Do you shop online? Have you ever experienced delivery failures? An INESC TEC-led study concluded that when a product is not delivered as expected – whether because it is out of stock or replaced with another – customers spend less and take longer to make another purchase, which can represent accumulated annual revenue losses for retailers of more than 12%.
Imagine ordering a packet of brand X rice, but after the order is placed, the retailer realises it is out of stock. As compensation, they send you a packet of brand Y rice. How would you react? According to a paper published in the Harvard Business Review, based on the study Navigating online order fulfillment failures: Impacts on future customer behaviour and the role of retailer mitigation in the Journal of Retailing, whenever an online order is not fulfilled, the customer takes longer to buy again and spends less on the next purchase. When a refund is issued, the average delay until the next purchase is around 24 hours. In the case of a substitution, the effect is even more negative, with the waiting time almost doubling.
The research also found that customers react differently depending on the type of product. Psychologically, unmet expectations generate frustration, and online shoppers tend to “punish” retailers by shifting their spending to other channels or competitors. This emotional response is particularly strong when a promotional item is missing. The researchers further concluded that the effect is less significant when it comes to perishable goods, probably because these are associated with immediate consumption needs, leading to faster replacement – often without a complete shift to another channel.
Pedro Amorim, a researcher at INESC, explains that the study may impact the way retail companies manage their inventory. “Many companies believe that replacing a product with a similar one is always better than not delivering anything at all. The solution is not to try to guess the ideal fix for failures, but to avoid them through more efficient stock management and better planning. Additionally, personalising substitutions, based on previous purchase data, can help reduce frustration and maintain consumer trust,” he mentioned.
At a time when e-commerce continues to grow at a rapid pace, driven by changes in consumption habits and greater digitalisation, this research (based on real data from 65,000 orders from a European retailer) may prove essential for the sustainability of online sales models.
In addition to INESC TEC, the study involved researchers from the Stockholm Business School (Sweden) and the Rotterdam School of Management, Erasmus University (the Netherlands).
The researcher mentioned in this news piece is associated with UP-FEUP.
News, current topics, curiosities and so much more about INESC TEC and its community!
