When the platform loses its competitive advantage: Impact of a competitor's implementation of expedited delivery

Abstract

Today, we can see fierce inter-platform competition in many industries, ranging from food delivery services to shared riding services. As such, it underscores the vital need for platforms to cater differentiated experiences to customers, which is the key to gaining competitive advantages and ultimately winning the competition. Consequently, platforms try to swiftly introduce new and innovative strategies, which became plausible thanks to the rapid evolution of information technologies. However, at the same time, the advancement of technologies has also paradoxically facilitated the imitation of each other’s unique strategies. Therefore, the fact that the interval of sustaining its position as a pioneer in one’s industry is getting shorter has been an emerging problem because other platforms can quickly ‘cherry-pick’ the first-mover’s strategy and make even further improvements. Thus, it is uncertain whether it is beneficial to be a first-mover platform to adopt a new strategy. This paper empirically examines the impact of the rival platform’s imitation of a strategy employed by the first-moving platform in the e-commerce context. Specifically, this paper observes fashion platform competition when one platform copies the other’s expedited delivery strategy. I use continuous DID setting with GPS matching, as the treatment is expedited delivery usage rate during the pre-treatment period, which has continuous values. The result shows that customers who have high treatment values intensively reduced purchases from FBP sellers due to the availability of another similar fast delivery option but reduced purchases relatively less from non-FBP sellers, which is counter-intuitive. This puzzling shift may be attributed to the underlying behavior mechanism of diversifying purchases and exploring.