A PERFORMANCE INDEX FOR TRADITIONAL RETAILERS INCORPORATING DIGITAL MARKETPLACE: BENCHMARKING THROUGH DATA ENVELOPMENT ANALYSIS (DEA)

Abstract

ABSTRACT In competitive markets, such as electronic commerce, evaluations of base-level performance and benchmarking are fundamental for retailers focusing efforts. Hence, we propose a new and practical approach to measuring retailers’ relative performance and benchmarking through a unique index that integrates digital, physical, and financial factors. We investigated 13 traditional retailers controlling 36 marketplaces (i.e., online platforms) in Brazil in 2020. The traffic to the marketplace, the companies’ inventory, capital intensity (physical infrastructure), and gross margin were used in the slacks-based measure and data envelopment analysis (DEA) model, followed by a slacks-based measure super-efficiency model for the sensitivity analysis. Companies’ relative performance is then determined, as well as thei customized targets for achieving efficiency. Three types of marketplaces are explored: pure (direct sales from suppliers to consumers for a fee), reselling (products purchased from suppliers and resold), and hybrid (both options direct and resale, depending on the product). Although data envelopment analysis has already been applied to examine retailers’ performance, there are few extant applications to e-commerce. Our findings show that retailers who operate through specialized (normally reselling) marketplaces tend to be inefficient, and retailers prefer to manage one non-specialized (normally hybrid) marketplace and focus efforts on achieving efficiency instead of managing many marketplaces inefficiently.