To Keep or Not to Keep: Effects of Online Customer Reviews on Product Returns

Abstract

While many studies examined the effects of online customer reviews (OCRs) on product sales, a clear understanding of the effects of OCRs on product returns is lacking. This study examines the impact of OCRs characteristics (valence, volume, and variance) on return decisions with a rich multi-year dataset from a major online retailer covering the electronics and furniture category. The main finding is that overly positive review valence (i.e., higher than the long-term product average), induces more purchases, but also more returns. An explanation for these findings is that OCRs help to form product expectations at the moment of purchase. Therefore, the purchase probability increases but the high expectations due to overly positive reviews may not be met, which results in negative expectation disconfirmation and consequently increases return probability as well. The effect of review valence on returns is stronger for novice buyers and for cheaper products. We further find that review volume and variance mainly affect purchase decisions, and have little to no effect on product returns. This study thus demonstrates that products returns should be considered when examining OCR effects, especially because overly positive reviews may hinder a retailer's financial performance, due to large reverse logistics costs associated with product returns.

Understanding Customer Experience and Satisfaction through Airline Passengers’ Online Review

“…For example, Dellarocas et al [21] have demonstrated that online review metrics can accurately forecast movie revenue. Minnema et al [22] have demonstrated that product returns have a strong relationship with online customer reviews and the effect of it needs to be considered. The number of reviews has grown exponentially over the past few decades, and the content of the reviews has had a significant impact on the repurchase of products [23].…”

Product Uncertainty in Online Markets: The Influence of Situational Factors and Individual Characteristics on Purchase Decision Reversal

“…In e-commerce product returns are substantially more common than in stationary retail as consumers do not have the opportunity to experience the product physically before making their purchase decision [11] and the majority of product returns online has been found to be related to negative post-purchase product evaluations [45].…”

“…[25,29,31,38]). Marketing tools, that were examined include website design [28,59], customer reviews [42,45] and thirdparty product assurances [12].…”

Using Big Data and Text Analytics to Understand How Customer Experiences Posted on Yelp.com Impact the Hospitality Industry

“…Mudambi and Schuff (2010) concluded that review depth has a greater positive effect on the helpfulness of the review for search goods than does experience goods or service. Minnema, Bijmolt, Gensler, and Wiesel (2016) have demonstrated that products returns have strong relationship with online customer reviews and the effect of it need to be considered. While researchers have demonstrated the effect of the presence of customer reviews to an online retailer, a part of unanswered research issue is what makes customer reviews helpful to a consumer in the process of making a purchase decision (Mudambi & Schuff, 2010).…”