Impact of Value-Added Service Features in E-Retailing Processes: An Econometric Analysis of Website Functions

Abstract

We examine the impact of three classes of website functions (foundational, customer-centered, and value-added) upon e-retailer performance. Using secondary panel data for 2007-2009 on operating characteristics of over 600 e-retailers, our econometric analysis finds that only the value-added service functions are positively associated with changes in e-retail sales revenues across time. We also observe a decreasing marginal impact of deploying additional value-added service features. To account for possible alternate explanations, we control for firm- and time-specific fixed effects, merchant types, merchandise categories, and order fulfillment strategies. By further decomposing e-retail sales revenues into website traffic, conversion rate, and average order value, we find that website functions affect e-retail sales revenues mainly through their impact on website traffic. Our investigation demonstrates the empirical research usefulness of the Voss (2003) conceptual e-service sand cone model. Our results identify for managers where to focus ongoing e-retailing system development efforts, yet suggest that focusing too many retailing capabilities on exploratory and experimental value-added service features may backfire, potentially leading to worsening e-retailer performance.