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The dynamic effects of subscription-based free shipping on purchase behavior and profitability: Insights from the acquisition and renewal phases

Author

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  • Bhave, Ashutosh
  • Bruce, Norris I.
  • Orimoloye, Larry Olanrewaju

Abstract

This study explores the dynamic effects of a subscription-based shipping (SBS) program offered by an apparel retailer, in which customers receive unlimited free shipping with no restrictions for a small annual membership fee. We examine how the SBS program influences revenues, order frequency, order size, basket composition, and profitability during the initial 12-month subscription and in the subsequent renewal period. Using data from a UK-based retailer, the study shows that the SBS program increases members' overall revenue and purchase frequency while decreasing their average order size. The gains come from the lift in purchases of low-cost items. These effects are most pronounced in the early months of the subscription and diminish rapidly over time. The SBS program is much less effective in generating additional revenue and profitability in the renewal phase. Moreover, members who do not renew after the first year show clear disengagement from the retailer upon discontinuation. This study provides insights into the viability of SBS programs, particularly for retailers charging a small subscription fee.

Suggested Citation

  • Bhave, Ashutosh & Bruce, Norris I. & Orimoloye, Larry Olanrewaju, 2026. "The dynamic effects of subscription-based free shipping on purchase behavior and profitability: Insights from the acquisition and renewal phases," Journal of Retailing, Elsevier, vol. 102(2), pages 208-222.
    • Handle: RePEc:eee:jouret:v:102:y:2026:i:2:p:208-222
    DOI: 10.1016/j.jretai.2025.10.001
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