The free shipping endowment: exploring omnichannel fulfillment steering by nudging consumers toward alternative order fulfillment methods
International Journal of Physical Distribution & Logistics Management
ISSN: 0960-0035
Article publication date: 26 November 2024
Issue publication date: 29 January 2025
Abstract
Purpose
This research explores the concept of omnichannel fulfillment steering (OFS) and demonstrates how retailers can influence a consumer’s fulfillment decisions through commonly used financial incentives such as discounts, credits and the opportunity to avoid home delivery fees.
Design/methodology/approach
We present insights from two theoretically grounded experiments to examine how different types of financial incentives can be used by omnichannel retailers to steer consumers from home delivery toward three alternative order fulfillment methods (AOFM) – buy-online-pickup-in-store, curbside-pickup and ship-to-locker.
Findings
Our analysis suggests that an opportunity to avoid shipping fees (penalty-avoidance) is a more effective OFS nudge than offering discounts or store credits (rewards). No difference was observed between offering discounts or credits as steering mechanisms; further, no omnichannel steering benefits were observed among the tested AOFMs. Collectively, these findings provide possible justification for retailers’ prioritization of credits to foster customer in-store visits, thus encouraging greater customer engagement and facilitating cross-selling opportunities. Finally, we uncover a penalty-avoidance endowment effect for “free shipping” of purchases over the current industry-standard free shipping threshold.
Practical implications
Retailers might prioritize store credits over discounts as nudges to steer customers toward an AOFM, with buy-online-pickup-in-store offering the greatest benefits for most retailers. Furthermore, using penalty-avoidance OFS incentives over a typical free shipping threshold may increase AOFM selection rates but engender adverse customer reactions.
Originality/value
Advancing the concept of OFS, this study directly informs retailers’ omnichannel incentive programs to nudge customers back into the store. Countering intertemporal choice theory, we could not demonstrate that delayed incentives are less effective than immediate ones. Based on prospect theory, we identify a free shipping endowment effect at a specific reference point along a purchase amount continuum.
Keywords
Citation
Brockhaus, S., Taylor, D., Knemeyer, A.M. and Murphy, P.R. (2025), "The free shipping endowment: exploring omnichannel fulfillment steering by nudging consumers toward alternative order fulfillment methods", International Journal of Physical Distribution & Logistics Management, Vol. 55 No. 1, pp. 22-48. https://doi.org/10.1108/IJPDLM-06-2023-0216
Publisher
:Emerald Publishing Limited
Copyright © 2024, Emerald Publishing Limited