News Release

Ease of return, prompt delivery are key drivers for online shoppers, says O.R. study

Peer-Reviewed Publication

Institute for Operations Research and the Management Sciences

LINTHICUM, MD, - The loyalty of customers ordering products electronically is driven primarily by two old-fashioned satisfiers - ease of return and timeliness of delivery - according to a study published in a journal of the Institute for Operations Research and the Management Sciences (INFORMS®).

Additional key drivers of e-customer loyalty, in descending order, are web site navigation, product availability, price, and product information.

"At a time when retailers are striving to integrate their 'brick' and 'click' operations, our results show that operations managers concerned about customer loyalty should prioritize decisions related to the order procurement and fulfillment processes," says Prof. Kingshuk K. Sinha of the University of Minnesota.

The study, "Operational Drivers of Customer Loyalty in Electronic Retailing: An Empirical Analysis of Electronic Food Retailers" is by Gregory R. Heim, Carroll School of Management, Boston College, and Prof. Sinha, Carlson School of Management, University of Minnesota. It appears in a special issue of Manufacturing and Service Operations Management (M&SOM), an INFORMS publication.

The study focuses on e-food retailers, but the results offer lessons to the broader context of e-retailing today, says Prof. Sinha. "Electronic food retailing is a good indicator for other e-retailing sectors because of its great product variety, which mirrors everything from sales on amazon.com to Dell Computers," he says.

Reverse supply chain

Of the variables representing the order fulfillment process, the authors found that product availability, timeliness of delivery, and ease of return have statistically significant association with customer loyalty. Customer concern with product availability, they write, lends support to those who view accurate inventory management as fundamental to earning the customer loyalty.

"The significance of the ease of return variable highlights the importance of carefully structuring a customer-service-friendly reverse supply chain for canceling the order and returning the merchandise," they write.

Navigability more important than aesthetics

Of the variables representing order procurement, the authors find that web site navigation, product information, and price are statistically significant. The importance to customers of web site navigation suggests that e-retailers should simplify the purchase process, while the lesser role of upscale design suggests that attracting customers to a site through web site graphics doesn't translate into customer loyalty.

For e-retailers, they write, the results point to the importance of web site layout and organization, the ease with which customers can move around the web site, and ensuring that links on the web site are functional.

Customers' lesser interest in web site aesthetics contrasts with the importance that some e-retailers have attached to making their web site attractive. Superior web site graphics, write the authors, may be successful in luring customers to the site but they aren't persuading people to buy and they aren't turning occasional customers into frequent ones.

From a managerial standpoint, say the authors, the observed importance of describing products well points to the need for monitoring the quality, not just quantity, of product information that is presented to customers visiting a retailer's web site.

Data

The study is part of a larger program of research, funded by the Alfred P. Sloan foundation, for which the authors collected data on 255 electronic food retailers during the months of May 1998 to June 1999. For 52 of the 255 electronic food retailers, data on customer satisfaction with order procurement and order fulfillment processes, and on customer loyalty were publicly available from a 1998 survey by BizRate, a market research firm.

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The Institute for Operations Research and the Management Sciences (INFORMS®) is an international scientific society with over 10,000 members dedicated to applying scientific methods to help improve decision-making, management, and operations. Members of INFORMS work in business, government, and academia. They are represented in fields as diverse as airlines, health care, law enforcement, the military, the stock market, and telecommunications. 2002 is the 50th anniversary of organized operations research in the United States. 1952 was the year that the journal Operations Research and the Operations Research Society of America, one of the founding societies of INFORMS, were born. The INFORMS website is at http://www.informs.org.


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