Commercializing the Package Flow: Cross-sampling Physical Products Through E-commerce Warehouses

Abstract

Many e-commerce platforms have established their warehouses to facilitate the storage and delivery of packages. This paper proposes a novel business model --- cross-sampling through e-commerce warehouses --- that e-commerce platforms with direct control over physical packages can adopt. Cross-sampling allows physical free samples provided by one brand (sampling brand) to be distributed with the packages of another unrelated brand. We demonstrate how the cross-sampling model can integrate offline control and online information to commercialize the package flow. In close collaboration with Alibaba, we implemented cross-sampling through a large-scale field experiment, in which more than 55,000 free samples were distributed, to empirically examine its effectiveness in driving online sales of the sampling brand. We show that cross-sampling offers three distinct advantages. First, it can be implemented at a large scale with negligible cost by leveraging the existing package flow. Second, it is highly effective in increasing brand impressions and online sales of the sampling brand and acquiring new customers. Third, it utilizes both user information (online) and item information (of the package) to personalize cross-sampling. We develop an analytical framework to monetize this information advantage of cross-sampling and quantify the value of information. Overall, cross-sampling is proven effective, and the analytical framework can be applied to other opportunities, including cross-selling and bundling across brands and categories. In this way, we demonstrate the potential of a new business model that leverages the offline logistics infrastructure as a profit center.