Membership Free Shipping Programs: Effect on Competition and Optimality of Member Fees

Zhong, Wen; Lin, Lihui

doi:10.24251/hicss.2017.475

Cited by 5 publications

(6 citation statements)

References 6 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…A more reliable relationship between a firm and its customers would suggest a greater capacity for the firm to be efficient. An additional factor that may account for the veracity of these findings is the greater tendency for firms that adopt MFS organizational programs, which impose a membership fee but offer free shipping, to possess a more extensive pricing band than other firms that do not (Wen & Lin, 2017). Several other research works corroborate the findings in this study.…”

Section: Discussionsupporting

confidence: 81%

The Effects of Transactional Barriers on the Effectiveness of a Firm’s Competitive Strategy

Obu,

Ukpere

2023

JEDEP

View full text Add to dashboard Cite

Extant literature has shown that firms’ decisions can exert a bearing on the effectiveness of their competitive strategy. This paper seeks to extend this body of literature by demonstrating how and under what circumstances a firm’s decision about transactional barriers, which it can impose on its customers, can impact the degree to which it can effectively deploy its competitive strategy in realizing its maximum possible profits. The study’s main findings demonstrate that at equilibrium, the size of the set transactional barrier is on average inversely related to the effectiveness of the firm’s competitive strategy, holding constant the consumers' income and other factors. Furthermore, the effectiveness of the firm’s competitive strategy in attaining the firm’s optimal profits is jointly and individually enervated by the price elasticity of the firm’s product demand and the size of the transactional barrier that it imposes on its customers. Additionally, the effectiveness of the firm’s competitive strategy tends to be maximized as the size of the transactional barrier tends to be zero. Therefore, the findings in this paper suggest that under the assumptions of the model in this paper, the optimal size of a transactional barrier to be imposed by a firm, in the service industry, should be zero.

show abstract

Section: Discussionsupporting

confidence: 81%

The Effects of Transactional Barriers on the Effectiveness of a Firm’s Competitive Strategy

Obu,

Ukpere

2023

JEDEP

View full text Add to dashboard Cite

show abstract

“…We abstract away details regarding logistics and inventory management in order to isolate the impact of the pricing model (wholesale vs. agency) on the value of the MFS program. A similar approach is used by Wen and Lin (2017). We consider two scenarios that differ with respect to who bears the shipping cost.…”

Section: Modelmentioning

confidence: 99%

“…They show that expedited free shipping with membership benefits the retailer when the value of expedited shipping to consumers (i.e., savings in holding cost) is sufficiently high, but the program hurts the society. Wen and Lin (2017) study the impact of an MFS program in a competitive setting in which one of two competing retailers adopts the program. They show that the MFS program benefits both retailers by softening the price competition between them.…”

Section: Introductionmentioning

confidence: 99%

Value of membership‐based free shipping in online retailing: Impact of upstream pricing model

Sun

Cavusoglu

Raghunathan

2022

Production and Operations Management

View full text Add to dashboard Cite

A consumer‐side innovation in online retailing is membership‐based free shipping (MFS) in which a retailer bears the shipping cost for purchases made by members that have paid an upfront membership fee. On the supplier side, the agency model of selling, where a retailer allows a third‐party manufacturer to sell his product on the site for a commission, has been gradually replacing the wholesale model, where the retailer buys from the manufacturer at a wholesale price and resells to consumers at a retail price. We show that the shift to the agency model enhances the value of the MFS program to the retailer in the sense the retailer gains more from the MFS program and MFS is profitable to the retailer in a larger region of the parameter space under the agency model than the wholesale model. The retailer's gain from MFS comes at the expense of consumers and the society under the wholesale model, but the consumers and the society can also benefit from MFS under the agency model. The key driver of these results is that, under the wholesale model, the MFS program increases the severity of the double‐marginalization problem because the MFS program increases the retailer's marginal cost; however, under the agency model, the MFS program reduces the impact of marginalization at the manufacturer end because the manufacturer faces consumers with lower purchasing cost on average. Thus, the MFS program hurts channel coordination in the wholesale model but helps it under the agency model.

show abstract

“…Without this additional Amazon Fresh membership, deliveries are only free for a minimum order volume of EUR100 (EUR4.99 delivery fee for orders below). This system with fixed membership fees is also a tool for customer retention and for incentivising customers to place a larger number of orders (Wen and Lin, 2017; Kim, 2019). It increases the switching costs and hence creates a lock-in situation (Phan and Vogel, 2010).…”

Section: What We Think We Know About Psychological Pricing In Food E-...mentioning

confidence: 99%

Psychological pricing in online food retail

Hillen

2021

BFJ

View full text Add to dashboard Cite

PurposeThis study aims to analyse the use of psychological pricing in online food retailing. In stationary grocery shops, psychological prices with nine-endings have been a well-documented phenomenon for many decades. However, little is known about the relevance of this pricing practice in the growing grocery e-commerce sector.Design/methodology/approachThe authors investigate the frequency of nine-ending prices at Amazon Fresh for more than 10,000 products from May 2019 until March 2020 for the customer location Berlin, Germany. Applying a within–between logit model, the authors identify the determinants for the use of nine-ending prices.FindingsThe authors find that more than 70% of all prices end in the digit 9. This indicates that Amazon Fresh applies psychological pricing to a similar degree as traditional offline grocers. Nine-ending prices are more likely for so-called “want” products such as snacks and sweets than for “should” products such as fruits and vegetables. Also, psychological price endings are used less for products with a higher price level and for products with temporary sales promotions.Originality/valueThis study is the first to analyse psychological pricing practices for the world's largest online food retailer Amazon Fresh. The study results contrast with most previous empirical and theoretical studies, which suggest that the use of psychological prices would decline in an online context.

show abstract

Membership Free Shipping Programs: Effect on Competition and Optimality of Member Fees

Cited by 5 publications

References 6 publications

The Effects of Transactional Barriers on the Effectiveness of a Firm’s Competitive Strategy

The Effects of Transactional Barriers on the Effectiveness of a Firm’s Competitive Strategy

Value of membership‐based free shipping in online retailing: Impact of upstream pricing model

Psychological pricing in online food retail

Contact Info

Product

Resources

About