The price of parcel delivery is driven by a number of supply and demand factors, and the price online shoppers pay e-retailers for cross-border parcel delivery does not reflect the prices charged by delivery operators.
In the delivery sector, as in other sectors, the price charged is market driven. It is a commercial decision influenced by demand and supply factors such as consumers' willingness to pay, volumes flows or the relative bargaining power of e-retailers.
Digging into economic and operational conditions helps better understand price differences between domestic and cross-border delivery services as well as between individual countries.
The e-retailer’s choice among the options above will depend on a number of factors, such as the size of the e-retailer, the products sold, the stage of development of the e-retailer, and the trade-off between the cost of complexity and the ability to meet individual customer needs. These factors vary across e-retailers and over time.
Two delivery decisions by e-retailers
As for the demand factors, these will thus play an important role in the e-retailer’s pricing. In fact, previous studies have shown that the delivery price can often be a ‘deal breaker’ in an e-shopper’s buying decision.29 As some e-retailers make “free” delivery the norm, this forms expectations among e-shoppers regarding the level of the acceptable delivery price. Similarly, e-shoppers are often reluctant to pay high prices for delivery when the online purchase concerns a low value product. When deciding upon the delivery price, e-retailers thus have to take e-shoppers’ expectations and needs into account, for example:
- How much e-shoppers are willing to pay for delivery of high value/low value products
- How the delivery price will affect the ranking of the e-retailer on price comparison websites
- How many delivery options and prices could be offered without deterring the e-shopper from buying due to complex process
- How important “free delivery” is as a selling argument
- How the pricing strategy could encourage e-shoppers to buy more (e.g., by providing “free” delivery above a certain order value threshold)
More findings read
http://www.copenhageneconomics.com/dyn/resources/Publication/publicationPDF/3/343/1456128562/principles-of-e-commerce-delivery-prices.pdf
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