On the value of subscription models for online grocery retail
Omnichannel retailers are increasingly introducing subscription-based delivery services. By subscribing to this service and paying fees upfront, customers are entitled to have orders delivered to their home for a given period without paying any extra delivery charge. We analyze the resulting changes...
| Autores: | , , |
|---|---|
| Tipo de recurso: | artículo |
| Fecha de publicación: | 2020 |
| País: | España |
| Institución: | Universidad de Navarra |
| Repositorio: | Dadun. Depósito Académico Digital de la Universidad de Navarra |
| Idioma: | inglés |
| OAI Identifier: | oai:dadun.unav.edu:10171/111803 |
| Acceso en línea: | https://hdl.handle.net/10171/111803 |
| Access Level: | acceso abierto |
| Palabra clave: | E-commerce Online retail Subscription models Difference-in-differences |
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On the value of subscription models for online grocery retailWagner, L. (Laura)|||/items/3fca94a6-682e-4dd4-a14a-e264cd663ce5Pinto, C. (Catarina)|||/items/79feb6eb-d026-45e6-9f4b-754efafa2317Amorim, P. (Pedro)|||/items/0b47c364-cd57-421b-a59f-c7ed590354c3E-commerceOnline retailSubscription modelsDifference-in-differencesOmnichannel retailers are increasingly introducing subscription-based delivery services. By subscribing to this service and paying fees upfront, customers are entitled to have orders delivered to their home for a given period without paying any extra delivery charge. We analyze the resulting changes in customer behavior from two perspectives:(i) ordering behavior and (ii) delivery preferences. The model is estimated from the online transactional data of a grocery retailer and combines matching and difference-in-differences approaches. We confirm that subscription customers spend more per month and purchase more frequently online than customers without subscriptions. However, this outcome is compromised by shifts towards narrower time slots in the mornings and at night, where slots are requested with less advance notice. When weighing the increased revenue and higher operational costs, we show that subscriptions have a negative impact on a retailer’s incremental profit. This remains valid for a wide range of assumptions about (i) the cannibalisation of sales from the retailer’s offline business, (ii) picking cost and (iii) delivery cost. To mitigate the impact of subscriptions on retailer profits, we develop a data-driven algorithm that predicts whether certain customers should receive promotions for the subscription plan, rather than it being advertised to all customers. As an extension, we also study whether the addition of a minimum order threshold to subscription plans changes consumer behaviour. We find that this introduction encourages customers to seek more variety and increase their basket size, but does not reduce their order frequency, a phenomena which may be ascribed to cross-selling.ElsevierDadun. Depósito Académico Digital Universidad de Navarra20202020-05-2820202020-05-28journal articlehttp://purl.org/coar/resource_type/c_6501info:eu-repo/semantics/articleapplication/pdfhttps://hdl.handle.net/10171/111803reponame:Dadun. Depósito Académico Digital de la Universidad de Navarrainstname:Universidad de NavarraInglésengopen accesshttp://purl.org/coar/access_right/c_abf2info:eu-repo/semantics/openAccessoai:dadun.unav.edu:10171/1118032026-06-21T12:47:57Z |
| dc.title.none.fl_str_mv |
On the value of subscription models for online grocery retail |
| title |
On the value of subscription models for online grocery retail |
| spellingShingle |
On the value of subscription models for online grocery retail Wagner, L. (Laura)|||/items/3fca94a6-682e-4dd4-a14a-e264cd663ce5 E-commerce Online retail Subscription models Difference-in-differences |
| title_short |
On the value of subscription models for online grocery retail |
| title_full |
On the value of subscription models for online grocery retail |
| title_fullStr |
On the value of subscription models for online grocery retail |
| title_full_unstemmed |
On the value of subscription models for online grocery retail |
| title_sort |
On the value of subscription models for online grocery retail |
| dc.creator.none.fl_str_mv |
Wagner, L. (Laura)|||/items/3fca94a6-682e-4dd4-a14a-e264cd663ce5 Pinto, C. (Catarina)|||/items/79feb6eb-d026-45e6-9f4b-754efafa2317 Amorim, P. (Pedro)|||/items/0b47c364-cd57-421b-a59f-c7ed590354c3 |
| author |
Wagner, L. (Laura)|||/items/3fca94a6-682e-4dd4-a14a-e264cd663ce5 |
| author_facet |
Wagner, L. (Laura)|||/items/3fca94a6-682e-4dd4-a14a-e264cd663ce5 Pinto, C. (Catarina)|||/items/79feb6eb-d026-45e6-9f4b-754efafa2317 Amorim, P. (Pedro)|||/items/0b47c364-cd57-421b-a59f-c7ed590354c3 |
| author_role |
author |
| author2 |
Pinto, C. (Catarina)|||/items/79feb6eb-d026-45e6-9f4b-754efafa2317 Amorim, P. (Pedro)|||/items/0b47c364-cd57-421b-a59f-c7ed590354c3 |
| author2_role |
author author |
| dc.contributor.none.fl_str_mv |
Dadun. Depósito Académico Digital Universidad de Navarra |
| dc.subject.none.fl_str_mv |
E-commerce Online retail Subscription models Difference-in-differences |
| topic |
E-commerce Online retail Subscription models Difference-in-differences |
| description |
Omnichannel retailers are increasingly introducing subscription-based delivery services. By subscribing to this service and paying fees upfront, customers are entitled to have orders delivered to their home for a given period without paying any extra delivery charge. We analyze the resulting changes in customer behavior from two perspectives:(i) ordering behavior and (ii) delivery preferences. The model is estimated from the online transactional data of a grocery retailer and combines matching and difference-in-differences approaches. We confirm that subscription customers spend more per month and purchase more frequently online than customers without subscriptions. However, this outcome is compromised by shifts towards narrower time slots in the mornings and at night, where slots are requested with less advance notice. When weighing the increased revenue and higher operational costs, we show that subscriptions have a negative impact on a retailer’s incremental profit. This remains valid for a wide range of assumptions about (i) the cannibalisation of sales from the retailer’s offline business, (ii) picking cost and (iii) delivery cost. To mitigate the impact of subscriptions on retailer profits, we develop a data-driven algorithm that predicts whether certain customers should receive promotions for the subscription plan, rather than it being advertised to all customers. As an extension, we also study whether the addition of a minimum order threshold to subscription plans changes consumer behaviour. We find that this introduction encourages customers to seek more variety and increase their basket size, but does not reduce their order frequency, a phenomena which may be ascribed to cross-selling. |
| publishDate |
2020 |
| dc.date.none.fl_str_mv |
2020 2020-05-28 2020 2020-05-28 |
| dc.type.none.fl_str_mv |
journal article http://purl.org/coar/resource_type/c_6501 |
| dc.type.openaire.fl_str_mv |
info:eu-repo/semantics/article |
| format |
article |
| dc.identifier.none.fl_str_mv |
https://hdl.handle.net/10171/111803 |
| url |
https://hdl.handle.net/10171/111803 |
| dc.language.none.fl_str_mv |
Inglés eng |
| language_invalid_str_mv |
Inglés |
| language |
eng |
| dc.rights.none.fl_str_mv |
open access http://purl.org/coar/access_right/c_abf2 |
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info:eu-repo/semantics/openAccess |
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open access http://purl.org/coar/access_right/c_abf2 |
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openAccess |
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application/pdf |
| dc.publisher.none.fl_str_mv |
Elsevier |
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Elsevier |
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reponame:Dadun. Depósito Académico Digital de la Universidad de Navarra instname:Universidad de Navarra |
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Universidad de Navarra |
| reponame_str |
Dadun. Depósito Académico Digital de la Universidad de Navarra |
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Dadun. Depósito Académico Digital de la Universidad de Navarra |
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15,812455 |