NEW YORK, NY – E-commerce sales boomed during the holiday shopping season, with sales up 11 percent in 2021. As the e-commerce industry is expected to hold on to pandemic-elevated sales into 2022, retailers should rethink their belief that customers have a never-ending demand for faster shipping times. New research from Columbia Business School shows that customers don’t want every product to get to them faster – they just want retailers to do better with the ones moving slowly.
The study, The Impact of Delivery Time on Online Purchasing Decisions finds that a faster estimated delivery time increases clients’ probability of purchase, with a one-day speedup leading to a 1.98% increase in demand on average. The increase in demand is equivalent to that from a 3.14% discount on price.
The research showed that there is a steep drop off in the chances of purchase when delivery is expected to take over a week. In an analysis of a lab supplier’s price quotes and final purchases, Kinshuk Jerath, Professor of Business at Columbia Business School, found that the chances of a quote turning into a purchase did not change dramatically if the expected delivery time was within a tolerable range. However, demand reduced dramatically when delivery stretched longer than 3-4 days.
Professor Jerath and doctoral student Elliot Shin Oblander analyzed six months of data from an e-commerce company selling lab equipment and supplies to research institutions, including both academic institutions and private research labs. The study also analyzed how customers shopped on their website, reviewing how many price quotes and shipping estimates resulted in purchases. The researchers reviewed 44,991 quotes across 6,268 products, 1,800 clients, and 89 vendors. Among the quotes, 5,201 (11.6%) resulted in a purchase.
“As e-commerce continues to dominate sales, it’s time for retailers and logistics companies to recognize that, in the current environment, customers can live with 2- and 3-day delivery,” said Professor Jerath. “Instead of focusing on speeding up from 2-day to 1-day delivery, retailers should be looking at their slowest moving products and seeing which ones they can boost in terms of delivery time. This research shows that hastening the delivery of the slower-moving products is more important for demand than reducing the delivery time of already relatively fast-moving products.”
To learn more about the cutting-edge research being conducted at Columbia Business School, please visit www.gsb.columbia.edu.
About the researcher
Kinshuk Jerath is the Arthur F. Burns Chair of Free and Competitive Enterprise, Professor of Business in the Marketing division at Columbia Business School...Read more.