Two Sides of Same-Day Delivery: Evaluating the Distributional Effects of Platform Fulfillment on Third-Party Sales

36 Pages Posted: 6 Jun 2024

See all articles by Euro Bae

Euro Bae

College of Business, Korea Advanced Institute of Science and Technology (KAIST)

Daegon Cho

College of Business, Korea Advanced Institute of Science and Technology (KAIST)

Soo-Haeng Cho

Carnegie Mellon University

Jin Soo Han

Korea Advanced Institute of Science and Technology (KAIST)

Yeongwoo Kim

affiliation not provided to SSRN

Date Written: June 03, 2024

Abstract

E-commerce platforms have increasingly introduced "Fulfillment by Platform" (FBP) programs, enabling third-party sellers to delegate order fulfillment operations and improve delivery speed. Despite the growing prevalence of FBP programs, there is a limited understanding of their impact on sales distribution between participating FBP sellers and non-FBP sellers. This paper presents the first empirical evidence of the distributional effects of an FBP program by leveraging a quasi-experimental variation in FBP sellers' delivery speed on a fashion e-commerce platform. The platform introduced faster same-day delivery for FBP sellers in a specific region without improving delivery speeds in neighboring regions. Our difference-in-differences analysis shows that the improvement in delivery speed increases FBP sellers' sales while cannibalizing those of non-FBP sellers at the aggregate level. However, we find that non-FBP sellers can safeguard their sales against rival FBP sellers by offering vertically or horizontally differentiated products. Furthermore, our customer-level heterogeneity analysis reveals that the sales loss of non-FBP sellers is driven by customers who diversify their purchases across multiple sellers, not by those who concentrate on either a specific FBP or non-FBP seller. Our findings underscore the importance of product differentiation and customer loyalty for both sellers and platforms as essential countermeasures to mitigate the potential adverse effects of FBP programs.

Keywords: delivery, e-commerce, fulfillment, platform, quasi-experiment

Suggested Citation

Bae, Euro and Cho, Daegon and Cho, Soo-Haeng and Han, Jin Soo and Kim, Yeongwoo, Two Sides of Same-Day Delivery: Evaluating the Distributional Effects of Platform Fulfillment on Third-Party Sales (June 03, 2024). Available at SSRN: https://ssrn.com/abstract=4854395 or http://dx.doi.org/10.2139/ssrn.4854395

Euro Bae (Contact Author)

College of Business, Korea Advanced Institute of Science and Technology (KAIST)

85 Hoegiro Dongdaemun-Gu
Seoul 02455
Korea, Republic of (South Korea)

Daegon Cho

College of Business, Korea Advanced Institute of Science and Technology (KAIST) ( email )

85 Hoegiro, Dongdaemoon-gu
Seoul 02455
Korea, Republic of (South Korea)

Soo-Haeng Cho

Carnegie Mellon University ( email )

Pittsburgh, PA 15213-3890
United States

Jin Soo Han

Korea Advanced Institute of Science and Technology (KAIST) ( email )

Yeongwoo Kim

affiliation not provided to SSRN

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