<p>Contingent free shipping can improve purchase motivation and increase sales, and is an important promotional means for e-commerce platforms. Among them, it is particularly common for e-commerce platforms to provide free shipping coupons to paid members. How much cost does it take to provide free shipping coupons and how much revenue does it bring, causing confusion to e-commerce platforms. The authors build pricing decision models based on consumers’ shopping frequency and their sensitivity to shipping costs when e-commerce platforms offering single, multiple and unlimited number of free shipping coupon services. Through the analysis, the authors find that high-sensitivity consumers dislike paying for shipping and prefer to purchase free shipping coupons. The authors also find that when adopting multiple free shipping coupons strategy, the optimal number of free shipping coupons to offer is associated with the frequency of consumers’ small order purchases. However, if unlimited number of free shipping coupons is offered, online retailers need to increase membership fees to make more profit. This study brings practical insights for e-commerce platforms as well as online retailers to determine reasonable pricing under different free shipping coupon service strategies and provide consumers with a more convenient shopping experience.</p>

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E-Commerce Platforms Offer Different Free Shipping Coupon Services: Surplus or Loss?

  • Zhipeng Tang,
  • Guowei Hua,
  • Xiaowei Li,
  • Edwin T. C. Cheng

摘要

Contingent free shipping can improve purchase motivation and increase sales, and is an important promotional means for e-commerce platforms. Among them, it is particularly common for e-commerce platforms to provide free shipping coupons to paid members. How much cost does it take to provide free shipping coupons and how much revenue does it bring, causing confusion to e-commerce platforms. The authors build pricing decision models based on consumers’ shopping frequency and their sensitivity to shipping costs when e-commerce platforms offering single, multiple and unlimited number of free shipping coupon services. Through the analysis, the authors find that high-sensitivity consumers dislike paying for shipping and prefer to purchase free shipping coupons. The authors also find that when adopting multiple free shipping coupons strategy, the optimal number of free shipping coupons to offer is associated with the frequency of consumers’ small order purchases. However, if unlimited number of free shipping coupons is offered, online retailers need to increase membership fees to make more profit. This study brings practical insights for e-commerce platforms as well as online retailers to determine reasonable pricing under different free shipping coupon service strategies and provide consumers with a more convenient shopping experience.