Researchers from Sichuan University, Tsinghua University, and the University of California Davis have recently published a significant study in the Journal of Marketing, exploring the impact of online retailers’ delivery services (ODS) on customer behaviour and sales performance. Titled “Understanding the Influence of Own Delivery Services on Customer Behaviour and Sales in Online Retail: Enhancing Trust and Delivery Quality in the Digital Economy,” the study is authored by Banggang Wu, Yubo Chen, and Prasad A. Naik.
The study addresses the increasing prioritisation of last-mile home delivery by online retailers worldwide. Many companies have invested significantly in developing delivery networks to fulfil customer orders directly, bypassing third-party logistics providers. For instance, Ocado in the UK initiated its ODS in 2000, followed by JD.com in China in 2010, BigBasket in India in 2011, and Amazon in the US after challenges during the 2013 holiday season. By 2023, Amazon alone delivered approximately 5.9 billion packages in the US through its ODS, highlighting the scale and importance of this trend.
Central to the study are questions regarding how adopting ODS influences consumer behaviour and impacts sales performance for online retailers. The research utilised extensive data, including 250,055 customer transactions over a decade across 416 cities and 49 product categories from JD.com, alongside 6.7 million customer reviews, to provide empirical insights into these dynamics.
Key findings reveal that ODS enhances delivery quality and builds consumer trust by ensuring online retailers take full responsibility for delivery issues and product damages. This contrasts with scenarios involving third-party delivery services, where attributing fault for issues like damaged goods can be unclear, potentially eroding trust. Consequently, ODS reduces consumer transaction risks, encouraging increased purchases and enhancing overall sales performance.
At an individual customer level, the study shows that ODS leads to a 7.8% increase in monthly spending, a 4.2% rise in purchase frequency, and a 5.1% increase in the number of items purchased. At a city level, ODS contributes to an average aggregate sales growth of 11.9%, with more pronounced impacts observed in cities with lower consumer trust levels. These effects are particularly significant for less frequent buyers, high-risk product categories, and products sold directly by the online retailer.
The study’s implications for Chief Marketing Officers (CMOs) underscore ODS as a strategic investment for acquiring and retaining active customers, as evidenced by JD.com’s substantial growth in active customer accounts following the implementation of ODS. Furthermore, the research suggests that ODS is particularly advantageous in markets with lower consumer trust levels, which is ideal for expanding customer bases in emerging markets like China and India.
Moreover, the study highlights ODS’s heightened effectiveness in handling high-risk product categories such as perishable goods, where maintaining delivery quality and consumer trust is crucial. Initiatives from retailers like Ocado in the UK, Walmart’s use of ODS for fresh and perishable food items, and Amazon’s deployment of fresh grocery delivery illustrate this.
Lastly, the research indicates that ODS tends to generate more sales for products sold directly by the online retailer than third-party products. This insight suggests opportunities for online platforms to expand ODS-like services to third-party sellers, akin to Amazon’s Fulfillment by Amazon (FBA) model, which provides storage, packaging, and shipping services. Such initiatives empower sellers by leveraging the online retailer’s robust delivery network, enhancing customer satisfaction and sales performance across a broader spectrum of products.
To conclude, the study underscores the strategic value of ODS in enhancing delivery reliability, building consumer trust, and driving sales growth in the competitive landscape of online retail. By offering insights into the optimal conditions and product categories where ODS can deliver the most significant impact, the research provides actionable guidance for online retailers looking to leverage self-owned delivery networks as a cornerstone of their operational strategy in the digital economy.
More information: Banggang Wu et al, How Own Delivery Services Influence Customer Behavior and Sales in Online Retail? Building Trust and Improving Delivery Quality in Digital Economy, Journal of Marketing. DOI: 10.1177/00222429241239892
Journal information: Journal of Marketing Provided by American Marketing Association