Abstract
Membership-based free shipping (MFS) has been increasingly adopted by online retailers. However, its effectiveness is understudied. This study leverages a consumer transaction data set provided by an online retailer and uses a stacked difference-in-differences approach to quantify the enrollment effect of MFS on consumers’ purchase behaviors and their net revenue contribution to the retailer. Interestingly, MFS enrollment does not lift average consumers’ spending at the beginning of the enrollment, as they break large orders into smaller ones. Retailers do not gain incremental net revenue due to the increased shipping costs during this period. However, the free shipping benefit may build a switching barrier that motivates consumers to purchase more often with larger order sizes over time. It eventually leads to increased spending and revenue contribution. MFS also increases members’ purchase variety and impulse purchases. In addition, the authors find that there is a greater increase in net revenue contribution after enrollment for light buyers, variety seekers, and those who are willing to pay shipping fees before enrollment. Surprisingly, MFS has a negative impact on the revenue contribution of heavy buyers, the conventional best-value consumers. Moreover, MFS can effectively strengthen consumer–retailer relationships by reducing customer churn.
Subject
Marketing,Business and International Management
Reference64 articles.
1. The Club Store Effect: Impact of Shopping in Warehouse Club Stores on Consumers' Packaged Food Purchases
2. Ali Fareeha (2021), “Amazon Prime Reaches 200 Million Members Worldwide,” Digital Commerce 360 (April 16), https://www.digitalcommerce360.com/2021/04/16/amazon-prime-reaches-200-million-members-worldwide/.
3. Amazon (2022), “Annual Report,” https://www.annualreports.com/Company/amazoncom-inc.
4. Retention Futility: Targeting High-Risk Customers Might be Ineffective
Cited by
2 articles.
订阅此论文施引文献
订阅此论文施引文献,注册后可以免费订阅5篇论文的施引文献,订阅后可以查看论文全部施引文献