The Value of Rapid Delivery in Omnichannel Retailing

Abstract

The authors study how faster delivery in the online channel affects sales within and across channels in omnichannel retailing. The authors leverage a quasi-experiment involving the opening of a new distribution center by a U.S. apparel retailer, which resulted in unannounced faster deliveries to western U.S. states through its online channel. Using a difference-in-differences approach, the authors show that online store sales increased, on average, by 1.45% per business-day reduction in delivery time, from a baseline of seven business days. The authors also find a positive spillover effect to the retailer’s offline stores. These effects increase gradually in the short-to-medium run as the result of higher order count. The authors identify two main drivers of the observed effect: (1) customer learning through service interactions with the retailer and (2) existing brand presence in terms of online store penetration rate and offline store presence. Customers with less online store experience are more responsive to faster deliveries in the short run, whereas experienced online store customers are more responsive in the long run.