Do firms or the customers always benefit when an electronic retailer increases its IT capacity or advertising effectiveness? Professor Subodha Kumar writes from his research.
Over the last decade, the number of Internet users has increased by leaps and bounds reaching 1.97 billion worldwide in June 2010 – up from only 45 million in 1995 and 361 million in 2000. Following this rapid growth in Internet usage, the number of online shoppers has also risen dramatically. For example, more than 627 million people worldwide have shopped online by October 2005. Furthermore, the US retail e-commerce sales grew 11% in 2009 to reach $155.2 billion and are expected to reach $248.7 billion by 2014.
Commensurate with the increasing number of online shoppers, there has been an explosive growth in the number of electronic retailers worldwide in last few years. An aspect of online shopping that is of interest here is the presence of processing delays at e-commerce sites. There are several potential causes of the delays associated with serving customers at an e-commerce site. Of these delays, there are some that are outside the control of the firm, e.g., the delay at the client end caused by a slow processor or network connection. The delays that can potentially be influenced by the firm’s decisions could be related to network delays caused by network devices, such as switches and routers, and the network connecting to the server, or server delays caused by delays at the firm’s website. In this research, IT capacity refers to capacity that can be increased by the firm to reduce delays experienced by online shoppers.