You are running an online shopping website that focuses on fashion apparel. Your

Question

You are running an online shopping website that focuses on fashion apparel. Your company normally purchases a product from a supplier-before the selling season starts. During the season, customers that purchase the product can give a rating of the product on the website. When-the selling season ends, any leftovers will be shipped back to the supplier and partial- refund will-be provided. You want to use the historical data to estimate how customer rating of a product influences the sales-of the product. You-have prepared data for the following variables: Y: the total sales of a product X: the average customer rating P: the-price-of a-product S: the set of dummies that indicate the category of a product(e.g., male versus female, season, and type) W: the beginning inventory-level Given the dataset, can you-use the data to correctly estimate the-influence of X on-Y? Why?

Explanation / Answer

Yes we can correctly estimate the influence of the average customer rating (X) on the total sales of the product (Y).

We can use regression methods to find out the relationship between the variables and using the regression equation so obtained we can estimate the total sales of a product given the rating.

For example let the rating scale vary from 1 to 5 ie, 1 is the lowest rating and 5 is the highest rating that a customer can give.

If the product is given a higher rating then we can say that more number of customers will buy it which directly increases the total sales of that particular product

Product rating Sales

5 100

5 100

5 100

5 100

5 100

Total sales will become 500

We can write an equation that Y =nX where n is the number of ratings

Using the other factors given ie P, S W we can make a better equation that estimates the total sales (Y)

Y= function of (X,P,S,W)

Uing the data we can use regression and the coefficient of X in the final equation times the number of customers and coefficient of the other variables will give us a estimate of Y

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