“Sorry, the product you ordered is out of stock”: Effects of substitution policy in online grocery retailing

Postpurchase out-of-stock (PP-OOS) often happens in an online grocery context, where products appear to be available at the time a consumer places order, but become OOS when order is dispatched. This paper investigates two substitution policies that can mitigate negative responses: substitutions match (i) on dominant attribute and (ii) with product from consumers’ past purchase portfolio. According data collected through computer-simulated experiments, involving more than 3,000 households five categories, matching increases acceptance, this varies across category differentiation level (flavor for horizontal differentiated categories like cereals or crips vs. brand vertical margarine ketchup). Category also informs acceptance of national private-label flavor substitutes, such that, same-flavor private label prefered categories. Matching basis previous purchases has positive effects both levels, combining policies, effect grows stronger same flavor, rather brand, matching. These detailed insights establish several key managerial implications contexts.