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Value of High-Quality Logistics: Evidence from a Clash between SF Express and Alibaba

SSRN Electronic Journal
2018
  • 12
    Citations
  • 6,224
    Usage
  • 47
    Captures
  • 0
    Mentions
  • 0
    Social Media
Metric Options:   Counts1 Year3 Year

Metrics Details

  • Citations
    12
    • Citation Indexes
      12
  • Usage
    6,224
    • Abstract Views
      5,178
    • Downloads
      1,046
  • Captures
    47
  • Ratings
    • Download Rank
      43,527

Article Description

Consumers regard product delivery as an important service component that influences their shopping decisions on online retail platforms. Delivering products to customers in a timely and reliable manner enhances customer experience and companies' profitability. In this research, we explore the extent to which customers value a high-quality delivery experience when shopping online. Our identification strategy exploits a natural experiment: a clash between SF Express and Alibaba, the largest private logistics service provider with the highest reputation in delivery quality in China and the largest online retail platform in China, respectively; the clash resulted in Alibaba unexpectedly removing SF Express as a shipping option from Alibaba's retail platform for 42 hours in June 2017. Using a difference-in-differences design, we analyze the market performance of 129,448 representative stock-keeping units (SKUs) on Alibaba to quantify the economic value of a high-quality delivery service to sales, product variety, and logistics rating. We find that the removal of the high-quality delivery option from Alibaba's retail platform reduced sales by 14.56% during the clash, increased the contribution of long-tail to total sales --- sales dispersion --- by 3%, but did not impact the variety and logistics rating of sold products. Further, we also identify product characteristics that attenuate the value of high-quality logistics and find that the removal of SF Express is more obstructive for (i) star products as compared to long-tail products, because the same star products are likely to be supplied by competing retail platforms that customers can easily switch to, (ii) expensive products, because customers need a reliable delivery service to protect their valuable items from damages or losses, and (iii) less-discounted products, because customers are more willing to sacrifice the service quality over a price markdown.

Bibliographic Details

Ruomeng Cui; Meng Li; Qiang Li

Elsevier BV

Delivery quality; Retail platform; Sales dispersion; Product variety; Natural experiment

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