Fresh product e-retailer’s sales strategy choice: free shipping, package, or combined strategy?

Abstract

Cold chain technology and online platform have enabled the rapid development of fresh food e-commerce. However, most fresh product e-retailers are losing money. This paper aims to answer the questions: Can the free shipping strategy, package strategy, and combined package and free shipping strategy (i.e., KF strategy) improve a fresh product e-retailer’s performance, and which strategy is the most effective? By deriving the optimal decisions of customers and/or the e-retailer under different strategies, we find that the e-retailer should adopt the free shipping strategy or the KF strategy if the shipping cost is higher than the threshold. Furthermore, some managerial insights are obtained. First, compared with the general strategy, the e-retailer needs to further reduce the price when the shipping cost is lower than the threshold despite bearing the shipping cost under the free shipping strategy or KF strategy. Second, the free shipping strategy or KF strategy is generally used to increase the customer’s single order quantity. However, if the shipping cost is higher than the threshold, the e-retailer should use these two strategies to reduce the single order quantity. Lastly, if the e-retailer wants to reduce its average logistics cost, the package strategy is a better choice.