Research On Free Shipping Decisions In B2C Transactions Under Delivery Delay

In recent years,with the improvement of internet technology and the rapid development of e-commerce,online shopping is becoming more and more popular among consumers.As an effective business mode,e-commerce is not only bringing convenience to consumers,but also is bringing huge profits for online retailers.However,the surge demand of online business has made the competition among e-commerce companies increasingly fierce.Free shipping as a preferential strategy of logistics service has become an important competitive means for network retailers.On the one hand,free delivery can boost consumers' demand,thereby expanding the enterprise market share and profits;on the other hand,the surge in online shopping orders will cause a huge logistics pressure,thus distribution delay is inevitable.This will not only affect the quality of logistics services and the consumers' shopping experience,but also will reduce the satisfaction of the company,and then cause the loss of profits.For example,in the annual Double-eleven Shopping Carnival,because many online businesses conducted large-scale promotional activities,huge trading volume makes the amount of orders extremely increasing in short term,seriously beyond the logistics load.Despite of the promoted free shipping strategy,consumers' discontent or even consumers' returns caused by the delay delivery is still common.Therefore,in order to ensure the maximum profits,the online retailers need to consider how to develop an effective free shipping strategy under delivery delay.In this case,this paper will address the following problems:(1)what is the impact of delivery delay to consumers' decision-making?(2)how does delivery delay affect retailer's sales profits by influencing consumers' decision-making?(3)If delivery delay is taken into account in the free shipping service,how the optimal free shipping threshold will be determined?To solve these problems,this paper builds a two-stage Stackelberg game model,and obtains the optimal free shipping threshold and profit margin by optimizing the retailer's profit.The impact of consumer parameters,the shipping strategy parameters,and delivery delay time on the optimal free shipping threshold,the optimal profit margin of goods and retailer's maximum profit will be analyzed.In this paper,research on free shipping decisions in B2C transactions under delivery delay is conducted based on related theory.We first establish the consumer net surplus function by analyzing the consumer buying behavior,and get the optimal decision of consumers.And then we build the profit function of the online retailer,obtain the optimal free shipping threshold and the commodity profit margin.Finally,the numerical result shows that:(1)Delivery delay has negative impact on consumer's best purchasing decision and retailer's maximum profit.Particularly,the intensity of negative impact on online retailer expresses short-term violent and long-term gentle in trend;(2)Effective free shipping threshold will discourage low-spending consumers,but at the same time can encourage middle and high consumption consumers to expand purchasing decisions,wich is exacerbated under delivery delay;(3)When exceeding a certain range,the greater the heterogeneity in consumers' preferences,the higher profit the online retailers benefit from delvery delay.(4)In the delivery delay scenario,the appropriate increase in basic shipping fee(the fixed shipping fee)can help enhance the profit of online retailers.