The double-edged sword of delivery guarantee in E-commerce

Abstract

E-commerce retailers (e-tailers) are increasingly competing in order fulfillment to win over customers. Delivery guarantee emerges as a key competitive factor. Prior studies have examined the relationship between delivery performance and consumer satisfaction, but little attention was paid to the practice of delivery guarantee itself. This study examines delivery guarantee as a decision support tool provided by e-tailers. Particularly, we draw on the signaling theory, expectation disconfirmation theory, and attribution theory to investigate whether it is worth to offer delivery guarantee, who (what kind of e-tailers) can benefit more from it, and how e-tailers should manage the order fulfillment process when they offer delivery guarantee. Through analyzing data from Alibaba using the Heckman Ordered Probit Model, we show that delivery guarantee can be a double-edged sword. That is, offering and meeting a delivery guarantee leads to higher consumer satisfaction towards order fulfillment than not offering one, but failing to meet the guarantee lowers consumer satisfaction more than not providing it. We further show that large e-tailers are more negatively affected by failed guarantees than small ones, and that the “middle mile” (delivery en route) of order fulfillment significantly reduces consumer satisfaction if failed. Taken together, this study generates implications for e-tailers that consider providing delivery guarantee. Large e-tailers should be especially cautious and assess their capability and commitment. The middle mile should receive enough managerial attention in addition to the widely concerned last mile.