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Retailers' use of shipping cost strategies: free shipping or partitioned prices?

Frischmann, Tanja, Hinz, Oliver and Skiera, Bernd 2012, Retailers' use of shipping cost strategies: free shipping or partitioned prices?, International journal of electronic commerce, vol. 16, no. 3, pp. 65-88, doi: 10.2753/JEC1086-4415160303.

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Title Retailers' use of shipping cost strategies: free shipping or partitioned prices?
Author(s) Frischmann, Tanja
Hinz, Oliver
Skiera, Bernd
Journal name International journal of electronic commerce
Volume number 16
Issue number 3
Start page 65
End page 88
Total pages 23
Publisher Routledge
Place of publication Abingdon, Eng
Publication date 2012
ISSN 1086-4415
1557-9301
Keyword(s) electronic commerce
e-tail
price comparison
pricing
shipping costs
Summary The Internet has radically reduced the cost of collecting and distributinginformation. Consequently, researchers initially predicted that the resulting price transparency would drive prices toward a single market price. However, this has largely not happened, partly because retailers use shipping costs to make prices less comparable. Using data on 517,048 offers of 895 retailers from a leading European price comparison site, we show that retailers pursue two different shipping cost strategies. Both strategies lead to higher gross product prices, which are the sum of net product price and shipping costs and thus try to capture consumer surplus. These strategies are conflicting, however, and target different consumer segments: Some retailers charge high shipping costs and thereby try to exploit consumers’ biased perceptions of partitioned prices, while other retailers offer “free shipping” to attract consumers and exploit their so-called zero-risk bias. Consumers realize the lowest gross product prices by ordering at retailers that charge moderate shipping costs.
Language eng
DOI 10.2753/JEC1086-4415160303
Field of Research 150599 Marketing not elsewhere classified
0806 Information Systems
1503 Business And Management
1505 Marketing
Socio Economic Objective 970108 Expanding Knowledge in the Information and Computing Sciences
HERDC Research category C1.1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2012, M.E. Sharpe
Persistent URL http://hdl.handle.net/10536/DRO/DU:30091182

Document type: Journal Article
Collection: Department of Marketing
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