The impact of delivery lead time on customer conversion

Sammanfattning: Delivery lead time (DLT) is seen as one of the most important service factors affecting the consumers willingness to fulfill a purchase within online retailing (Esperet al., 2003). The purpose of this thesis is to investigate the effect variations in the offered DLT have on customer conversion rate within e-commerce. This is done by analyzing historical online customer demand data from a case company within the furniture industry. Further, two other factors are studied in relation to DLT, delivery charge and consumer commitment. The purpose was to further understand how these factors influence consumers behaviour in relation to the offered DLT. The research questions for the study related to the Swedish market and were the following: How does delivery-lead-time affect the probability of an fulfilled order for online furniture sales? and (2). How is the sensitivity for changes in DLT affected by the factors delivery-cost and consumer commitment?. The analysis was done using a quantitative approach of logistic regression models. The generated models displayed statistical significance and could quantify the relationship between the variables DLT and conversion rate. The overall samples showed that when offered an DLT increase from three to ten days the probability of a consumer fulfilling the purchase decreases with 10.67 %, which for the case company studied, could be translated to a potential loss of sales of 68 million SEK per year. Further, the conducted study indicate that a high consumer commitment make consumers less sensitive to changes in DLT, while delivery charge have the opposite effect. That is a high delivery charge make consumers more sensitive to longer DLT. Historically research related to the topic of DLT has been done using surveys or interviews to study consumer preferences. This is what makes this study different as it is based on actual sales data enabling the study of consumers actual behaviour, rather than their experienced preferences. The work of this thesis contributes to the research by quantifying the relationship of DLT and conversion rate.