Organization Leadership and Decision making

Organization Leadership and Decision making

Organization Leadership and Decision making

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 bubble 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 retail sales increased from 1 336 billion USD in 2014 to 2  304 billion USD in 2017 (72% growth) and is expected to grow up to 4 878 billion USD by the end of 2021 (265% 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- riteria 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.

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