Villa suffered their third straight Premier League loss on the bounce as they were beaten 3-0 at the Emirates.
Thomas Partey, Pierre-Emerick Aubameyang and Emile Smith Rowe scored before the hour mark to set the Gunners cruising with Jacob Ramsey netting a late consolation for the visitors.
Smith said: “I can’t give an overall performance rating because the first half was really bad and the second half better but it didn’t need to be an awful lot better to be better.
“If we lose the game playing like we did in the second half I can accept that. I can’t accept the first half performance because we got dominated physically. It is not something I expect to see from my players and haven’t seen often.
“We didn’t win enough headers or second balls. We can talk about tactics, we can talk about systems but unless you do the basics it is going to be a struggle.”
Partey put the Gunners ahead by heading home a 23rd minute corner before the hosts doubled their lead on the stroke of half-time in controversial circumstances.
Referee Craig Pawson appeared to blow for the break before then awarding Arsenal a spot-kick for Matt Targett’s challenge on Alexandre Lacazette.
Emi Martinez saved Aubameyang’s spot-kick but the rebound fell right back to the striker.
Smith said: “My first instinct, in real time, was it looked a penalty. When it went to the monitor, to me it is too frivolous. We are looking too closely to see if he touches the man first or the ball.
“The one thing we spoke about in the summer was these kind of decisions not going to VAR and staying with the on-field referee.
“My understanding was we were walking off the pitch for half-time, then he gives the penalty. “If it is a goal, or he saves it, surely he blows up and we walk off the pitch? Instead he is able to put in the rebound and when we kick off again he blows up. That frustrated me most and I am still seeking clarity.
“If Craig Pawson was in front of us now and asked if he was certain that was a penalty, I don’t think he would say he was certain.
“I could see by the way he was looking at the screen he wasn’t sure. If you have someone in your ear saying that is a penalty, it is hard to go against them.
Stand by your own decision - there is an inevitability about it when they go to the screen.”