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Survey: Package insurance, personalization among top e-commerce shopper asks

Survey by UPS Capital finds online shoppers are looking for more options around theft protection, delivery

E-commerce businesses believe package insurance is a viable path to profitability for consumers looking for more protection against package theft and damage. (Photo: Jim Allen/FreightWaves)

Many e-commerce brands offer free shipping today in an effort to compete. But for many small and midsized (SMB) brands, there is a cost. Without the scale of Amazon or Walmart, shipping rates tend to be higher and technology to track those deliveries more scarce.

There is hope, though, and it appears in the form of a new survey from UPS Capital. Shoppers want personalization.

“Today, free shipping, two-day shipping and free return offers have become table stakes for e-commerce shippers looking to satisfy consumer expectations,” the survey stated. “However, this research uncovered shoppers are seeking something more as we look towards the future of e-commerce – and it all starts with more control over shipping.”

According to UPS Capital, which produced a white paper – Unpacking the eCommerce Shipping Experience – based on the survey of both e-commerce businesses and consumers, 97% of SMBs believe consumers will prefer to have more direct control over their shipping experience in the future.

The shoppers agreed. When asked what personalization services they were most interested in, 74% said the ability to track packages in real time, 72% said the ability to pick the exact package arrival date, and 57% said access to multiple cost-affordable delivery options.

“Half of [consumers] when given the choice of two-day shipping for free or on the other side of giving them a guarantee that the package would be there on time and intact, they chose the second option,” Eduardo Lopez Soriano, vice president of UPS Capital, told Modern Shipper.

The other big ask for consumers? The ability to protect their packages. An estimated 210 million packages disappeared from porches in 2021 and UPS Capital, which is the financial services division of UPS (NYSE: UPS), said it has seen a 65% increase in claims paid due to package “mishaps,” which includes theft, damaged and lost packages. Lost package claims increased 107% and damage claims were up 78%, the company said.

Watch: Tech’s role in the supply chain

Even these discouraging statistics are opening doors for SMBs, Soriano said, as he pointed to the increasing use of insurance to protect shipments and make the customer whole when a mishap occurs. Slightly more than half of consumers (51%) said they would like to have the option to add shipment protection guarantees, including full-value reimbursement.

“Their concern about shipping mishaps outweighs their desire for speed – simply getting their order in prime condition has become their number-one priority,” the report noted.

The report, however, found a bit of a disconnect between consumers and SMBs. The survey found that 95% of SMBs would be interested in offering customers the option of purchasing insurance coverage that provided guaranteed replacement in the event of loss, theft or damage, while 65% of consumers would be interested in this option, yet the insurance offerings are still limited.

Soriano said UPS Capital is seeing interest grow on both sides, but to make it work, SMBs need to consider outsourcing a program.

“I do believe they need to get a company to handle [it],” he said. “SMBs need the experts that know how this works; the experts that know what the right premium is to charge. Those experts also have adjusters that can decide whether this is a legitimate claim and when it might be a little iffy. The decision is not whether to have insurance, I think that it is very clear in this market. The decision is what kind of insurance to offer.”

Insurance is also viewed as a clear win for SMBs, with 42% believing that an insurance offering could drive a revenue increase of between 6% and 10%. Another 44% think that increase could be as much as 20%. One of the key reasons is negative reviews posted online. In today’s society, unhappy customers tend to take to social media to voice their frustrations. The survey found 72% of SMBs reported shipping incidents have led to negative customer reviews.

“Overall, the shipping experience is becoming a larger pain point for consumers,” the survey noted. “In fact, the data shows the top reason a shopper would bother to leave a negative review is if a package was damaged or never arrived.”

Soriano said there has been an increase in shipping incidents since the start of the pandemic, driven in part by the increased use of drop shipping. The number of SMBs reporting a significant or slight increase in the use of drop shipping was 86%, but 66% also reported more loss, theft and damage with drop shipments.

“They are really at the mercy of quality control,” Soriano said. “They need to make sure they are choosing that right drop shipper. You want a partner that is going to look at the product and make sure it wasn’t damaged before it is put in the box.”

A good drop-shipping partner would also work to ensure the item is in the proper-sized box and is packed correctly. These decisions impact online customer reviews, Soriano said.

“I think all online merchants, and we know that is the way of the future, they live and die by reviews,” he said. “Everyone is looking at price and looking at reviews.”

The big takeaway from the survey is that SMBs have options to improve customer service and potentially revenue. Soriano said offering additional services such as insurance options, date of delivery, real-time tracking and easy pickup/return options allow SMBs to upsell the customer.

“SMBs said that if I can give customers all that, the likelihood is one, I’m going to be more profitable because I can charge them for more services, or two, I’m going to be more profitable because I will [improve customer retention],” he noted. “What we are seeing is that, in the end customers want that personalization and SMBs that can provide those last-mile perks will be the winners in e-commerce.”

 Click for more articles by Brian Straight.

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Brian Straight

Brian Straight leads FreightWaves' Modern Shipper brand as Managing Editor. A journalism graduate of the University of Rhode Island, he has covered everything from a presidential election, to professional sports and Little League baseball, and for more than 10 years has covered trucking and logistics. Before joining FreightWaves, he was previously responsible for the editorial quality and production of Fleet Owner magazine and Brian lives in Connecticut with his wife and two kids and spends his time coaching his son’s baseball team, golfing with his daughter, and pursuing his never-ending quest to become a professional bowler. You can reach him at [email protected]