© 2019 Straipsnio autoriai. Leidėjas VGTU leidykla „Technika“.
Šis straipsnis yra atvirosios prieigos straipsnis, turintis Kūrybinių bendrijų (Creative Commons) licenciją (https:
creativecommons.org/licenses
y/4.0/), kuri leidžia neribotą
straipsnio ar jo dalių panaudą su privaloma sąlyga nurodyti autorių ir pirminį šaltinį.
INVESTIGATION OF DIGITAL RETAIL COMPANIES
FINANCIAL PERFORMANCE USING
MULTIPLE CRITERIA DECISION ANALYSIS
Kotryna URBONAVIČIŪTĖ*, Nijolė MAKNICKIENĖ
Vilnius Gediminas Technical University, Vilnius, Lithuania
Received 02 March 2019; accepted 26 March 2019
Abstract. Digital retail (online retail or e-commerce) sector is continuously expanding its stake in the global economy each
year. According to the statistics, online retail share of the total global retail sales takes approximately 11.9% in 2018 and is
expected to reach 17.5% at the end of 2021. The same pattern of rapid growth was noticed more than 18 years ago when
a burst of dot-com bu
le crashed many of the internet-based online shopping companies. “Growth over profits” mental-
ity and overestimated perception of the magnitude of online sales resulted in a superficial understanding of the business’
financial performance. Because of that, it is highly necessary to analyze and adequately evaluate the financial performance
of digital retail companies. Thus, the purpose of this article is to investigate the top 4 digital retail companies’ financial
performance by applying multiple criteria decision analysis (MCDA) TOPSIS and SAW methods to demonstrate that sales
turnover is not the only and the prime measure to evaluate the successful company’s financial performance.
Keywords: financial performance, digital retail, digital transformation, online retail, e-commerce, MCDA, TOPSIS meth-
od, SAW method.
Introduction
Digitalization or digital transformation is a significant
trend in nowadays business world. Digital transforma-
tion and transition to digitalization are nearly in all the
services of our globalized economy. One of the fields that
are affected by digital transformation the most is the retail
industry. E-commerce sales have been growing rapidly in
the past couple of years. According to the statistics, digital
etail sales increased from 1 336 billion USD in 2014 to
2 304 billion USD in XXXXXXXXXX% growth) and is expected
to grow up to 4 878 billion USD by the end of XXXXXXXXXX%
growth) (Statista, 2018a, 2018b).
The growing share of this business sector and the po-
tential future impact to the economics emphasises the
need for proper investigation and evaluation of the finan-
cial performance of this sector players. Sales turnover is
a widely used financial indicator of the company’s per-
formance and the magnitude of the business. However,
this traditional performance determinant might not be the
most adequate measurement to evaluate digital company’s
success due to the vastly increasing digital transformation
process and its impact to the business. Thus, identifying
adequate success factors is a crucial matter to evaluate suc-
cessful business performance.
This scientific article aims to assess the top 4 digital re-
tail companies financial performance using 2 of the multic-
iteria decision analysis (MCDA) methods – TOPSIS and
SAW – in order to demonstrate that sales turnover is not
the only and the prime measure to evaluate the success-
ful company’s financial performance and to determine
which one is the most successful business.
The research conducted in this scientific article is lim-
ited to digital (or e-commerce) retail companies. E-com-
merce company is defined as a company that does most
of its business on the Internet. It excludes Internet service
providers or other information technology companies.
1. Theoretical background
1.1. Digital transformation effect to the business
Digital transformation (digitalization or digitization) is
a trending process of integration of digital technologies
into all areas of a business. This transformational process
Economics and Management
Ekonomika ir vadyba
Mokslas – Lietuvos ateitis / Science – Future of Lithuania
ISSN XXXXXXXXXX / eISSN XXXXXXXXXX
2019 Volume 11, Article ID: mla XXXXXXXXXX, 1–9
https:
doi.org/10.3846/mla XXXXXXXXXX
*Autorius susirašinėti. El. paštas kotryna.u
XXXXXXXXXX
https:
doi.org/10.3846/mla XXXXXXXXXX
K. U
onavičiūtė, N. Maknickienė. Investigation of digital retail companies financial performance using multiple criteria...
2
and its effect to business have been widely investigated by
many authors in their scientific papers. Jürgen Meffert and
Anand Swaminathan XXXXXXXXXXagreed that companies that
adopt digital technologies in their business would retain
their leadership and leverage their strengths. Companies
that want to digitalize successfully can either improve their
cu
ent business model and processes, add new streams
of revenue to their business model, or replace their old
usiness models with the new ones. However, since digital
transformation is a complicated process, authors C. Matt,
T. Hess and A. Benlian in their scientific article Digital
Transformation Strategies XXXXXXXXXXargue that increasing
digitalization of business processes makes it necessary to
develop a better understanding of digital business trans-
formation strategies. It is essential to set a clear approach
and assign adequate responsibilities for implementation of
such conversion change in the business. One of the core
elements which helps the company to differentiate itself
from the competitive environment and to create addition-
al value, according to S. Mithas, A. Tafti and W. Mitchell
(2013), is an investment into general information technolo-
gies and IT outsourcing. Moreover, according to a survey
which was conducted by MIT Sloan Management Review
and Capgemini Consulting to investigate how businesses
succeed or fail in using digital technology to improve busi-
ness performance it was revealed that 78% of respondents
admitted that achieving digital transformation will be-
come critical to their organization within next two years.
The results of the survey indicated that managers believe
that digital technology will
ing transformative change to
usiness (Fitzgerald, Kruschwitz, Bonnet, & Welch, 2013).
1.2. Online retail or “e-tail” concept
One of the fields that are affected by digital transforma-
tion the most is the retail industry. A term online retail
or “e-tail” actually covers retailing using a variety of dif-
ferent technologies or media (Chen & Leteney, XXXXXXXXXXAc-
cording to the World Trade Organization (World Trade
Organization, 2018), e-commerce concept is described as
“commercial transactions that are digitally-ordered and
either digitally or physically delivered.” Many retail firms
that have traditionally operated solely in the store channel
(or offline) have been transforming their business process-
es to engage with customers in the online channel. This
strategic realignment is triggered by the rapid increase in
online retail sales that has grown at a faster rate than in-
store sales (Ishfaq, Defee, Gibson, & Raja, 2016).
The online channel is an information-wealthy and
cost-effective channel for product placement. It provides
consumers with detailed product information worldwide
(Rapp, Baker, Bachrach, Ogilvie, & Beitelspacher, 2015).
Consumers are provided by the availability to reach the
online site and search for product information anywhere
without being bordered by time and place. The most sig-
nificant advantage against offline channels is that consum-
ers can more easily compare information between various
products on the Internet (Zhu, Goraya, & Cai, XXXXXXXXXXDue
to its many distinctive advantages, online retail continues
to grow. Da
ell Rigby XXXXXXXXXXalso agrees that digital retail-
ing will continue to grow fast because of the vast selection
of goods, the reasonable prices, the convenience of shop-
ping from home, and the access to product reviews and
ecommendations. Comfortable shopping, 24/7 conveni-
ence, reducing dependence to visit physical stores, travel
costs savings, reasonably quick delivery, secure payment,
a wide range of products and personalization services,
are only a few of many reasons why consumers choose to
shop online over traditional retail options.
1.3. Online retail market overview
The online retail market overview is restricted to digital
(or e-commerce) retail companies only. E-commerce com-
pany is defined as a company that does most of its busi-
ness on the Internet. It excludes Internet service providers
or other information technology companies. According
to revenue (total sales turnover), the top 4 online retail
companies are Amazon, Inc, JD.com, Inc, Alibaba Group
Holding Ltd and eBay, Inc (Table 1).
Table 1. Top 8 digital retail companies1 in the world according to turnover (in millions US$)2
Company Country XXXXXXXXXX
Amazon, Inc USA $177 866 $135 987 $107 006 $88 988
JD.com, Inc China $55 641 $37 167 $27 880 $18 537
Alibaba Group Holding Ltd.3 China $22 965 $15 686 $12 293 $8 463
eBay, Inc USA $9 567 $8 979 $8 592 $8 790
Rakuten, Inc Japan $8 407 $7 123 $5 896 $5 690
Zalando SE Germany $5 377 $3 834 $3 232 $2 691
ASOS plc UK $2 595 $1 777 $1 706 $1 515
B2W Companhia Digital Brazil $2 148 $2 641 $2 308 $ 2 964
1 Compiled by the author according to financial data from the official firms’ annual reports.
2 In cases were financial information was stated in other cu
ency than US Dollars (USD), the figures were converted using the year-
end-date FX exchange rate stated in https:
www.oanda.com/cu
ency/converte
3 Financial year of Alibaba Group Holding Ltd. ends as of 31st March.
https:
www.oanda.com/cu
ency/converte
Mokslas – Lietuvos ateitis / Science – Future of Lithuania, 2019, 11, Article ID: mla XXXXXXXXXX
3
The top 1 place is firmly occupied by e-commerce
company Amazon also known as Amazon.com. Founded
in 1994 in Seattle by Jeff Bezos, Amazon has become a
household name when it comes to online shopping. This
internet company today has the most substantial revenue
and is considered as the biggest employer of all the internet
companies with a workforce of more than 566 thousand
employees. Jingdong or JD.com is an e-commerce company
operating in Beijing. Jingdong has well over a quarter of a
illion registered users as of 2018. It was founded in 1998
and started trading online six years later. Alibaba is the
iggest e-commerce company in Asia with headquarters in
Hangzhou; China has more than a billion users worldwide.
Jack Ma, the founder of Alibaba, was rejected from more
than 30 job posts in the early 1990s when he started mak-
ing websites for companies with his wife and a friend. The
usiness grew exponentially, and in the year 1999, Alibaba
Group was founded. Alibaba has two major portals that run
under it, Alibaba and AliExpress. eBay is an e-commerce
company which was founded in 1995 by a computer pro-
grammer named Pie
e Omidyar. It was one of the first suc-
cessful dot-com bu
le companies that epitomized online
shopping. Its most distinctive feature is the online auction
feature, alongside a conventional buy-it-now shopping op-
tion. These top 4 digital retail companies will be further
assessed in this scientific