Customer Preferences for Delivery Service Attributes in Attended Home Delivery

Abstract

Retailers face increasing competitive pressure to determine how best to deliver products purchased on-line to the end customer. As online retailing grows, so does the need for retailers to establish an appropriate fulfillment strategy. This is particularly true in grocery where the customer must be present to receive perishable goods from the retailer. Attended home delivery requires the retailer and the customer to agree upon a delivery time slot that works for both parties. Customers may exhibit different preferences for the selection of a delivery time slot. Using data from a grocery retailer that performs attended home deliveries, we evaluate customer responses to three delivery attributes, namely, speed, precision, and flexibility. We define speed as the expected time between the placement of an order and delivery, precision as the duration of the offered time slot, and flexibility as the availability of choices across times of the day and days of the week. Our results demonstrate that customers not only value speed as an attribute of delivery service but that precision and flexibility are also key drivers of the customer’s time slot selection process. In fact, under many conditions, customers prefer precision and flexibility over speed. We also explore the willingness of customers to pay for time slots with various attributes and find substantial and significant heterogeneity among customers. Customers that differ in their loyalty to the retailer, basket value, basket size, and basket composition exhibit differences in their willingness to pay. Understanding customer preferences towards the attributes of delivery time slots and how the willingness of customers to pay for a given time slot differs across customers is important for practitioners seeking to design competitive fulfillment strategies. Moreover, our findings enable academics to refine their assumptions of customer behavior when modeling the attended home delivery context.