Navigating online order fulfillment failures: Impacts on future customer behavior and the role of retailer mitigation

Abstract

In online grocery retail, out-of-stocks can cause order fulfillment failures. Store-based fulfillment models have heightened this challenge. Here, online customers often receive orders not fulfilled as expected, with products being substituted, partially fulfilled, or reimbursed. When order fulfillment fails, the customer may change future ordering behavior by delaying the next order or by spending less in the online channel. Using data from the online operation of a leading omnichannel grocery retailer, we evaluate the magnitude of impact on the next order when the prior one is not fulfilled as expected. We also explore the role of retailer efforts in mitigating this impact. We find that failures significantly delay the time to the next order by 7.22% on average, with delays becoming more pronounced for non-perishable products. Spending reductions are especially evident when promoted items fail to ship. Mitigation efforts, substitutions in particular, often exacerbate delays and compound the dissatisfaction. Although substitutions help recover lost sales, they negatively impact future customer behavior. This suggests that selective stockout prevention, coupled with improved substitution practices, should be prioritized to optimize economic and customer outcomes.