Journal of Exclusive Management Science – April 2018 - Vol 7 Issue 04 – ISSN 2277-5684

A Theoretical Overview of Prospective Applications of Business Analytics in Electronic

Commerce
Mr. Vivek Raj S N
Mr. Murugan V G

Assistant Professor, Department of Management Studies, Panimalar Engineering College, Bangalore

Trunk Road, Varadharajapuram, Nazarethpettai, Poonamallee, Chennai- 600123.
Abstract
Unprecedented growth is being witnessed in e-business and e commerce industries throughout
the world. Improvements in technology and availability of smart devices across the population have
given a boost to e commerce industry in growing economy like India. E commerce service providers
compete among each other to retain the customers and gain their loyalty. These e-commerce companies
must use innovative techniques to study the customer behaviour and buying patterns to outsmart their
competitors. This paper discusses one such technological trend that can be used by e commerce
companies. Business analytics is one of the growing techniques that have taken its place in almost all
the sectors. This paper provides a simple overview of different techniques of business analytics and its
applications in e-commerce sector. E-commerce transactions create huge amount of data and this data
can be used by business analytics techniques along with the help of statistics to study, observe and
predict customer behaviour and purchase patterns.
Keywords
E commerce, Business Analytics, customer behaviour, statistical techniques, data, purchase
pattern.
1. Introduction
Business analytics uses the statistical tools and techniques powered by modern programming
and visualizing tools for iterative analysis of data for reliable business decision making. Business
Analytics has three important components and clear understanding of these three components is
paramount for its applications. The three components are Knowledge of Core business process,
Statistical techniques and programming.

Business
Knowledge

Business
Statistics
Analytics

Programming

Fig.1
Components of Business analytics
This paper discusses the theoretical applications of basic business analytics techniques like
correlation, simple linear regression, multiple linear regressions, logistic regression, clustering, and
time series analysis in e-commerce website.
2. Review of Literature
This Section discusses some of the prior publications about the Applications and usage of
Business Analytics.
Aditee Karn, Monika Arora (2016) [1] discussed the usage of visual tools like dashboards in
analyzing HR data.
Amol Deepak Nerkar (2016)[2] discussed the difference between business analytics and business
intelligence.

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 Journal of Exclusive Management Science – April 2018 - Vol 7 Issue 04 – ISSN 2277-5684

Simon Monyai, 'MasekaLesaoana, Timotheus Darikwaand PhilimonNyamugure (2016)[3] have

applied factor analysis and multinomial Logistic Regression in South African general house hold survey,
specifically Multinomial Logistic Regression is used to examine Quality of Life Factors.
ShikhaTripathi, Kushendra Mishra (2015)[4] in their review paper have concluded that business
analytics assist business experiments and these techniques helps firms in many key areas.
A. AsonOkoruwa(2017)[5] has used regression technique inassessing value of property by using
Selling price as dependent variable and weighted property productivity index as independent variable.
Xiaowei Yang, Bin Peng, Rongqi Chen, Qian Zhang, Dianwen Zhu, Qing J. Zhanga,
FuzhongXued and LihongQib (2014)[6]assessed Bayesian and Frequentist’s model inclassifying hospitals
in to three different categories based on their level of service.
3. E Commerce Metrics
In this paper a theoretical introduction about some of the possible applications of business
analytics techniques have been discussed. Before discussing the usage of various tools a small
orientation about metrics used in e commerce websites is necessary. There may be a question on why
there is a need of metrics for this study. The Business Analytics techniques mostly deploy the use of
variables for analysis. The Variables for the ease of understanding can be classified as dependent and
independent variables. The Metrics of the e-commerce websites can be used as variables in business
analytics techniques. There are lot of metrics that can be used to measure various parameters of the
website. A few Example parameters can be seen below
Table.1 Sample e-commerce metrics
Metrics Symbol Meaning
Time Spent TS Total Time spent by the customer per session.
Prod visited PV Total No. of products visited by the customer in each browsing session.
Product bought PB Total number of products that the customer buys during each session.
Times visited TV Total No. of times the customer has visited a particularproduct.
Visit Frequency VF No of times the user visits the website per day.
Response Time RF Time taken by the website server to respond to the user request.
Traffic TF No of user Visits to a website on a particular time.
Sources SRF Origin of user i.e. from search engine/direct entry/other sites/ad clicks.
Bounce Rate BRT Percentage of visitors who leave the website immediately after visiting
the website.
Revenue RVN Revenues from Sales.
Pages count PGCN Frequency of visit of each page.
Conversion Rate CNVRT Percentages of visitors who bought a product.
Number of Prior NPV Number of Prior Visits made by the customer to the shopping site.
Visits

Having seen the some examples of metrics used for measurement of various parameters of
shopping website the paper now proceed to some applications of business analytics in e commerce
websites.
4. Business Analytics Techniques
a. Correlation
Correlation measures the degree of relationship between two variables. Correlation co-efficient
which measures the degree of correlation lies between range of -1 to 1. -1 denotes perfectly negative
correlation and +1 denotes perfectly positive correlation. Now some of the possible usage of correlation
in shopping websites can be discussed below. For example degree of correlation between time spent by
each customer and no of product bought per each session can be carried out. If the correlation is
positive and closer to one it denotes that more the time spent by the customer per session more the
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 Journal of Exclusive Management Science – April 2018 - Vol 7 Issue 04 – ISSN 2277-5684

products bought and it shows strong positive relationship. If the correlation co efficient is negative and
is near -1 it denotes both variables are strongly negatively related.Some of the other variables for which
the correlation analysis can be carried out are
Table .2 Sample Variables for correlation analysis
Variable 1(x) Variable 2(y)
No of Products visited No of Product bought
Server Response Time Bounce Rate
Traffic Rate Bounce Rate
Visit Frequency No of Product bought
Server Response Time Product bought

b. Regression Analysis
Another important analysis that has been used significantly for many years is regression
analysis. Regression Analysis explains how much the independent variables affect/predict/explain the
dependent variable. Even though there are many types of regression, First simple linear regression is
focused
y = a + bx
y = dependent variable
x = independeent variable
a = intercept
b = slope
First lets us discuss some of the applications of simple linear regression in shopping websites.
The e- commerce administrator may want to find the relationship between time spent by the customer
during each session and the number of products bought.Here the variable to be predicted is No. of
products bought. i.e. the dependent variable. Independent variable is the time spent by customers
during each browsing session.
PB = a + b TS
Let us assume some sample values to better understand the equation
Table .3 Dummy Data for Time Spent and Product bought
Customer TS(in Minutes) Product Bought
X 20 2
Y 19 1
X 18 1
Z 25 3
A 5 0

From Analysis the regression equation is found out as

PB = −0.9756 + 0.1365TS
The Value of Slope measures predicted change in the value of Products bought based on Time
Spent. The Equation given above is just a demonstration of how linear regression works and actual
calculations involve millions of data. We require more sophisticated tools like Python or R to process the
huge amount of data.
Another Example that can be pointed out is that to find relationship between Server Response
Time and Bounce Rate.
BR = a + SRT
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 Journal of Exclusive Management Science – April 2018 - Vol 7 Issue 04 – ISSN 2277-5684

Other Such Equations that can be formed are

Revenue = a + advertising spend
PB = a + SRT
PB = a + Traffic
c. Multiple Linear Regression
Now the focus shifts to multiple linear regression. Multiple Linear Regression explains how many
independent variables affect or predicts a dependent variable
y = a + bx1 + cx2 + dx3 + ⋯ exn + err
y = dependent variable
x1, x2, … . xn = independeent variable
a = intercept
b, c, e = slope
Err=error
One such possible application of regression equation can be seen below. For example the
company wants to predict the total number of product bought based on various metrics. Now the PB
becomes the dependent variable.
Let us first initially form an equation taking in to consideration some independent variables.
𝑃𝐵 = 𝑎 + 𝑏𝑃𝑉 + 𝑐𝑇𝑉 + 𝑑𝑁𝑃𝑉+ e SRT + f VF + g TR
One of the prominent measurements that can be obtained from regression equation is R2 also
called as the coefficient of determination. The Value of R 2 denotes the percentage of independent
variable explained by the dependent variables. The Range of R 2 lies between zero and one. R2 also
explains the fit of the model. If the Value of the R 2 is higher the model is a better fit. The Multiple linear
regression equation can be formed with different combinations of independent variable till we get better
model fit.
d. Logistic Regression
In the Previous example Application of Linear Regression in shopping website is discussed.
There is a constraint in linear regression that is the dependent variable should be continuous. Consider
the following scenario. Suppose the company management wants to predict whether the customer
would buy the product or not. Here the dependent variable is binary (buy or does not buy). This
prediction is not possible using Linear Regression. So a specialised form of regression called as Logistic
regression should be applied. Logistic Regression is used when the dependent variable is binary.

Figure .2 Logistic Regression explaining whether the customer buys the product or not
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 Journal of Exclusive Management Science – April 2018 - Vol 7 Issue 04 – ISSN 2277-5684

e. Forecasting
Another important technique that finds its application in shopping websites is Time Series forecasting.
Suppose the sales of a product in a hypothetical shopping website are recorded every week. The
Shopping website wants to forecast the sales of the product for forthcoming weeks. This is necessary to
keep stock of product as per the customer demand and requirements. Accuracy of forecasting is very
important. There are various forecasting models available and model which gives more accurate results
could be selected.Time Series can be used to predict these following measures
 Trend
 Seasonality
 Cycles

f. Market Basket Analysis

It is type of association mining technique. Market Basket Analysis can be used to find items that
are brought more frequently together. Using this technique the E commerce website management can
create more combo offers for frequently bought item set and it may boost up sales. Secondly the
Categories of product which are brought together can be placed in the digital space together. Customers
can also can recommendations about the frequently bought items from the shopping websites.
g. Clustering
Clustering is grouping objects in to different clusters so that objects within the group are more similar
and objects in other group are not similar. One of the possible applications of Clustering in shopping
websites is that the customers can be divided into different clusters based on various parameters so
that similar customers are in same cluster. Now After Segmenting the customers in to different groups,
Cluster specific promotions, offers can be provided. This would be a great help in targeted marketing.
5. Limitations and Further Study
This Paper discusses the theoretical applications of selected business analytics tools in e commerce
websites. Further research can be done by applying these techniques on a real data collected from e-
commerce websites. This would add further insight about customer behaviour and shopping patterns.

6. Conclusion
E Commerce is one of the fastest growing sectors of economy and availability of latest
technologies has given a boost to it. E-commerce transactions generate huge volumes of data which
contains significant insight about the customers shopping behaviour. This paper discussed how some
of the simple and powerful business analytics techniques can used to analyse the data and gain
information about customer purchase patterns.
7. References

a) Aditee Karn, Monika Arora. (2016). HR Dataset of employees: An Implementation of Business

Analytics. International Journal of Management Research and Social Science,3(2), 23-26.
b) Amol Deepak Nerkar. (2016). Business Analytics (BA): Core of BusinessIntelligence (BI). International
Journal of Advanced Engineering, Management and Science , 2(12), 2176-2178
c) Monyai, S., Lesaoana, '.,Darikwa, T., &Nyamugure, P. (2016). Application of multinomial logistic
regression to educational factors of the 2009 General Household Survey in South Africa. Journal Of
Applied Statistics, 43(1), 128-139. doi:10.1080/02664763.2015.1077941
d) ShikhaTripathi, Kushendra Mishra. (2015). Business analytics a tool to business experimentation-
Issues and challenges.Asian Journal Of Management Research,5(3),433-437
e) Okoruwa, A. A. (2017). Regression Analysis of Property Productivity Index and Value. Appraisal
Journal, 85(2), 104-121.
f) Yang, X., Peng, B., Chen, R., Zhang, Q., Zhu, D., Zhang, Q. J., & ... Qi, L. (2014). Statistical profiling
methods with hierarchical logistic regression for healthcare providers with binary outcomes. Journal Of
Applied Statistics, 41(1), 46-59. doi:10.1080/02664763.2013.830086

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