The e-commerce boom over the last decade has thrust the importance of last-mile logistics into the spotlight. The definition of “fast” has evolved for many consumers, with enterprise retailers like Amazon.com and Walmart setting a precedent for same- and next-day delivery. In fact, on-demand last-mile delivery platforms and new last-mile parcel networks were among the top companies attracting investments in 2021, according to McKinsey.
While the benefits of last mile shipping options are appealing, brands shouldn’t turn a blind eye to the risks that come along with it — especially if they’re relying on a commercial insurance policy or the carrier’s liability coverage to protect them.
What is the Last Mile Blame Game?
One-in-three (33 percent) consumers say they’ve experienced porch piracy with a last mile delivery, and 14 percent of them have had multiple incidents over the past year, according to a report by UPS Capital Insurance Agency, Inc. Issues like these often lead to customer confusion about who should be held accountable — the merchant supplying the product or the carrier delivering it. The same report shows that most of the time (83 percent) the carrier is blamed when a delivery goes wrong, while 38 percent of the time the merchant is blamed.
This drives a vicious cycle of criticism that can damage not only the reputations, but the bottom lines, of both carriers and merchants — with two-thirds (66 percent) of consumers saying they would be unlikely to buy or never buy again if they had a negative last mile experience. While many turn to their shipping insurance coverage in this scenario in hopes of mitigating their losses, they might be surprised to find out they’re not adequately protected.
What You Think is Insurance Might Not Be
With the quick shift to same-day delivery, many businesses and carriers are currently operating in an underprotected and underinsured manner. In the event of an unexpected issue, many merchants rely on their commercial insurance policy or carrier liability as their safety net, not realizing the risks and minimal coverage that they may provide.
Without a specific endorsement to include shipping, it’s not covered in a commercial policy. And while carrier liability can be a perfectly adequate way for some merchants to protect their goods in transit, it’s simply not insurance. Carrier liability coverage depends on what they’re shipping, the terms they may have negotiated with their carrier, and the standard limits provided by each different carrier. A dive deeper may reveal that what was thought to be protection is not, and comes nowhere close to covering the loss.
Reaping the Rewards of Shipping Insurance
A separate UPS Capital report shows that 51 percent of small to midsize businesses (SMBs) claim a top challenge for them is financial loss due to reshipments in order make things right with the customer. This loss is compounded by heightened consumer expectations for speedy resolution. These expectations can be better met with proper shipping insurance, allowing merchants to quickly reship replacement goods or issue a credit to their customers with greater confidence that the associated costs can be recovered up to the full sales value.
And it’s not only merchants that are seeking increased protection in the last mile. Shoppers seem well aware that supply chain volatility has affected their ability to receive their packages. As a result, consumers are more likely to order from merchants that offer enhanced protection. In fact, 88 percent of consumers say they would be more willing to work with a merchant that offers peace of mind and protection for same- or next-day shipments in the event of a loss, damage or porch-pirated theft.
Winning the Blame Game
Accidents are bound to happen, but there’s no use getting caught up in a blame game that hurts all parties involved. Merchants and carriers with concrete solutions that offer consumers peace of mind and minimize confusion about who to contact when something goes wrong can differentiate themselves and succeed in the new era of same- and next-day delivery.
Ryan Fannon is the director of product management at UPS Capital, a provider of package and freight shipping insurance for any carrier, by land, sea and air, as well as financing solutions and merchant services.
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