From Amazon to Apple: Modeling Online Retail Sales, Purchase Incidence and Visit Behavior

47 Pages Posted: 13 Jun 2013

See all articles by Anastasios Panagiotelis

Anastasios Panagiotelis

Monash University

Michael S. Smith

University of Melbourne - Melbourne Business School

Peter Danaher

Monash University

Date Written: June 12, 2013

Abstract

In this study we propose a multivariate stochastic model for website visit duration, page views, purchase incidence and the sale amount for online retailers. The model is constructed by composition from carefully selected distributions, and involves copula components. It allows for the strong nonlinear relationships between the sales and visit variables to be explored in detail, and can be used to construct sales predictions. The model is readily estimated using maximum likelihood, making it an attractive choice in practice given the large sample sizes that are commonplace in online retail studies. We examine a number of top-ranked U.S. online retailers, and find that the visit duration and the number of pages viewed are both related to sales, but in very different ways for different products. Using Bayesian methodology we show how the model can be extended to a finite mixture model to account for consumer heterogeneity via latent household segmentation. The model can also be adjusted to accommodate a more accurate analysis of online retailers like apple.com that sell products at a very limited number of price points. In a validation study across a range of different websites, we find that the purchase incidence and sales amount are both forecast more accurately using our model, when compared to regression, probit regression, a popular data-mining method and a survival model employed previously in an online retail study.

Keywords: Copulas, Marketing Models, Online Purchasing

JEL Classification: M31, C53, C11

Suggested Citation

Panagiotelis, Anastasios and Smith, Michael S. and Danaher, Peter, From Amazon to Apple: Modeling Online Retail Sales, Purchase Incidence and Visit Behavior (June 12, 2013). Journal of Business and Economic Statistics, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2278746 or http://dx.doi.org/10.2139/ssrn.2278746

Anastasios Panagiotelis

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

Michael S. Smith (Contact Author)

University of Melbourne - Melbourne Business School ( email )

Peter Danaher

Monash University ( email )

23 Innovation Walk
Wellington Road
Clayton, Victoria 3800
Australia

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