Fast or free shipping options in online and Omni-channel retail? The mediating role of uncertainty on satisfaction and purchase intentions

Pages1099-1122
Published date13 November 2017
Date13 November 2017
DOIhttps://doi.org/10.1108/IJLM-05-2016-0130
AuthorSiqi Ma
Subject MatterManagement science & operations,Logistics
Fast or free shipping options in
online and Omni-channel retail?
The mediating role of uncertainty
on satisfaction and purchase
intentions
Siqi Ma
University of Arkansas, Fayetteville, Arkansas, USA and
University of Akron, Akron, Ohio, USA
Abstract
Purpose The purpose of this paper is to investigate the effect of a dimension of logistics service quality
(delivery time) interacting with shipping charges and purchase importance on customer satisfaction and
purchase intentions in an e-commerce context. Uncertainty in terms of perceived ambiguity and perceived
riskiness is shown to be the theoretical mechanism that plays a mediating role in the relationships between
delivery time and customer satisfaction, as well as between delivery time and purchase intentions.
Design/methodology/approach This study used a scenario-based role playing experiment. Three
variablesare manipulatedin the design of thestudy delivery time,shipping charges,and purchase importance.
Participantresponses (n¼360) were collectedthrough Amazon MechanicalTurk with perceptual measures.
Findings Results indicated that increased delivery time significantly increased customersperceived
ambiguity and perceived riskiness which reduced satisfaction as well as negatively impacted purchase
intentions. Further, free shipping reduced customersperceived ambiguity when delivery time was lengthy,
but strengthened the perception of ambiguity when the delivery time was short.
Originality/value This paper sheds light on how a dimension of logistics service quality (delivery time)
interacts with shipping charges and purchase importance to impact customer satisfaction and purchase
intentions. It introduces uncertainty in the form of perceived ambiguity and perceived riskiness, to the
logistics service literature as the mechanism that can explain how delivery time interacting with shipping
charges and purchase importance impact customer satisfaction and purchase intentions. The implications for
online retailers are that they should display separate shipping charges for shorter delivery times but for
longer delivery times they should display a total price for the product which includes the shipping cost. Also
when the purchase is important to the customer, they should offer shorter shipping time choices if they want
to increase customer satisfaction.
Keywords E-commerce, Delivery time, Perceived ambiguity, Perceived riskiness, Purchase importance,
Shipping charges
Paper type Research paper
Introduction
E-commerce has seen tremendous growth in sales in recent years. The US e-commerce
market has increased from $31 billion in 2001 to $166 billion in 2008, and to $305 billion in
2014 (Rao et al., 2011; Griffis et al., 2012). Both pure online retailers as well as Omni-channel
retailers are designing and redesigning their distribution network infrastructure to promote
and to cope with this growth (Bell et al., 2014). In making informed decisions about these
networks, picking nodes, selecting pricing strategies and service levels, one of the
determining factors that promote the success of online retail is logistics service quality.
Excellence in logistics operations has become a crucial aspect
to maintain and develop the competitive advantage for online retailers in the
hyper-competitive business environment (Yazdanparast et al., 2010). To ensure the
success of e-commerce, online retailers must understand the needs of customers in term of
logistics services in order to provide them the highest value to meet their expectation and
The International Journal of
Logistics Management
Vol. 28 No. 4, 2017
pp. 1099-1122
© Emerald PublishingLimited
0957-4093
DOI 10.1108/IJLM-05-2016-0130
Received 5 June 2016
Revised 22 September 2016
4 November 2016
Accepted 12 November 2016
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0957-4093.htm
1099
Fast or free
shipping
options
create satisfaction (Ricker and Kalakota, 1999). Since product delivers directly to a
customers home or business rather than to the store in online shopping, the quality of
logistics services concerning the timeliness of last miledelivery is a significant
determinant of customer satisfaction and purchase intentions (Lee and Whang, 2001).
Collier and Bienstock (2006) suggest that timeliness of delivery as one of the dimension of
e-service quality has a significant influence on customer satisfaction and future behavioral
intentions. Rao et al. (2011) indicate that physical distribution service quality is a key
indicator of customers purchase satisfaction which impacts customer retention.
While this body of work on logistics service quality has shed some light on customer
satisfaction, the literature has not yet investigated the impact of each dimension of logistics
service quality on customer experiences such as satisfaction and purchase intentions.
Since product delivery issues become more salient to customers (Esper et al., 2003), the
objective of this study is to investigate the impact of delivery time one dimension of
logistics service quality on customer satisfaction and purchase intentions. Further,
marketing literature indicates customers satisfaction and purchase intentions can be
affected by uncertainty (Crosby and Stephens, 1987). This paper proposes that perceived
ambiguity and perceived riskiness two dimensions of uncertainty are the mechanisms
that can explain why delivery time impacts customers satisfaction and purchase intentions.
Customers increasingly want better physical distribution service quality, especially a
shorter delivery time. Many customers view themselves as time starvedand the lengthy
delivery time makes customers anxious and dissatisfied with the purchase (Collier and
Bienstock, 2006). Online retailers are learning to provide alternatives to compensate for the
lengthy delivery time by offering free shipping. For example, Nordstrom offers free
shipping for online purchases with three to six business day delivery; their two-day delivery
charges $15, next day delivery is $25, and Saturday delivery is $35. Therefore, shipping
charges act as an alternative factor to delivery time that can impact customersbehaviors.
Lewis (2006) presents a study of the effects of shipping charges on customer acquisition,
retention, and order size. Results indicate that shipping charges significantly impact both
order incidence and order size. Gümüşet al. (2013) argue that shipping and handling
surcharge, one of the main complaints about online retailing, has a significant negative
effect on customer purchase decisions. Further, customer behaviors can be influenced by
purchase importance. Ostrom and Iacobucci (1995) find that customers weigh purchase
criticality differently. They place greater importance on price under conditions for less
critical services and greater importance on quality for more critical services. Therefore,
shipping charges and purchase importance are potential moderators that may strengthen
the relationship between delivery time and perceived ambiguity and perceived riskiness.
This study will provide two key contributions to the literature. While prior research has
studied the effect of logistics service quality on customers experience, they have not
attempted to explore the influence of each dimension of logistics service quality. Specifically,
this study explores the impact of delivery time, one dimension of logistics service quality,
which interacts with shipping charges and purchase importance on customer satisfaction
and purchase intentions. In addition, this study is trying to understand the underlying
mechanism that explains how delivery time influences satisfaction and purchase intentions.
Perceived ambiguity and perceived riskiness are proposed to be the dimensions of
uncertainty that lead to this influence.
This paper is organized in the following manner. A review of literature related to
delivery time, shipping charges, and perceived uncertainty is initially provided, followed
by hypotheses development and the conceptual model. An overview of the methodology
used and results from the scenario-based role playing experiment is next offered.
Finally, a discussion and implications for online retailers are offered along with
suggestions for future research.
1100
IJLM
28,4

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