Disentangling the Customer-Level, Cross-Channel Effects of Large-Order-Advantaged Online Shipping Policies
Authors: Kanuri, Vamsi K.; Crecelius, Andrew T.; Kumar, Subodha
Journal: MIS Quarterly (2025)
<jats:p>A key challenge in e-commerce retail is identifying a shipping fee policy that will incentivize more online orders and sales. To achieve this, retailers occasionally alter their shipping policies. While information systems research has extensively examined e-commerce channel strategies and their interplay with offline channels, it has yet to explore the online and offline implications of changes in e-commerce shipping policies. Against this backdrop, we studied a shipping policy change designed to incentivize higher-dollar orders, specifically, a large multichannel retailer’s shift from a tiered online shipping policy to a flat-rate policy. Using rich customer-level panel data and a regression discontinuity in time approach, we demonstrate that a flat-fee online shipping policy, counterintuitively, shifts sales away from the online channel and toward the offline channel—generating 23% more offline sales across 21,028 customers in five states. Evidence from additional analyses corroborated an account based on two mechanisms: an online order aggregation effect, wherein flat-fee shipping encouraged shipping fee-sensitive shoppers to aggregate purchases into larger orders, and…