Sooner or Later? Promising Delivery Speed in Online Retail

20 Pages Posted: 17 Apr 2020

See all articles by Ruomeng Cui

Ruomeng Cui

Goizueta Business School, Emory University

Tianshu Sun

University of Southern California - Marshall School of Business

Zhikun Lu

Emory University - Department of Economics

Joseph Golden

Collage.com

Date Written: March 29, 2020

Abstract

Online retailers have to provide customers with an estimate of how fast an order can be delivered before they purchase it. This delivery speed promise is what online retailers can strategically adjust at almost no cost but what may fundamentally impact business outcomes. It influences consumers' purchasing decisions and post-purchase experiences, often in the opposite direction. On one hand, an aggressive (i.e., faster) delivery estimate could assure more customers of meeting their deadlines and thus may increase their purchases ex-ante. On the other hand, an aggressive estimate tends to overpromise customers, risking a longer than expected wait time, which can lower customer satisfaction and increase product returns ex-post. In this research, we study the causal effect of retailers' delivery speed promise on customer behaviors and business performance. Collaborating with Collage.com, an online retailer that sells customized photo products, we co-designed its new shipping policy. We exogenously varied the disclosed delivery speed estimates across cities while keeping the physical delivery speed unchanged. Using a difference-in-differences identification and a dataset with 212,340 transactions in 7,090 cities, we find that a one-day faster promise increases sales by 0.73%, profits by 2.0%, and value per order by 3.5%; a one-day slower promise reduces sales by 0.51%, profits by 2.7%, and value per order by 3.1%. However, the aggressive disclosure increases product returns. Retailers could leverage our insights to customize delivery promises for certain products or customers.

Keywords: delivery speed information, online retail

Suggested Citation

Cui, Ruomeng and Sun, Tianshu and Lu, Zhikun and Golden, Joseph, Sooner or Later? Promising Delivery Speed in Online Retail (March 29, 2020). Available at SSRN: https://ssrn.com/abstract=3563404 or http://dx.doi.org/10.2139/ssrn.3563404

Ruomeng Cui (Contact Author)

Goizueta Business School, Emory University ( email )

1300 Clifton Road
Atlanta, GA 30322
United States

HOME PAGE: http://www.ruomengcui.com

Tianshu Sun

University of Southern California - Marshall School of Business ( email )

3670 Trousdale Parkway
Bridge Hall 310B
Los Angeles, CA 90089
United States

Zhikun Lu

Emory University - Department of Economics ( email )

1602 Fishburne Drive
Atlanta, GA 30322
United States

HOME PAGE: http://www.luzk.net

Joseph Golden

Collage.com ( email )

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