Wayfair Shipping Fee Change: Model the Profit Impact of Repricing One Delivery Option

Wayfair ships customer orders using three delivery methods and is thinking about changing the price it charges customers for one of them. As the product manager, explain how this price change would affect Wayfair's profit: which effects you would expect, how they interact, and how you would find out whether the net impact is positive. ```hint Follow each customer response The fee change is only the first-order effect. Trace what different customers do when they see the new price at checkout, and what each of those reactions does to the full profit of an order, not just its shipping line. ``` ### Clarifying Questions - Which of the three methods is being repriced, and how does it differ from the other two in delivery speed, cost to Wayfair, or the kind of items it carries? - Is the price going up or down, and by roughly how much? - What prompted the change: a method that loses money, a competitor's offer, or a customer-experience goal? - Is the method free for some orders or customers today, and do carrier contracts tie Wayfair's costs to shipping volume? ### What a Strong Answer Covers - A breakdown of profit into per-order components and order volume across all three methods, not just the fee revenue - The customer responses to the new price (paying it, switching methods, abandoning, changing basket size) and the profit effect of each - Cost-side effects such as carrier pricing, fulfillment capacity and customer service load - Longer-term effects on repeat purchase, customer lifetime value and acquisition efficiency - A way to measure the net impact, with a primary metric that captures lost orders and a clear decision rule ### Follow-up Questions - How would you test the new price without customers seeing different prices for the same delivery and losing trust? - The test shows higher profit per visitor after a month, but repeat purchases from affected customers fall over the following months. What do you do? - How does your analysis change if the price is lowered instead of raised?