Costco’s Embrace Of Online Customer Comments Illustrates How Innocuous They Are Now Viewed

Written by Evan Schuman
October 30th, 2008

When Costco on Monday (Oct. 27) announced that it would support—for the first time—customer comments on its products, the move was less noteworthy for the $71 billion chain’s late-to-the-party embrace than for what it says about the industry’s acceptance of a once much-feared feature.

Costco’s deployment of Costco Reviews went out of its way to avoid anything controversial or, for that matter, innovative or creative. Almost all of the functionality has been outsourced to an Austin-based social commerce vendor called Bazaarvoice, which will review all comments and post them within 24 hours, once any profanity or "completely inappropriate" comments are removed, said Ginnie Roeglin, Costco’s Senior VP for E-Commerce.

The soft launch happened about Oct. 2 and the program went live to all of Costco’s 45 million members, weeks before it was formally announced, Roeglin said. (I love when companies "announce" efforts like that. "This just in. We did this big thing weeks ago.") Technically, the site is limited to Costco members. But the site does say that "non-members pay an additional surcharge" of five percent to shop on the Costco site.

Roeglin didn’t have much of an explanation for why Costco waited so many years after most retailers started allowing consumers to comment on products they’ve purchased, other than to say "it’s always been on our list of things that we wanted to do, but it was a matter of priorities. It was something that I wanted to get in before the holidays."

For years, however, major retailers have looked at customer comments cautiously. OK, let’s be candid. The prospect of letting their customers publicly criticize their products in front of other customers scared the barcodes off of them.

Major retailers "are really scared about disrupting their vendors," said Andy Chen, founder and CEO of PowerReviews, which runs its own consumer comment site called Buzzillions and had briefly talked with Costco about handling this rollout. "Posting reviews gets a little bit hairy because it disrupts an otherwise smooth relationship. It took some senior management swaying to get this done. When they see poorly rated products, they get scared. It’s about their base-level fear and understanding."

But those concerns were certainly not unique to Costco. So why, after all these years, are conservative retailers like Costco and others finally agreeing to do customer reviews?

"Because, by now, virtually every other retailer has beat them to it," Chen said. "It’s at a point where no legitimate brand can say, ‘I’ll shut you down because you do reviews.’ At this point, it doesn’t take much guts to do it. To be last is risk-free."

Another social network tracker is Adam Cohen, a partner with an interactive marketing agency called Rosetta. Cohen argues that much of the retail resistance to consumer comments is based on decades-old marketing training.

Many of those retail execs "subscribe to the old school approach that ‘We have to control the message. We have an audience that we have to project to. Everything has to go through PR and legal and marketing has to control everything," Cohen said.

Now that customer reviews are fairly ubiquitous and the risk is seen as much less, E-tailers can look at those reviews as boosting conversion.

Consumers typically split the E-Commerce process into two neat categories: the research phase (including product selection, comparisons, general education about the category and what the options truly are) and the purchase phase.

If consumers go to a particular E-Commerce site to browse and see what’s there, consumer reviews make a lot more sense than for some utilitarian sites that are designed to just make quick sales.

It’s also fair to point out that the Costco/ similarities are much less than most large retailers. Costco the brick-and-mortar chain, for example, sees a lot of its revenue from food products, a category that simply doesn’t offer., on the other hand, makes some 50 percent of its money from electronics, offering many products that its physical counterpart doesn’t.

Costco does not offer traditional buy-online-pick-up-in-store (with a handful of exceptions such as digital photos and automobile tires) nor does it support any mobile applications, although Roeglin said that mobile is on her future wishlist. "We’re just looking into mobile now," she said.

Another risk with customer comments is that the system can be so easily gamed by vendors, to say either nice things about their own products or nasty things about their rivals. Many programs today try a wide range of techniques to make such efforts more difficult—by tracking IP addresses, seeing how quickly comments are written, closely examining outlying comments, etc.—but like counter-intelligence, the trickier the protections get, the more clever the fraudsters get.

Costco’s approach is mostly to let the community police itself. That, coupled with a healthy dose of consumer skepticism, is probably an effective tactic or, at the very least, a very cost-effective one.


One Comment | Read Costco’s Embrace Of Online Customer Comments Illustrates How Innocuous They Are Now Viewed

  1. Adam Cohen Says:

    To elaborate on my comment, what marketers are starting to understand is that conversations about brands and products are taking place all over the internet, in blogs, forums and social networks. By opening up user reviews, through a partner like Bazaarvoice, companies are bringing the conversation directly to their own websites and creating a more compelling platform for users. There are lots of studies that suggest user reviews increase conversion – I’d be interested to see how Costco fares over the next several months and if they are able to realize the benefits.


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