The Information Content of Alternative Data: Evidence from E-commerce Sales

Abstract

 Whether it is making more informed decisions, achieving scale, streamlining processes, improving operational efficiency or offering better products and services, businesses are embracing digital transformation as the way forward. Alternative data takes an extremely important place in investment and commodities market analysis. In this paper we make an attempt to analyze the effect of alternative data on the informativeness of financial forecasts. In our case study the manufacturers predict uncertain demand and decide independently whether to share direct retail prices. Information sharing strategies and e-commerce sales mode selection strategies are discussed in detail. The value of information exchange and the impact of forecast accuracy on profits are further examined. In addition, we analyze the value and optimal strategy of information exchange. The results indicate that manufacturers are affected by the accuracy of predictions in different information sharing strategies. Furthermore, manufacturer optimal future profits are strongly influenced by investment efficiency. The results also show that the manufacturers have a significant impact on the optimal decision of the supplier. The findings yield important implications both for decision-makers and future academic research.