bought online has such high return rates.
Researchers from University of Groningen the Netherlands and University of Munster in Germany analyzed more than two years of sales data from an unnamed major European online retailer. A total of almost nine million page views and 631,063 purchase transactions for 2,164 different products in the electronics and furniture categories were captured.
Manipulating the data through a series of simulations, the authors found while positive reviews can raise sales, it also lifts the bar around expectations for the product. When the product arrives, it often falls short of those expectations and is returned.
The effect happens to a greater degree for “novice” buyers as well as for cheaper products, the study found. The net result is a higher total return cost that offsets the gain in sales, equaling to lower profits.
The researchers advised retailers to seek out a large number of reviews to provide consumers with a balanced estimation of the product’s performance. They wrote. “Retailers thus should actively stimulate customers to write a review after purchase, for example by providing them an appropriate incentive or by reminding them to write a review.”
The study noted that one of the down sides of online selling is its high return rate, estimated at 30 percent and costing retailers between $6 and $18 per return. Approximately nine percent of items bought at brick & mortar stores are returned, according to the National Retail Federation (NRF).
A study released last fall from returns management software provider TrueShip found that 22 percent of e-commerce returns resulted from a product looking and appearing different when it arrives than it did online.
HRC Advisory’s “2015 Supply Chain Transformation” study suggested having online purchases shipped to an actual store for pickup in order for the customer to touch and feel the product or examine how it actually works could reduce online return rates “to a more acceptable 15 percent.”
- To Keep or Not to Keep: Effects of Online Customer Reviews on Product Returns – Journal of Retailing (sub. required)
- How 5-star online customer reviews can backfire – Phys.org
- Too much positive online customer reviews can backfire – Business Standard
- Consumers Want it Now — But When Will Retailers Deliver? – HRC Advisory
- How can online returns be minimized? – RetailWire
- Online return issues stem from failures in supply management – Strategic Sourceror
DISCUSSION QUESTIONS: Do you think reviews play a role in return rates for items purchased online? Can reviews be used to reduce the level of returns? What else can retailers do reduce the rate of returns from items purchased online?