How do online reviews impact revenue for retail businesses?

It's clearly important for retail businesses to claim their listings on as many review sites as possible, but they shouldn't just stop there. Our analysis reveals that as customers search for local retail shops, one of the things they're looking for is a business that engages with customer reviews.

75% of all retail businesses in our analysis haven't responded to a single review, and those businesses earn 6% less in annual revenue.

Once businesses engage with their customers online by replying to reviews, though, revenue starts to go up. Retail businesses who responded to even just one review earn $18,000 more each year than the average retail business.

As you can see in the charts above, retail businesses that engage with their customers via online reviews earn more money. Retail businesses that reply to their reviews between 1 and 25% of the time earn 19% more revenue than the average.

Interestingly, the increase in revenue stays the same even as retail shops reply to 25% to 50% of their reviews, and drops slightly when the review rate raises to 50% or more.

This is likely because retail businesses with a large number of total reviews are very popular and well-established, and may be likely to earn more money than average, but may also be more likely to have a much lower review response percentage.

This becomes clear when you look at retail business revenue by total number of review responses:

Retail businesses that responded to at least 1 review responded to a total of 14 reviews on average. Again, even retail businesses that respond to just one review earn more money than average.

Revenue rapidly climbs the more times a retail shop responds to reviews. Even those shops with just a handful of reviews earn quite a bit more than average, and by the time you get to those who respond to more than 50 reviews, they're earning over $175,000 more each year than average.

When it comes to responding to reviews, it's clear that retail businesses should focus on engaging with their customers by responding to many reviews, positive and negative alike.

As we'll explain in the sections below, getting more reviews is clearly important, but staying engaged with customers in a real and meaningful way can make a clear difference.

Retail business owners often stress about their star rating, but as you can see in the section above, a high star rating has a somewhat nebulous correlation with increases in revenue. On the other hand, our findings suggest that retail business owners should perhaps focus much more on increasing the number of reviews than almost anything else.

Retail businesses in our analysis averaged 43 reviews on review sites. This is significantly less than the 82.5 average across all businesses, suggesting retail businesses may need to work a little harder than other industries to get reviews.

We analyzed the revenue of businesses whose review counts fall above and below that average 43 review threshold.

The results of this analysis revealed a strong positive correlation between review count and sales revenue.

Retail locations with more than the average number of reviews earn 26% more in annual revenue than businesses with review counts below the average, while those with less than the average number earn 7% less than the average retail business.

Looking closer at the numbers helps clarify any relationship between the number of reviews and an increase in average revenue.

Retail locations with fewer than 10 reviews earn far less than average, while those with 21 to 43 reviews earn slightly more than the industry average.

Annual revenue at retail locations with more than 200 reviews is 46% more than the baseline average, suggesting that a large number of reviews is far more appealing to customers searching for retail shops online than almost anything else.

Google and Yelp are the most important for retail when we look at individual review sites. Retail businesses with an above average number of reviews on Google earned 38% more than average while those with a lot of Yelp reviews earn 21% more.

Regardless of the platform, local retail shops would be well-advised to get as many reviews on as many sites as possible. Even if some of those are negative reviews (which isn't necessarily a deal-breaker, as we'll explain below), there's little question that customers put more value in a higher number of reviews (or other factors) than they do in a 5-star rating.

It's clearly important to get a steady stream of fresh reviews, but how important is the ratio of positive to negative reviews?

On average, 16% of reviews retail businesses receive are negative, which is slightly less than the 19% average across all industries. Let's take a look at whether the total number of negative reviews correlates with revenue at retail businesses.

As with businesses across all industries, the retail businesses that earn the highest average revenue are those with a healthy mix of positive and negative reviews.

Retail businesses with 25% to 35% negative reviews earn the most, and actually earn 3% more in annual revenue than businesses whose reviews are only 5-10% negative. Even shops with 35% to 50% negative reviews earned 8% more than the average retail business.

Now, this is likely due to multiple factors, such as businesses in that sample having a larger total number of reviews, but it's clear that business owners shouldn't lose sleep over getting the occasional bad review.

When customers browse retail business listings on review sites, they might expect to see a certain amount of bad reviews. A business with little or no negative reviews might appear untested or even a little "too good to be true."

Our takeaway: retail businesses that focus on getting as many real and authentic reviews as possible reap the rewards.

We looked at which states' retail shops were the best at managing their online presence. First we looked at the percentage of retail businesses in each state that had claimed at least one review site listing.

88% of Rhode Island retail businesses have claimed at least 1 business listing, which is good for the top spot nationwide. Utah came in second with 86%, and North Dakota third with 85%.

On the other end of the spectrum, 29% of retail shops in Maine and Arkansas haven't claimed even a single listing, putting them at the bottom of the list.

Lastly, we looked at how frequently businesses in each state responded to reviews.

South Dakota retail businesses were the most engaged, averaging a response rate of 37% among businesses who responded to at least one review. South Dakota and Wyoming came in close behind with a response rate of 30%.

Alaska and Montana retail businesses were the least engaged out of all states, averaging a reply rate of 16% among businesses who responded to at least one review.