The Influence of E-Commerce Initiatives on Corporate Performance: An Empirical Investigation in the United States

Abstract

Electronic commerce (EC) on the Internet is an attractive technology for business organizations to be more efficient. The Web-based economic model is more efficient at the transaction cost level. It also provides cost-effective marketing and a disintermediation of costly distribution channels. While there is some anecdotal evidence about such benefits, no cross-sectional studies appear to have been conducted on measuring the impact of EC on financial performance of companies. This paper analyzes financial statements of 45 publicly held corporations that have implemented EC initiatives. The results indicate that the majority of the sample companies have experienced improved financial performance in the post e-commerce era. Introduction The Web (or WWW) has experienced a phenomenal growth over the last few years. From a few thousand people in 1993, to 150+ million in 1999 the Web is expected to attract over one billion by 2004 (Bingi, et. al., 2000). This growth has attracted all kinds of organizations initially to provide marketing information about their products and services, customer support, and to later conduct business transactions (known as ecommerce) with customers or business partners over the Web. The Web-based economic model is staggeringly more efficient at the transaction cost level (Benjamin & Wigand, 2000). For example, the cost of processing an Airline ticket through traditional approach is eight dollars, but is only one dollar through the Web. In addition to the lower cost, the Web also enables higher level of customization to the needs of individual clients (Barua and Winston, 2000). Similarly, other efficiencies can be derived from marketing and advertisements, online information processing with forms that are electronically linked to databases, and online customer support (Hoffman, et. al., 1995). Elimination of middleman in the distribution channel (or disintermediation) also can have a big impact on the market efficiency (Michalski, 1995). Other efficiencies are generated due to less or no inventory, storage space, larger customer base, and 240 hours access at no additional cost (Steinfield and Whitten, 1999). EC also allows organizations to expand their business reach. One of the key benefits of the Web is access to and from global markets (Economist, 1997). The Web eliminates several geographical barriers for corporation that wants to conduct global commerce. Political, trade, and cultural barriers may still make it difficult to take true advantage of the global business environment. Yet, the Web does make communication of information easier. Finally, the rich interactive media and database technology of the Web allows for unconstrained awareness, visibility, and opportunity for an organization to promote its products and services (Senn, 2000). This enhances organizations' ability to attract new customers, thereby increasing their overall markets and profitability. Despite the recent dot-com failures (Francis, 2000), EC has made tremendous in-roads in traditional corporations. Forrester Research in their survey found 90% of the firms plan to conduct some commerce - business-to-consumer (B2C) or business-to-business (8213), on the Web and predicts e-commerce transactions to rise to about $6.9 trillion by 2004. As a result of this efficiency and the ability to attract and retain more customers, organizations that have adopted EC must have significant improvements in their bottomline. While there is some anecdotal evidence found in the literature about increased financial benefits and return on investment (ROI) experienced by individual companies through EC, no cross-sectional studies appear to have been conducted on measuring this impact of EC on financial performance of companies. The impact of such initiatives on, for example, sales revenues, cost of producing goods or services, global sales, and on quality of services have yet to be identified and reflected in income and ROL This paper discusses the results and implications of an exploratory study that surveyed the financial statements of a number of publicly held companies in retail business and distribution that have implemented EC initiatives over the past five years. …

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