Commercializing the Package Flow: Cross-sampling Physical Products Through E-commerce Warehouses

Many e-commerce platforms have established their warehouses to facilitate the storage and delivery of packages. This paper studies a novel business practice---cross-sampling through e-commerce warehouses---that allows physical free samples provided by one (sampling) brand to be distributed with the packages of another unrelated (distributing) brand. In close collaboration with Alibaba, we implement cross-sampling through a large-scale field experiment, in which more than 55,000 free samples are distributed, to empirically examine its effectiveness in driving online sales of the sampling brand. First, we find significant increases in store visits of the sampling brand both in the short term and long term up to 14 months afterward. There is also a significant long-term increase in sales for new customers, suggesting that cross-sampling is effective in acquiring new customers. Second, our results suggest that the effect comes from customers' repeated purchases of the sampled item. Cross-sampling of a particular item leads to a positive spillover to other products within the sampling brand's online store and the indirect channel that also sells products of the sampling brand. The results indicate that cross-sampling promotes the sampling brand through customers' positive experiences with the physical free samples. Finally, we illustrate the potential for personalization for cross-sampling. Cross-sampling is more effective for customers who recently viewed related products, are less price sensitive, or just purchased non-essential products from the distributing brand. By taking into account the interaction among brands, items, and customers, we can further improve the profitability of cross-sampling by targeting the ``right" packages. Overall, as cross-sampling is scalable, effective, and flexible, we demonstrate the high potential of a new business practice that combines offline logistics control and online information to generate additional business value for customers, brands, and the platform.