In this paper we report on two studies that (1) examine whether service quality and the set of functionality offered by a website can explain price dispersion in the online electronics market, and (2) investigate whether customers are willing to trade-off lower prices for more website functionality. The results highlight the importance of functionality offered by retailer websites in explaining the dispersion in observed prices, especially compared to service quality and market share. Study 2 demonstrates that customers attach different importance to product prices and have non-zero valuations for website functionality.