The Little Bid More, the Merrier? Quantifying the Effects of Filler-Item Recommendations in Contingent Free Shipping

Abstract

As the contingent free shipping strategy (CFS) becomes the standard practice among e-commerce sites, customers may abandon it due to the difficulty in reaching the free-shipping threshold or may take advantage of it by adding “filler items” to reach the threshold before the checkout (called fill-in purchases). This paper looks into the filler-item recommendation strategy under which the e-tailer proactively recommends filler items to encourage fill-in purchases. Different from most traditional product recommendations, the nature of filler-item recommendation renders its effectiveness in reshaping customer behaviors and economic outcomes unpredictable. The empirical analysis demonstrates how the availability of filler-item recommendations affected customers' purchase behavior. Specifically, 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, or approximately 3% in transaction volume. However, the findings also suggest a downside of the filler-item recommendation: 80% of the incremental transactions were fill-in purchases, and the benefits for e-tailers were marginal or even harmful. This paper is among the first to contribute to the literature by quantifying the value of the filler-item recommendation system, which also offers guidance for e-commerce practitioners.