Impact of Customer Traffic and Service Process Outsourcing Levels on E-Retailer Operational Performance

Abstract

Many service firms deliver services via a mix of internally developed and delivered (i.e., insourced) and externally developed and delivered (i.e., outsourced) service processes. Service process outsourcing is especially common in e-retailing. Portions of e-retail customer ordering processes and delivery processes can be digitized and contracted to third-party vendors. Via outsourcing, service systems change from dyadic to triadic. Prior research examines consumer perceptions of dyadic (consumer to e-retailer) outcomes, but little research considers service co-delivery with outsourcing partners (i.e., triadic systems). Literature also does not focus on joint associations of service process outsourcing and customer traffic with e-retailer operations. We analyze several years of data on North American e-retailers. We first examine factors associated with e-retailer outsourcing levels, for front-end and back-end service processes. We observe customer traffic is positively associated with future outsourcing. We then examine how outsourcing moderates associations between contemporaneous customer traffic and e-retailer operational performance, as measured by numbers of processed orders, website response times, and customer satisfaction. Results suggest outsourcing levels are associated with operational outcomes, yet surprisingly, high outsourcing and high traffic jointly may not benefit e-retailers.

Keywords: customer traffic, service process outsourcing, third-party vendor, e-retail