Sooner or Later? Promising Delivery Speed in Online Retail

39 Pages Posted: 17 Apr 2020 Last revised: 9 Oct 2022

See all articles by Ruomeng Cui

Ruomeng Cui

Goizueta Business School, Emory University

Zhikun Lu

Emory University - Goizueta Business School

Tianshu Sun

University of Southern California - Marshall School of Business

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 decide to make the purchase. Retailers can strategically adjust this delivery speed promise online without changing offline infrastructure, and it may fundamentally impact business outcomes. It can influence consumers' purchasing decisions and post-purchase experiences, often in the opposite direction. On one hand, an aggressive (i.e., faster) delivery estimate could ensure that more customers meet 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 estimate 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 across the US, we exogenously varied the disclosed delivery speed estimates online while keeping the physical delivery speed unchanged. Using the difference-in-differences identification strategy, we find that a faster promise increases sales and profits, but it also increases product returns and reduces customer retention. In addition, we propose a data-driven model that uses the estimated parameters to optimize the delivery promise to maximize customer lifetime value. Our findings provide managerial insights and a data-driven policy that retailers can leverage to optimize and customize their delivery promises.

Keywords: delivery speed information, online retail, innovative business strategy

Suggested Citation

Cui, Ruomeng and Lu, Zhikun and Sun, Tianshu 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

Zhikun Lu

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

Tianshu Sun

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

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

Joseph Golden

Collage.com ( email )

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