When Yu Jeffrey Hu began his first academic post at Purdue University in 2005, he and his wife couldn’t find all the furniture they wanted in the college town of West Lafayette, Indiana. So the couple furnished almost their entire apartment through online shopping.
Although they found that there were some cons to that approach (i.e. the love seat that arrived was smaller and shabbier than expected), the experience didn’t dampen Hu’s enthusiasm for e-commerce.
Now an associate professor of IT management at Georgia Tech Scheller College of Business, Hu is an expert on not only e-commerce and Internet retailing, but also online advertising, social media and consumer behavior.
Chasing the Long Tail
In fact, Hu co-authored the first paper on what famously became known as the “Long Tail” phenomenon in Internet markets (cited in major media such as Time magazine and National Public Radio). Through their research, Hu and his colleagues found that Internet retailers could generate big revenues through their ability to attract niche consumers.
For example, a brick-and-mortar bookstore might only carry 100,000 books and rely heavily on big-sellers like the Harry Potter series, while an online retailer could sell millions of titles, cumulatively making a lot of money from titles that might not individually sell that many copies (this string of specialty items comprises the “Long Tail”).
“When we started that research in the late 1990s, people talked about Internet commerce being more efficient and inexpensive,” Hu says. “But we found that most of the value gained is not through lower prices, but through greater product variety.”
Exploring Future Trends
Hu, who earned his PhD from the Sloan School of Management at Massachusetts Institute of Technology, recently published an article on the future of retail in the Sloan Management Review.
Titled “Competing in the Age of Omnichannel Retailing,” the article describes how the explosive growth of smart phone technology has enabled customers to comparison shop for better prices and access online reviews all while wandering through a store’s aisles. “This phenomenon, known as ‘showrooming,’ is changing how retailers compete,” Hu says.
In the past, brick-and-mortar retail stores benefited from consumers being able to experience the feel of merchandise and achieve instant gratification, he explains, while online retailers emphasized low prices, wide product selection, and product reviews. However, Hu says that “the distinctions between the physical and online will vanish, turning the world into a showroom without walls.”
To survive in this new retail world, brick-and-mortar stores can employ a variety of strategies, such as providing inventory information online to enhance customer certainty of finding items; enabling consumers to buy online and pick up at stores; packaging specialized product bundles; and offering product-related services that are facilitated by the presence of a nearby physical location, according to Hu.
Analyzing Big Data
Employing business analytics to interpret “big data” will be crucial for all types of retailers, he adds. “To better understand customer needs and values, companies are increasingly dealing with big data sets that consumers leave behind through transactions and via social media,” he explains. “This data can be turned into managerial actions to improve profits, lower costs, and develop innovative new products.”
Hu was recruited to Georgia Tech from Purdue in 2012 to build upon the Scheller College’s strengths in analyzing such data. He helped with the development of the Tech's new Master of Science in Analytics program.
“Companies are increasingly turning to academics to figure out how to make sense of these large data sets,” he says. “Our papers are already having an impact on firm strategy. I’ve been surprised by how quickly analytics has had a profound impact on day-to-day business operations.”
Georgia Tech is a great environment for researching and teaching business analytics because of the Institute’s strengths in technology and computing, he says. “Plus, there are a lot of companies in the Atlanta area that can afford me opportunities to work on projects with large data sets.”
During his career, Hu has conducted research or consulted for many organizations, including Amazon, HP, Cisco, Nortel, the European Commission, and several large retailers. His research has been published in a number of leading journals, and he serves as associate editor of Management Science and Information Systems Research.
Change in Plans
A native of Nanchang, China, Hu didn’t initially set out to study business. He’d planned on becoming an electrical engineer until hearing Tsinghua University’s business school dean Zhu Rongji (later the country’s prime minister) speak of the country’s growing need for finance and business management professionals.
“I switched my major to finance because of that call,” remembers Hu, who earned his bachelor’s degree in 1997 and an MS in economics from the University of Wisconsin-Madison in 1999. “Even though I earned my PhD in management science and IT, I’m still interested in how social media can impact financial markets.”
In fact, Hu is one of the first researchers to demonstrate the effect of social media content on stock markets. For example, he has studied seekingalpha.com, one of the largest personal finance Websites, which allows investors to share opinions.
“In our research, we found that the information shared by investors on social media is highly correlated with company performance, even though you might think the opinions expressed there would be of low value,” he says. This study was published in the leading journal The Review of Financial Studies.