Customer Preferences for Delivery Service Attributes in Attended Home Delivery

Abstract

Retailers face increasing competitive pressure to determine how best to deliver products purchased online to the end customer. Grocery retailers often require attended home delivery where the customer must be present to receive the delivery. For attended home delivery to function, the retailer and customer must agree on a delivery time slot that works for both parties. Using online data from a grocery retailer, we observe customer preferences for three delivery service attributes associated with each time slot: speed, precision, and timing. We define speed as the expected time between the placement of an order and its delivery, precision as the duration of the offered time slot, and timing as the availability of choices across times of the day and days of the week. We show that customers not only value speed as an attribute of delivery service but that precision and timing are also key drivers of the customer’s time slot selection process. We also observe substantial customer heterogeneity in the willingness of customers to pay for time slots. Customers that differ in their loyalty to the retailer, basket value, basket size, and basket composition exhibit distinct differences in their willingness to pay. We show that retailers with the capability to tailor their time slot offerings to specific customer segments have the potential to generate approximately 9% more shipping revenue than those who cannot. Our findings inform practitioners seeking to design competitive fulfillment strategies and academics modeling customer behavior in the attended home delivery context. This paper was accepted by Vishal Gaur, operations management. Funding: This work was supported by the Fundação para a Ciência e a Tecnologia [PTDC/EME-SIS/31908/2017]. Supplemental Material: The data files are available at https://doi.org/10.1287/mnsc.2020.01274 .