How to flourish less developed areas´ e-businesses: Focusing on free shipping effect

Shipping cost is a crucial factor that influences people´s online purchasing behaviors. Free shipping option can increase customers´ behavior greatly while shipping cost even only occupy a small amount of the whole price will impede purchasing behaviors obviously. If all e-business retailers in one area have the ability to provide free shipping options to all online customers, the e-business in this area will win out other areas in competition and the e-economy of this area will be flourished. But in a natural status, free shipping option emerges slowly and unevenly. This situation provides local governments of less-developed areas a chance to promote their e-business economies. This paper elaborates the conduct mechanism based on supply chain and behavioral economics. The mechanism is divided into customers make purchasing decisions, local online retailers provide free shipping options, express companies receive transfer payments and local government takes active interventions. East China´s e-business data supports most parts of this viewpoint. It is concluded that free shipping effect can be gained along the chain of customers, retailers, express companies and local government. Less developed area´s local governments can adopt active interventions upon express companies to stimulate e-economy in their areas.