Unveiling the ripple effect of delayed deliveries on subsequent purchases: evidence from a parcel delivery union strike

Abstract

With the rise of m-commerce, customer expectations for fast delivery are on the rise, yet order fulfillment delays are often unavoidable and uncontrollable. However, there is a lack of research on this topic, with most studies neglecting the impact of order fulfillment glitches on subsequent customer purchasing behavior. This thesis aims to quantify the impact of delivery delays on subsequent net purchases and refunds using unique customer transaction data obtained from an online fashion retail platform. A difference-in-differences analysis was conducted using an exogenous parcel delivery strike that occurred in South Korea. The results suggest that the strike had a significant and lasting impact on net purchases, which persisted even after the resumption of delivery services. Regions with severe delivery delays initially showed a 2.29% decline in weekly net purchases on average, yet in the longer run, there was a 0.86% increase in one-day delivery product purchases. Additionally, customers who had experienced one-day delivery in the past recovered more quickly from the reduction in purchases, as did those with recent purchase history and higher previous purchase amounts. Furthermore, delays had a greater negative impact on differentiated products such as high-priced and niche items, resulting in an increase in net purchases of low-priced and mass products with one-day deliveries over time. It is noteworthy that despite the restoration of parcel delivery, delayed deliveries continued to reduce returns and exchanges of products, suggesting that customers began to make more thoughtful purchase decisions to avoid lengthy processes. This thesis highlights the significance of expedited delivery in mitigating the adverse effects of delivery delays on customer purchase behavior.