Scale Expansion and Operations Inefficiency in Pure E-commerce Firms

This paper examine the importance of website quality indicator in e-commerce efficiency evaluation. It applies Data Envelopment Analysis (DEA) models and traditional production theory to account for how scale affects efficiency in pure e-commerce firms. The results of DEA models identify website quality, user scale and user experience each contribute to improving operations efficiency, but scale expansion often leads to overall operations inefficiency. Due to excessive scale expansion, all inefficient Decision Making Units exhibit decreasing return to scale. These findings may help managers resize the scale of their operations. This research enriches scale economic theory and improves the indicator system in e-commerce efficiency evaluation.