The Role of Online Buying Experience as a Competitive Advantage: Evidence from Third-Party Ratings for E-Commerce Firms

Abstract

Claims have often been made that the quality of online buying experience - web site ease of use, selection of goods offered, quality of customer service, the effectiveness of virtual community building, and site personalization - are crucial to the success of e-commerce firms. We posit that website usability and product selection can be competed away via imitation. On the other hand, we hypothesize that factors such as customer confidence and relationship services including community building and site personalization represent a sustainable competitive advantage. To test these hypotheses, we examine the relation between third-party ratings of online buying experience provided by Gomez Advisors and firms' Tobin's q for a sample of 46 e-commerce firms during the period 4Q: 1999 to 3Q: 2000. We find that the association between online buying experience scores and Tobin's q is positive but decreasing in the extent of competition. Our results related to the detailed aspects of online buying experience are largely consistent with our posited hypotheses.