How Do Filler-Item Recommendations Affect Customers’ Purchase Behavior in a Contingent Free-Shipping Strategy?

Abstract

It is popular among e-tailers to offer free shipping for purchases with a basket value above a certain threshold, which is known as the contingent free-shipping strategy (CFS). To take advantage of CFS, customers often add to reach the threshold. This paper looks into the filler-item recommendation strategy, under which the e-tailer recommends filler items for customers to make fill-in purchases. While such a recommendation is adopted by a few e-tailers, little has been done to quantify its operational impacts. This study empirically explores how the availability of filler-item recommendations affected customers' purchase behavior. We observed that the filler-item recommendation system resulted in 5.4% more fill-in purchase behavior and, on average, 0.35 more filler items in each shopping basket. In other words, a policy encouraging filler items leads to a volume increase of approximately 3% on transactions. However, the introduction of filler-item recommendations also brings adverse effects: 80% of the incremental transactions were fill-in purchases, and the benefits for e-tailers were marginal or even harmful. A further profit analysis revealed that the recommendation policy conditionally outperformed the neutral policy. This study contributes to research on shipping fee designs and online recommendation systems, specifically on the filler-item recommendation design.