Competition in Internet Retail Markets: The Impact of Links on Web Site Traffic

Like any other retailers, web-based businesses face the challenge of attracting consumers to their stores (sites). In the case of offline retailers, location and brand are often identified as the most significant influences on store traffic. For web-based retailers, however, relatively little is known about the factors that attract visitors to sites. One potential method of attracting customer visits is links from other web sites, which may be viewed as a referral (e.g. word-of-mouth) from a trusted third party. To examine the importance of links we model the number of visits to individual internet retail stores as a function of the number of links each has with other sites and the information/product content of the internet retail store. Using data from Alexa.com () we test our model with the top 500 companies across five different industries. The results demonstrate that the number of links to a particular internet retail store explains over 60% of the variance of site traffic between different sites and that there is a very high level of industry concentration in all five sectors. These findings raise interesting issues for the design and implementation of strategies for attracting customers to Internet sites.