Impact of Free Shipping Threshold on PC and Mobile Channels: Evidence from an Online Retailer

Abstract

Many online retailers offer free shipping services if customers spend more than a threshold amount. We use a unique transaction-level dataset from a large online retailer to study the impacts of free shipping threshold on consumer shopping behavior across two different online channels, mobile and PC channels. Specifically, we focus on customer order padding behavior, i.e., strategically adding items to a shopping cart to qualify for free shipping. We find that customers are more likely to pad their orders on the PC channel than on the mobile channel. We attribute this impact to the different search cost on the two channels. Furthermore, we find that the way customers pad their orders is different. Specifically, in order to increase basket size, customers on the mobile channel rely more on buying a larger quantity of the same item, while users placing their order on the PC channel prefer to add new products to the shopping cart and/or to purchase higher-priced substitutes.