Free shipping policy for imported cross-border e-commerce platforms

Abstract

As the imported cross-border e-commerce market is getting more competitive nowadays, the free shipping strategy, as a unique service model, plays an important role in the market share competition. Formulating a free shipping strategy to enable companies to obtain more orders and make more profits has become one of the imperative concerns of cross-border e-commerce companies. We will analyze the impact of increasing the free shipping threshold on consumer behavior and corporate profits, combine the free shipping solutions of four large cross-border e-commerce companies in the China, consider more realistic factors (i.e., commodity prices, order distribution, market competition, consumer characteristics), build a consumer purchase decision model and a consumer increase purchase model based on consumer decision theory, and provide decision support for its selection of a suitable free shipping strategy based on the real operating data of the cross-border e-commerce platform. The results indicate that raising the free shipping threshold within a certain range can help increase a company’s average order price and gross profit margin as well as reduce corporate costs. However, an excessively high free shipping threshold weakens the stimulus for consumers to increase purchases and decreases the customer conversion rate. The closer the order price is to the free shipping threshold, the more likely it is that consumers will increase their purchases; the further the order price is from the free shipping threshold, the more likely it is that consumers will pay the shipping fee. This study provides a practical reference for decisions about cross-border e-commerce free shipping policies.