Free Shipping Beyond the Platforms: The Case of Extended MFS Programs
| dc.contributor.author | Sun, Geng | |
| dc.contributor.author | Cavusoglu, Huseyin | |
| dc.contributor.author | Raghunathan, Srinivasan | |
| dc.date.accessioned | 2024-12-26T21:07:53Z | |
| dc.date.available | 2024-12-26T21:07:53Z | |
| dc.date.issued | 2025-01-07 | |
| dc.description.abstract | Online retail platforms, which facilitate transactions between consumers and sellers, have transformed the shopping experience across various product categories. Addressing the challenge of the shipping burden associated with online purchases, many platforms have introduced membership-based free shipping (MFS) programs over the last decade, and these programs have been widely embraced by consumers. Recently, some platforms have extended these programs to encompass outside sellers, enabling member consumers to get free shipping even when purchasing from external sources. While this extension offers the potential for additional revenue in the form of ``logistics-as-a-service" (LaaS), it also pits platform sellers against external counterparts, potentially cannibalizing platform sales analogous to a manufacturer experiencing a decline in sales of existing products while extending his product line. The implications of the extended MFS program on the platform, sellers, and consumers remain uncertain. In this paper, we examine the impacts of introducing the extended MFS program using a game-theoretic model. Contrary to common belief, our findings suggest that the extended MFS program can enhance the platform's core business by bolstering its profitability. It may increase the commission revenue and/or reduce the fulfillment costs related to member consumers' purchases on the platform. Moreover, all stakeholders in the platform ecosystem -- the platform, internal and external sellers, and member consumers -- can stand to benefit from the extended MFS program, albeit at non-member consumers' expense. Furthermore, the platform may incur a loss from LaaS itself but still derive overall benefit from the extended MFS program. Our results underscore the nuanced implications of the extended MFS program, challenging the notion of viewing it solely as a LaaS for expanding business and generating additional profit. Instead, it represents a strategic approach with profound ramifications that are distinct from those associated with product line extension. | |
| dc.format.extent | 10 | |
| dc.identifier.isbn | 978-0-9981331-8-8 | |
| dc.identifier.other | bfedd876-a390-4426-bce4-3dac99960767 | |
| dc.identifier.uri | https://hdl.handle.net/10125/109342 | |
| dc.relation.ispartof | Proceedings of the 58th Hawaii International Conference on System Sciences | |
| dc.rights | Attribution-NonCommercial-NoDerivatives 4.0 International | |
| dc.rights.uri | https://creativecommons.org/licenses/by-nc-nd/4.0/ | |
| dc.subject | Digital Supply Chain of the Future: Applications, Implications, Business Models | |
| dc.subject | competition, free shipping programs, game theory, logistics-as-a-service, online retailing | |
| dc.title | Free Shipping Beyond the Platforms: The Case of Extended MFS Programs | |
| dc.type | Conference Paper | |
| dc.type.dcmi | Text | |
| prism.startingpage | 4146 |
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