The effect of threshold free shipping policies on online shoppers' willingness to pay for shipping

Abstract

More and more online retailers now offer free delivery for orders exceeding a minimum purchase quantity—in effect, a threshold free shipping (TFS) policy. While TFS has become so prevalent in e-tailing, there is still not much known about the factors that may influence the consumers’ intentions to pay for delivery when they purchase less than the specified quantity. Based on the dual entitlement principle, we develop a conceptual model to examine the possible influence on consumer perceptions of the characteristics of the TFS policy (i.e., threshold level, shipping charge, and delivery timing) and how this may influence their inferred retailer's motive and value perceptions, which in turn impacts their perceptions of the fairness of the policy and willingness to pay for shipping when the threshold for free shipping is out of reach. A total of 367 online responses were collected. The results reveal that consumers’ inferred motive for the retailer's TFS policy is positively influenced by their perceptions of the threshold and shipping fees as a profit generator, but negatively influenced by the delivery timeliness. As hypothesized, both perceived threshold and delivery timeliness contribute to the consumers’ value perceptions. In addition, perceived policy fairness is affected by the perceptions of shipping fees as a profit generator and perceived value. Finally, the consumer's willingness to pay for shipping is mainly affected by the inferred motive rather than the perceived value and policy fairness perceptions.