Evolutionary Stages of e-Tailers and Retailers: Firm Value Determinants Model

We have studied the evolutionary stages of pure e-tailers, click & mortar (C&M) and brick & mortar (B&M) retailers for three points of time: June 1999, June 2000, and June 2001. To evaluate the dynamic stages of etailing business as an innovative venture, we propose four stages: exploration, breakeven, growth, and maturity. The stages are measured by the impact of revenue and income on the firm value, and a regression model is adopted to formulate the model. To empirically examine the stages of e-tailers and retailers, we have collected 14 e-tailers, 112 C&M, and 75 B&M from the U.S. stock markets. According to this study, the proposed stage model explains the evolution of pure e-tailers very meaningfully. E-tailers were in the late exploration stage in 1999, breakeven stage in 2000, and growth stage in 2001. Unlike our hypothetical expectation, the stage model could not adequately explain the effect of online business to C&M. In this regard, the impact of online channel to traditional retailers was not revolutionary. In 1999 and 2000, the primary contributing factor to firm value of C&M was income, but in 2001, it was revenue. According to this result, investors were very conservative to the risky investment on the click business of traditional retailers. However, it turned out that C&M has performed better than B&M in terms of revenue, income, income/ revenue, stock price, and market capitalization. It is noteworthy that the revenue effect of C&M in 2001 was significantly higher than that of B&M.