Have Your Cake and Eat It? Price Discount Programs under the Membership Free Shipping Policy in Online Retailing
Online retailers offer free shipping services, such as threshold free shipping (TFS) and membership free shipping (MFS), to promote sales and provide a better shopping experience to consumers in online retailing. Although MFS attracts more member-consumers, it encourages consumers to place more smal...
| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
| Published: |
MDPI AG
2024-01-01
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| Series: | Journal of Theoretical and Applied Electronic Commerce Research |
| Subjects: | |
| Online Access: | https://www.mdpi.com/0718-1876/19/1/12 |
| _version_ | 1797240363924062208 |
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| author | Zhipeng Tang Guowei Hua Tai Chiu Edwin Cheng Xiaowei Li Jingxin Dong |
| author_facet | Zhipeng Tang Guowei Hua Tai Chiu Edwin Cheng Xiaowei Li Jingxin Dong |
| author_sort | Zhipeng Tang |
| collection | DOAJ |
| description | Online retailers offer free shipping services, such as threshold free shipping (TFS) and membership free shipping (MFS), to promote sales and provide a better shopping experience to consumers in online retailing. Although MFS attracts more member-consumers, it encourages consumers to place more small orders than TFS, which significantly increases the operational costs of the online retailer. To address this issue, we propose two price discount policies under the MFS service, namely the limited-time discount and the threshold discount. Then, we build analytical models under these two policies to explore the impacts of offering price discounts on the retailer’s profit and consumers’ welfare. We find that no matter which discount policy is adopted, consumers are more likely to consolidate several small orders from different time periods into a big one to obtain the discount. The economies of scale generated by consumers consolidating their orders under these discount policies can help reduce online retailers’ operational costs. Therefore, regardless of any discount policy offered by the online retailer under the MFS service, consumers will place more big orders and more member-consumers are attracted, i.e., the online retailer can have its cake and eat it too. Our research findings provide decision-making insights for practitioners who offer free shipping services and price discounts to consumers in online retailing. |
| first_indexed | 2024-04-24T18:06:15Z |
| format | Article |
| id | doaj.art-b10f81c58bad406c9b4151ba16244673 |
| institution | Directory Open Access Journal |
| issn | 0718-1876 |
| language | English |
| last_indexed | 2024-04-24T18:06:15Z |
| publishDate | 2024-01-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Journal of Theoretical and Applied Electronic Commerce Research |
| spelling | doaj.art-b10f81c58bad406c9b4151ba162446732024-03-27T13:50:19ZengMDPI AGJournal of Theoretical and Applied Electronic Commerce Research0718-18762024-01-0119120923110.3390/jtaer19010012Have Your Cake and Eat It? Price Discount Programs under the Membership Free Shipping Policy in Online RetailingZhipeng Tang0Guowei Hua1Tai Chiu Edwin Cheng2Xiaowei Li3Jingxin Dong4School of Economics and Management, Beijing Jiaotong University, Beijing 100044, ChinaSchool of Economics and Management, Beijing Jiaotong University, Beijing 100044, ChinaDepartment of Logistics and Maritime Studies, The Hong Kong Polytechnic University, Hong Kong 999077, ChinaSchool of Economics and Management, China University of Geosciences (Beijing), Beijing 100083, ChinaBusiness School, Newcastle University, Northern Stage, Newcastle Upon Tyne NE1 7RU, UKOnline retailers offer free shipping services, such as threshold free shipping (TFS) and membership free shipping (MFS), to promote sales and provide a better shopping experience to consumers in online retailing. Although MFS attracts more member-consumers, it encourages consumers to place more small orders than TFS, which significantly increases the operational costs of the online retailer. To address this issue, we propose two price discount policies under the MFS service, namely the limited-time discount and the threshold discount. Then, we build analytical models under these two policies to explore the impacts of offering price discounts on the retailer’s profit and consumers’ welfare. We find that no matter which discount policy is adopted, consumers are more likely to consolidate several small orders from different time periods into a big one to obtain the discount. The economies of scale generated by consumers consolidating their orders under these discount policies can help reduce online retailers’ operational costs. Therefore, regardless of any discount policy offered by the online retailer under the MFS service, consumers will place more big orders and more member-consumers are attracted, i.e., the online retailer can have its cake and eat it too. Our research findings provide decision-making insights for practitioners who offer free shipping services and price discounts to consumers in online retailing.https://www.mdpi.com/0718-1876/19/1/12membership free shippingprice discountlimited-time discountthreshold discountonline retailing |
| spellingShingle | Zhipeng Tang Guowei Hua Tai Chiu Edwin Cheng Xiaowei Li Jingxin Dong Have Your Cake and Eat It? Price Discount Programs under the Membership Free Shipping Policy in Online Retailing Journal of Theoretical and Applied Electronic Commerce Research membership free shipping price discount limited-time discount threshold discount online retailing |
| title | Have Your Cake and Eat It? Price Discount Programs under the Membership Free Shipping Policy in Online Retailing |
| title_full | Have Your Cake and Eat It? Price Discount Programs under the Membership Free Shipping Policy in Online Retailing |
| title_fullStr | Have Your Cake and Eat It? Price Discount Programs under the Membership Free Shipping Policy in Online Retailing |
| title_full_unstemmed | Have Your Cake and Eat It? Price Discount Programs under the Membership Free Shipping Policy in Online Retailing |
| title_short | Have Your Cake and Eat It? Price Discount Programs under the Membership Free Shipping Policy in Online Retailing |
| title_sort | have your cake and eat it price discount programs under the membership free shipping policy in online retailing |
| topic | membership free shipping price discount limited-time discount threshold discount online retailing |
| url | https://www.mdpi.com/0718-1876/19/1/12 |
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