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Fake package insurance’s threat to the e-commerce industry

29 May 2024 | 15 Shares

Source: Route

In just the first quarter of last year, Americans spent an astonishing $252 billion online, and by the end of the year, e-commerce comprised 16.7% of total retail revenue across the country.1

Figures like these continue to progress inexorably upwards, showcasing a situation that’s unlikely to change any time soon, especially given that large Chinese retailers – Temu the latest to join the crowded market – look set to expand into the US.2

Yet, there is a darker side to the ease and convenience of online shopping that’s becoming more apparent to many consumers. In 2022, around 260 million packages were stolen at the point of delivery, so-called porch piracy.3

For retailers, that value of losses totaled around $20 billion of lost products. Whether they’re responsible for it or not, porch piracy is a problem that reflects on the retailer, as many customers don’t distinguish between the seller and the delivery service. This can significantly impact the brand’s overall customer experience, leading to a series of adverse effects on retailers’ operating costs: customer service, inventory, logistics, and marketing.

Source: Route

Millions of shoppers affected directly or indirectly by the problem are increasingly opting for shipping insurance at checkout to cover their packages, and many pay extra for what they hope will cover them in the event of theft or damage.

What consumers and retailers need to realize, however, is that many of the ‘package protection’ solutions offered can be from fraudulent operators drawn to what they see as a lucrative opportunity. Under false assurances, when things go missing, both merchants and shoppers are left on the hook for issues that come up, with little hope of compensation.

Oklahoma and Utah have issued written guidance confirming that legitimate package protection offerings must include the involvement of a licensed insurance producer. The need to include a licensed insurance producer is not unique to Oklahoma and Utah. All state DOIs provide access to state databases identifying such licensed producers.

As the volume and value of online retail continue to grow, so will the demand for package and delivery protection. Illegal package protection services create risks for individual retailers and the e-commerce industry as a whole. Fraudsters’ illegal offerings can ruin businesses’ reputations and eat into already tight profit margins, lowering repeat business revenues and creating public relations nightmares for retailers.

Companies have a responsibility to select an insurance service with due diligence. A genuine package and delivery insurer complies with the intricate rules and regulations of multiple states’ insurance markets, acting as the face of the retailer if an order goes missing.

A legitimate option like that offered by Route is the key to solving the growing issue of bogus package insurance. It gives retailers and customers peace of mind that missing items will be replaced easily as part of an overall service that creates a class-leading post-sale customer experience.

Customers shopping at retailers using Route benefit from real-time delivery tracking and delivery options that enhance purchasing experiences–allowing smaller companies to compete with the customer service expectations consumers now have from behemoths like Amazon.

To put the impact of using Route into perspective, Solo Stove – a popular fire pit company – was running into major customer service issues trying to ship large, easily damaged metal fire pits. Since implementing the Route platform, it has saved thousands of dollars in out-of-pocket insurance premiums, reduced claim-related customer service tasks by 92%, and increased buyer satisfaction metrics by 10%.

Route ensures deliveries, and its tracking capabilities also allow customers to minimize the time packages are left unattended, lowering the risk of theft. Route-tracked and insured deliveries can also be carbon offset, a feature we covered in more detail in this article[ed. please link to previous article]. Using Route, companies can ensure their brand is synonymous with reliability, safety, and sustainability.

Book a demo of Route to eliminate the risk of fake package insurance, improve brand identity and customer experience, and lower costs in multiple areas of your retail business.