۱٫ Introduction

۲٫ Related literature

۳٫ Data, methodology and results

۴٫ Conclusions

References

As industries mature, the bases and drivers on which company valuation is based evolve. Generally, during the introduction phase, when a new technology emerges, the perceived potential of this technology is what drives the valuation as the company does not yet generate revenues nor profitability. As the company and industry develop, revenues and market position become more important than technology, and at a later point in time, once companies become profitable, profitability becomes the main valuation base and driver. This paper explores the development of the valuation bases and drivers for the online retail industry over time. While there are, several studies tackling the importance of revenues compared to the importance of profitability at a certain point in time, there are no studies looking at this topic over time. The study draws two main conclusions. Firstly, it confirms the conclusion of similar studies showing that the key valuation base in online retails has evolved from being revenue based to being profitability based and secondly, it demonstrates that the key valuation driver in the online retailing industry has evolved from being revenue growth to being profitability margin. The second finding is very surprising as it marks the development of the online retailing industry to a new development phase.

Introduction

The online retail industry has its roots in Michael Aldrich’s modified TV and telephone based system which connected to a central computer processed transactions. While the system was initially used by businesses only, Tesco and WM Morrison implemented the technology for home use and offered together with it home delivery (Aldrich, 2011) (Winterman & Kelly, 2013). Despite the innovative nature of the home shopping system, and even though the first true online retailer launched in 1989, Peapod – the first online grocery store (Peapod, 2016) it took until 1995 for the first large online shops to appear. Both Amazon and eBay launched their businesses in 1995 (Amazon, 2014) (eBay, 2017). The appearance of the World Wide Web played an important role and acted as an enabler for the launching of these two online shops (Peter, 2004). These two shops represent the beginning of the online retail industry as we know it.