Chain Stores’ Revenue Affected By Yelp Reviews
According to Michael Luca, more reviews on independent stores can decrease profits for chains.
Michael Luca, an assistant professor at Harvard Business School, has made a compelling finding on how Yelp boosts revenue for smaller stores but has the adverse effect on chain stores and chain restaurants. Luca studied over 3,500 restaurants in Seattle, USA, from 2003 to 2009 and found that ratings on Yelp impacted the bottom line. A positive review for a small, local restaurant raised its profile but in turn, decreased revenue for a chain restaurant.
Luca’s early data also suggested that when more independent restaurants are covered on Yelp, it leads to an average drop in the chain’s revenue by 5%. Although the research only primarily focused on restaurants, Luca believes that the same findings could apply to various industries, from retailers to health practitioners.