Eduardo Lopez-Soriano, Vice President at UPS Capital takes a look at how supply chain issues and porch pirates are prompting the consumer demand for shipping insurance protection in the US market.
With porch piracy and shipping delays on the rise, the last mile is quickly becoming the most important touchpoint within the consumer experience journey. According to two new research studies commissioned by UPS Capital, “Personalized Shipping Experiences: The Next Frontier for eCommerce” and “Emerging Risks and Rewards in the Last Mile,” consumer demand to have better control over shipments and more protection options from merchants is increasing.
In fact, 87% of consumers reported they would be more likely to shop with a merchant if they could personalize their shipping experience, and 51% of consumers said the ability to add shipment protection for lost, stolen or damaged items would be the most important personalization perk. With the shipping landscape rife with new risks, today’s consumers are seeking reassurance, and the merchants that can offer protection during the last mile will rise above the competition.
Supply Chain Volatility Introduces New Risks
Merchants have pivoted their business models to better handle supply chain volatility, many without knowing they may be incurring new risks. One example of these hidden risks is drop-shipping. According to the “Personalized Shipping Experiences” study, 86% of merchants report either a significant or slight increase in the use of drop-shipping since the pandemic began in 2020. Drop-shipping is considered a cost-effective strategy that doesn’t require the merchant to keep product on-hand and instead allows for orders to be shipped directly from the supplier to the customer. However, drop-shipping comes with new risks, as the same report found that 66% of SMBs have seen an increase in package theft, damages and losses from drop-shipping, compared to shipments going directly from their business.
And with persistent inventory availability challenges, some merchants have turned to purchasing products in bulk due to fears of running out of stock, especially ahead of sales events or peak season. However, excess warehoused inventory may create greater risk in the event of theft or natural disasters like fires and floods, where a merchant could lose tens of thousands to millions of dollars of product in one fell swoop.
The Rise of Porch Piracy
E-Commerce merchants face another growing threat – porch piracy. According to a study conducted by Safewise, about 210 million packages were stolen from residential properties in 2021. To put this number into perspective, there are approximately 122 million households in the United States today according to the U.S. Census. That means that the average household is experiencing more than one package theft per year. Further, the “Emerging Risks and Rewards in the Last Mile” study showcases that merchants that deliver direct-to-consumer are feeling the pain of these losses as well – 64% of merchants have had to pay out of pocket to cover these kinds of losses, damaging their bottom line and hurting their customer relationships.
Consumers Are Seeking Control Over Their Shipments
Giving consumers more control over the shipping experience is a solve for addressing some of these new risks. With 51% of shoppers reporting they want the ability to add shipment protection that guarantees protection for lost, stolen or damaged items and includes full-value reimbursement, it’s clear they see the value in shipping protection.
Consumers are aware that porch piracy and supply chain volatility have impacted them. As a result, they are more likely to order from merchants that offer enhanced protection. In fact, 88% of consumers would be more willing to work with a merchant that offers peace of mind and protection for same-day or next-day shipments in the event of a loss, damage or porch-pirated theft. Shoppers expect what they purchase online to arrive in premium condition, and shipping insurance is an easy, quick way to provide peace of mind in this area, for merchants and shoppers alike.
It’s clear that consumers want choices – and not just around dictating package arrival. They’re also actively seeking options to protect the items they buy online. Shipping insurance provides merchants the confidence to reship or reimburse their customers if there’s a loss, damage or porch piracy incident. Now is the time for merchants to focus on customer experience and find the right resources to protect their brand, their customers and their shipping experience.
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