Effects of retailers' free shipping promotions on manufacturers' product sales and product review ratings in multichannel retailing

It is substantial for manufacturers to know the optimal market structure in terms of retailers using free shipping promotions that help them decide whether and how to subsidize retailers. Our research uses fixed‐effect models to empirically examine the impact of the proportion of free shipping retailers on consumer purchase decision and perceived product quality with secondary data from Amazon.com . We find that more retailers using free shipping decrease a manufacturer's product sales while increasing product review ratings. However, the negative impact of the market structure on the manufacturer's product sales is weakened as product substitutes and product review volume increase.