E-shop till you drop

Online shopping is big business. Websites selling everything from mp3 players and music to books and budget flights continue to thrive. Now, an international research team have devised a simple method for assessing the success of internet shops and e-commerce sites.

Naveen Donthu of the Robinson College of Business at Georgia State University, Atlanta, USA, and Paul Alpar of the School of Business Administration and Economics, at the Philipps University Marburg, Germany and explain that there are several ways to assess the success of an internet shop. However, the most obvious approach is simply to measure how well the respective websites transform their inputs into outputs and compare them. In other words, they ask does the site get as much back from its investments as its competitors"

A shopping website is both a computer information system and a sales channel, Alpar explains. So, he and Donthu have used Data Envelopment Analysis (DEA) to obtain a performance benchmark for a range of internet shops. The data sources they analyzed include results from a web crawler, website visitor statistics collected by a market research firm, and measurement of visitors' perceptions of the sites.

According to Alpar and Donthu, the proprietors of e-shops desperately need measures of whether they are succeeding or not. Early measurements focused only on the number of visitors to an e-shop, click-through or conversion rates. That can help provide insights into whether an advertising campaign is working but does not take into account the efforts associated with creating and running the site and says little about the economic success of the site.

The team suggests that the two areas of measured success - the technical variables, information content and site usage, and the marketing variables, perceived website quality and intention to purchase - have to be brought together in a definitive analysis. They have now investigated 37 websites in the clothes and accessories sector and combined both aspects of success - technical and marketing to evaluate each.

One of the main findings is that offering too wide a variety of products leads to lower efficiency. "One of the advantages of big department stores in the physical world is their offering of 'everything under one roof', says Alpar, "This advantage does not count online since moving from one specialty shop to another does not take more time than moving from one department to another of the same store." He adds, that, "Consumers may reason 'I'll look for product X at shop A because they are likely to carry it'. On the internet, most consumers enter a store via a search engine or even a price comparison site because this leads them quickly and directly to the products they are looking for."

The team suggests that the more efficient websites - Jcrew, Abercrombie, Gap, and Urbanq - can act as role models for the less effective ones. The non-efficient websites can learn how to become efficient by reducing specific inputs or by increasing specific outputs and by how much these inputs or outputs need to be changed to perform at least as good as the competition.