Examining the Impact of Shipping Charge Fairness on Consumer Satisfaction and Behavior

Abstract:Firms are increasingly recognizing that consumers' perceptions of price fairness should be considered when making logistics decisions at the firm level. A key element of price fairness is the shipping charges that consumers pay. This is especially critical with respect to online retail shipping charges as they represent a substantial portion of consumers' total cost and are visible to consumers before they place an order. Perceptions of the fairness of these prices are believed to impact online shoppers' selection of a retailer as well as influence subsequent purchase behavior. While large retailers may be able to leverage scale economies in shipping to offer free shipping on many orders, smaller firms may not be able to offer this to consumers. Thus, the general expectations of consumers are an important competitive factor in the environment, especially for the small and medium enterprises that are employers of 70 percent of US workers. This study assesses the impact of shipping charge fairness upon consumer satisfaction, repurchase, and positive word-of-mouth outcomes for a focal firm. Additionally, the moderating influences of shipping charge magnitude and consumer experience are examined. Consumer perceptions of fairness are found to influence satisfaction as well as willingness to repurchase and make positive referrals.