[Paper Review] Are consumers ready to pay extra for crowd-shipping e-groceries and why? A hybrid choice analysis for developing economies

Oleksandr Rossolov, Yusak O. Susilo|arXiv (Cornell University)|Mar 13, 2023

Urban and Freight Transport LogisticsEngineering3 citations

TL;DR

This study investigates Ukrainian consumers' willingness to pay extra for crowd-shipping e-groceries using a hybrid choice model with a latent variable to capture unobserved behavioral factors. Results show strong readiness to pay more for flexible, consumer-oriented delivery, while environmental benefits are not a key motivator due to low environmental concern and car-dependent mobility patterns in the context of developing economies.

ABSTRACT

This paper presents the behavioral study's results on willingness-to-pay the extra money by the customers for e-groceries deliveries based on crowd-shipping. The proposed methodology was tested for Ukraine, i.e., a developing country where the crowd-shipping services are under development conditions. To account for the behavior complexity of the consumers who have not faced the crowd-shipping services in the past, the choice model was enhanced with a latent variable. The findings indicate the revealed readiness of the e-shoppers to pay extra money for crowd-shipping delivery if it provides more flexible and consumer-oriented service. The expected environmental impact of the crowd-shipping delivery was not considered as important by the e-shoppers, which is explained by low concerns about the environment and car-oriented mobility in the considered case study.

Motivation & Objective

• To assess consumer willingness to pay a premium for crowd-shipping e-grocery delivery in a developing economy context.
• To understand the behavioral drivers behind this willingness, particularly in the absence of prior exposure to crowd-shipping services.
• To examine the role of environmental concerns and mobility preferences in shaping consumer choices for alternative delivery models.
• To develop and apply a hybrid choice model that incorporates latent variables to better capture complex consumer decision-making.
• To provide actionable insights for logistics providers and policymakers in emerging markets considering crowd-shipping adoption.

Proposed method

• A hybrid choice model is employed to integrate observed choice behavior with unobserved heterogeneity through a latent variable representing consumer attitudes toward delivery services.
• The latent variable captures unobserved preferences related to service flexibility, convenience, and personal values toward delivery options.
• Data were collected via a survey of e-grocers in Ukraine, representing a developing economy with nascent crowd-shipping infrastructure.
• The model estimates utility functions for different delivery options, incorporating socio-economic, behavioral, and environmental attributes.
• The analysis uses maximum likelihood estimation to calibrate the model and assess the significance of each attribute on consumer choice.
• Sensitivity analysis is conducted to evaluate the impact of varying service attributes on willingness to pay.

Experimental results

Research questions

• RQ1 What is the extent of consumer willingness to pay a premium for crowd-shipping e-grocery delivery in a developing economy?
• RQ2 How do perceived service flexibility and consumer orientation influence the decision to pay extra for crowd-shipping?
• RQ3 To what extent do environmental concerns influence the willingness to pay for crowd-shipping compared to traditional delivery?
• RQ4 How do mobility patterns and car dependency affect consumer preferences for alternative delivery models?
• RQ5 What role do unobserved behavioral factors, such as trust or convenience orientation, play in shaping delivery choice decisions?

Key findings

• Consumers in Ukraine show a significant willingness to pay extra for crowd-shipping if it offers greater flexibility and consumer-centric service features.
• The latent variable analysis confirms that unobserved preferences for convenience and service adaptability strongly influence the choice to pay more for crowd-shipping.
• Environmental impact was not a significant motivator for additional payment, reflecting low environmental concern among the surveyed population.
• Car-oriented mobility patterns in Ukraine reduce the appeal of crowd-shipping as an environmentally friendly alternative, despite its potential sustainability benefits.
• The hybrid choice model with latent variables provides a more accurate representation of consumer behavior than standard discrete choice models in contexts with limited prior exposure to crowd-shipping.
• The estimated willingness to pay premium for flexible crowd-shipping delivery exceeds that for traditional home delivery, indicating strong market potential in developing economies with similar conditions.