Glenn Gooding [00:00:03]:
Welcome to Parcel Perspectives, the podcast dedicated to small parcel shippers. I'm Glenn Goodick, and each episode we dive into insights, best practices and strategies to help you navigate this complex, costly market. Join me as we explore ways to strengthen your long term partnerships with your chosen carriers and stay competitively aligned.
Glenn Gooding [00:00:30]:
Hey, good day everyone. This is Glenn Gooding, president of idrive Logistics, and I'm really excited to have Eduardo Lopez Soriano here today. Eduardo is head of marketing for UPS Capital in the US and the international regions. He's worked in supply chain and logistics for over 20 years before moving to UPS capital, where he now uses all of that expertise and knowledge to help SMBs grow their businesses by integrating protection options within their existing shipping workflows. Welcome, Eduardo. Happy to have you.
Eduardo Lopez-Soriano [00:01:02]:
Hi Glenn, great to be here.
Glenn Gooding [00:01:03]:
So today we're going to talk about the impact shipping has on the customer experience and how to build customer loyalty by improving your shipping or really post purchase experience, as we call it, from order tracking and delivery all the way to common issues like loss damage and porch piracy, and more specifically, how shipping protection or coverage is such a critical element in a positive shipping and post purchase experience. So, with that in mind, let's talk about what's been happening, e commerce, and more specifically within the shipping and logistics portion of that, the effects of the pandemic of 2021 and 22. It's accelerated growth of the B two C e commerce channel. People were buying online who wouldn't have otherwise, or who didn't buy as much or as often as before. Consumers spent over $2.67 trillion globally on the top 100 online marketplaces in 2020, accounting for 62% of global online retail sales. And now we see the pandemic slow ending is happening. So there's a lot of betting on the continued exponential growth of e commerce. E commerce is still growing, but is slowing down due to factors like inflation, recession fears, global conflict, supply chain issues, et cetera.
Glenn Gooding [00:02:19]:
However, merchants and consumers, getting accustomed to the ease and convenience of e commerce, are making those purchases through those channels more frequently now. So consumers spent more than $4.28 trillion in e commerce marketplaces in 2020, up 27% from the prior year. That figure is expected to grow by nearly 50% in 2024. With e commerce here to stay, networks will continue to operate at or above capacity. And supply chain risk is thus likely to stay with us as well.
Eduardo Lopez-Soriano [00:02:52]:
That's right, Glenn. If you think about it, when the volume increased so dramatically because of the pandemic, there were some carriers that didn't have the flexibility in their network to flex enough to handle all that volume. What that resulted was increased in claims for packages that had insurance. From a perspective, in UPS capital, we saw a dramatic increase both in damaged and lost packages. Lost packages actually doubled year over year. Damaged packages increased by 78%. Now, something that is very interesting is that even after the volume has declined to after the pandemic, we're still seeing a high level of claims. And there are three main factors that are driving that based on the studies that we have been completing in the last couple of years.
Eduardo Lopez-Soriano [00:03:46]:
So one of them is drop shipping. When we asked SMBs if they were using additional drop shipping, 86% of them said yes. Now they bring a lot of flexibility, but there's a problem. 66% of those SMBs that are using more drop shipping are also seeing additional issues with damages packages in comparison to doing their own fulfillment. And that has many reasons. When you're partnering with a dropshipper, they may not have the same level of quality control that you have. They may not be looking at inventory to make sure that the product is not damaged, they may not be using the right packaging to make sure that the product stays in good condition, or they may not be using the right shipping mode. That's one of them.
Eduardo Lopez-Soriano [00:04:37]:
The next one is porch piracy, and that's growing like crazy. We looked at a research that was done by a third party, and 210 million packages were stolen out of a porch in 2021. That is huge. When you think about it, it's more than one package per household in one year. The third factor that we're seeing is the increased use in same day delivery carriers. When we ask SMBs, either we're using more same day delivery carriers, half of them say yes. And again, this is great. It provides a lot of flexibility.
Eduardo Lopez-Soriano [00:05:15]:
But it also came with a problem. 60% of them said that they're seeing more damages using same day carrier than when they were using traditional carriers. So if you think about it, a lot of these factors, using drop shipping, using same day delivery carrier, and the fact that there's going to be an increase in port piracy, those will continue. But what is very important for SMBs is to make sure that they're partnering with the right groups, with the right partners, either going to partner with a dropshipper, make sure they have the same level of quality that they value, either going to partner with the same day carrier, just carefully to make sure that they have a high level of reliability. And when all that fails, it's important for them to consider insurance. That's an excellent safety net to make sure that if something happens and there is a bad situation, they can turn that into a good customer experience.
Glenn Gooding [00:06:20]:
Hey, Eduardo, let's talk about the role shipping plays in customer loyalty today. I've always advocated, when trying to serve my clients, that you've got to be very, very deliberate about the carrier you source with, because whether you realize it or not, that brand, that carrier, that delivery experience is really an extension of that SMB brand. I was wondering if you could kind of offer some of your perspective on this subject.
Eduardo Lopez-Soriano [00:06:47]:
You're absolutely right, Glenn. I agree completely with that. And what you're saying is very consistent with what we found in the research. When you look at all the information from the recent studies we have completed, we see two things. One, that the shipping experience is seen by the consumers as an extension of the SMB service. Therefore, the reputation of the SMB is directly impacted by that shipping experience. And now let's think about some of the numbers from the analysis. 72% of SMBs said that they have received negative reviews in the last year because a package was damaged, lost or stolen.
Glenn Gooding [00:07:36]:
Wow.
Eduardo Lopez-Soriano [00:07:36]:
And the reviews is the consumer saying, hey, the merchant is not giving me the experience that I was expecting. Now there's another one. The top reason a consumer will leave a negative review for a merchant is if there was a lost or damaged pack. And thirdly, talking about the relationship between the shipping experience and driving loyalty, 37% of consumers are unlikely to buy from an SMB again if they have issues with the shipping experience. So there's no question about it. There's a link right there between shipping experience and loyalty. It drives decisions both at the time of purchase in the front end, but also in repurchase in the back end. If they didn't have a good experience in the first time around, they will not buy again from that merchant.
Eduardo Lopez-Soriano [00:08:35]:
Different factors that we discuss the issue with withdraw shipping, the fact that we have more porch piracy. Well, that will continue. And therefore it's important to have a safety net. And again, insurance, we believe, is that safety net. When we ask consumers to compare between ensuring a package or having two day delivery, 47% of them said that they would prioritize a guaranteed replacement of a damaged product higher than two day delivery. So the priorities are definitely changing.
Glenn Gooding [00:09:11]:
Yeah, I'd imagine they are. You know, Eduardo, me, as a consumer, I would be disappointed if I had a lost package. But if I had a vendor, an SMB that I just purchased from, go above and beyond and expedite a new shipment out and follow up to ensure that that buying experience was good, they'd have a loyal customer for me. And so I really see the role of insureshield as being kind of the mechanism to enable snbs to accomplish that. Well, we definitely see this dynamic here on the iDrive shipcaddy side and 100% agree that customer loyalty can be improved through a positive user experience in the whole shipping process. So here at iDrive and ship Caddy, we're keenly focused on the aspects of the shipping process and experience with our online platform and consulting business. We've learned so much regarding insight on shipping and really feel we're kind of on the tip of the spear with regard to feedback, oftentimes from clients and shippers. Our platform offers merchants awareness of shipping costs prior to and during checkout and label creation.
Glenn Gooding [00:10:16]:
And together with UPS Capital, we're educating customers about where protection is an often neglected aspect of that shipping experience, including the cost of doing business. So we must consider how to strategize shipping and associated costs. Is there free shipping above a certain order value? Is it a flat rate etcetera? I think ship county provides visibility into the shipping journey through tracking and clearly delivery to the end consumer is paramount. This is where key players like UPS Capital Insurshield come into play. There's a ton to unpack here, but we really, we've done a lot of past podcasts on some of these topics, but we really kind of want to focus on the insurance aspect because I think it is the cornerstone solution to the customer experience when you're dealing with a distressed shipment. So I guess given that, Eduardo, for those new listeners, can you explain what shipping insurance actually is?
Eduardo Lopez-Soriano [00:11:12]:
For sure, Glenn, the simplest way to put it is shipping insurance is designed to provide peace of mind during the shipping process and streamline the post purchase experience. All right, so what do we mean by that? Well, when packages have shipping insurance, they are covered in case the package is damaged, lost or stolen. The amount covered usually includes the value of goods plus shipping costs. As simple as that. But that's not it. There's more. When you have insurance and you have a policy with that, you get tons of flexibility. So think about it.
Eduardo Lopez-Soriano [00:11:50]:
If you're a merchant and you're getting your policy, you can choose and determine, hey, I'm going to insure all my packages regardless of value, regardless of carrier and destination. Or you can be a little more surgical and say, you know, I'm only going to ensure certain skus that have high value, that are fragile or perishable. Also, you can say, you know, forget about skus, all my products are valuable, but I see how the reliability, the frequency of damages is higher with one carrier than another. So then you can determine, I will only ensure those packages that are going with this particular carrier. Now there's another level of customization that you can get in particular with insure shield, and that's the ability to decide who's going to pay for the insurance. You can decide that the merchant is going to be paying for this insurance depending on the rules, the criteria you selected, or you can leave that option for the consumer and they can do it at a checkout. Cardinal consumers going through the path to purchase, they are buying something that is very valuable for them. They want to make sure that it's insured.
Eduardo Lopez-Soriano [00:13:03]:
They click on it. Now if you're a merchant and you want to have an extra safety net, even if the consumer decides not to insure that particular package, you can have rules to insure it anyway in the back end. So again, it gives you that peace of mind and it gives you tons of flexibility to, to achieve that peace of mind.
Glenn Gooding [00:13:24]:
I love that flexibility. So in essence, you can custom tailor insure shield to your specific business and desired buying experience. Is that what you're saying?
Eduardo Lopez-Soriano [00:13:33]:
That's exactly right.
Glenn Gooding [00:13:34]:
That's fantastic. Great explanation too. So I think a lot of our listeners are most familiar with carrier liability. I know in my years I've often counseled shippers away from the standard carrier liability are probably scratching their heads trying to understand the difference. Can you talk a little bit about what carrier reliability is and how that's different from shipping insurance?
Eduardo Lopez-Soriano [00:13:57]:
For sure, there are significant differences between carrier liability and shipping insurance. Car liability is really pretty limited. It really started as a mandate from the government working with the different transportation companies to make it very clear. What were the transportation companies responsible for during shipping? With cargo ability, the default is the first $100 are covered and anything above that the customer needs to pay for the additional declared value.
Glenn Gooding [00:14:33]:
Out of curiosity, Eduardo, on that piece, when you say the first dollar 100, is that retail value or is that wholesale value?
Eduardo Lopez-Soriano [00:14:41]:
That's a great question. And that also speaks to the differences between car liability and insurance. With car liability you're only being covered by the cost of the product. When you look at insurance, you're covered by the value of the goods sold. So actually the sales value, the invoice value. In addition with insurance you also get the coverage for shipping costs. And with insure shield is not only the shipping cost of the original shipment, it's also the cost of expedited shipment to send the replacement, if that's what the customer wants. And there are many other differences between car liability and interest shield or shipping insurance.
Glenn Gooding [00:15:23]:
Wow. So if you don't mind, Eduardo, I want to walk through just a simple example real quick here because I think what you just stated is huge. So if I'm running a small and medium business out of my garage and I'm insuring via insurance shield, I have made a sale to you, for example, for that retail value, and I booked that margin. For some reason that shipment is distressed. It's lost in shipment. We file a claim, insure shield now reimburses me the full retail value plus the shipping cost for an expedited shipment back out to you. So in essence, on that one order that was distressed, I as a business owner have booked two orders. Is that right?
Eduardo Lopez-Soriano [00:16:02]:
That's right. That's right. An example is the cost of that product was $50. And let's assume you have great margins. You sold it for 80. With carrier ability, you get $50. It's done with insurance, you get the $80, you get the shipping cost of the original shipping, and you get the cost of expedited shipping to send a replacement.
Glenn Gooding [00:16:24]:
Wow. That's huge. That's huge. It sounds like this is a premium service offering. Is it actually cheaper than carrier liability?
Eduardo Lopez-Soriano [00:16:34]:
Well, it is actually. I thought you were asking me if it's actually more expensive and it's not more expensive, it's actually cheaper. And the thing is, it doesn't end there. Right. We were talking earlier about porch piracy. Well, carry liability doesn't cover porch piracy. It actually doesn't even cover damages due to weather. Insure shield covers both.
Eduardo Lopez-Soriano [00:16:55]:
Other piece that very few people know about is that in order to be successful in processing a claim with carry liability, you need to prove that the carrier did negligence. Right. You need to prove negligence on the part of the carrier. When you have insurance, you just have to demonstrate that the package was lost, damaged or stolen. Then there's another piece that we haven't discussed yet. We've all been talking about, hey, what's covered? What is the amount that is covered? But something that is critical, it's the claims process. So just to give you a few numbers, for the particular case of lost packages with carry liability, you have to wait 20 days before you can submit a claim with interest shield for a loss package. You don't have to wait at all.
Eduardo Lopez-Soriano [00:17:46]:
Now let's assume you waited the 20 days or it's not a lost package. It's a damaged package. You are going to enter the claim for car liability. Well, it's going to take you, on average, 72 minutes. Compare that with the five minutes that would take a merchant with Shib Caddy via the on platform claim portal to submit the CAD. So 72 minutes in one side, five minutes on the other. Now you've submitted the claim. Now you're waiting for the claim to get processed.
Eduardo Lopez-Soriano [00:18:17]:
It takes 18 days for a carrier to figure out whether they're going to pay or not for the claim that they submitted. With insure shield. It takes less than five days. So now you've gone through the process. You waited for the period to decide whether the claim is going to be paid or not. We asked SMBs and 42% of them were satisfied with the amount paid. Right. So the other 58% were not satisfied.
Eduardo Lopez-Soriano [00:18:44]:
Compare again that with claims process with insure shield, where we're paying in full 95% of the claims.
Glenn Gooding [00:18:52]:
Wow. So much faster claims process, much more efficient for someone in a customer service or call center role. And a higher payout.
Eduardo Lopez-Soriano [00:19:04]:
That's right. And in most instances, to your original question, cheaper with insure shield than with carrier liability.
Glenn Gooding [00:19:11]:
It sounds like a win win. I agree. Right on. So if you don't mind, let's circle back to customer experience for a minute. Customer experience is important here at ship Caddy. That's an absolute. Can you explain to listeners how something like shipping insurance can make or improve an SMB's ability to offer an exceptional customer experience to the users? And I know we've skirted around it, talked about some details and differentiators between carrier liability and insure shield. But if you were to boil it down, how does insure shield really kick an SMB up to the next notch of CX?
Eduardo Lopez-Soriano [00:19:45]:
Yeah, yeah, let's talk about that. The large retailers, right? Everybody talks about the Amazon effect, and it's not only them. And they've created this expectation not only based on time in transit, but also based on the level of service that a retailer provides an end customer. So looking at research, 64% of consumers rated Amazon shipping experience a four or a five, with five being the best score. Now, you compare that same question about SMBs and only 29% of SMBs ranked in this range. Now, if I am a very large retailer, well, I can afford to refund or reshape a package right away because I have all these backing, right? All this money behind me. If I SMB, it gets really expensive really quickly. If I'm going to be doing on my own right.
Glenn Gooding [00:20:48]:
Absolutely. Absolutely everyone.
Eduardo Lopez-Soriano [00:20:50]:
Now we know that the customers are expecting that part of the customer experience is, hey, get a decision quickly, tell me what's going to happen and ideally reshape or refund right away. So if you can count insurance, if you have a product like insure shield, and you know that 95% of the time you're going to be covered, well, now you have a tool that is going to make it an even playing field with the large retailers. And you can say right away, yes, mister customer, I'm going to refund you or I'm going to reship you because I know I have that safety net in the back end with insurance customer experience now it's excellent. And now you're competing hand to hand with the large retailers.
Glenn Gooding [00:21:39]:
Awesome. So final thoughts. How can insure shield help SMBs attract and retain more customers if something goes wrong in their shipping experience?
Eduardo Lopez-Soriano [00:21:48]:
So we've done a lot of research on what is important for customers during the shipping experience and what is important to them if something goes wrong. And what we found is the two biggest reasons for a customer not to ship with a company again, are one, lack of support for stolen and damaged packages. That's 44%. And the second one is lack of communication around delayed deliveries, and that is 39%. Now, there's something else that we haven't talked about, and this is the ability of seeing where are all the claims as an SMB for a particular consumer, right? So with insure shield, you can get visibility of all those claims for a particular consumer and then being constant conversations with them and ask them, hey, what is your preference between a reshipment or a refund? Is there any time constraint within the shipment? So when you're getting these additional information with your claims and you're having this common communication with the customers, you're making the whole process for the SMBs a lot faster than it used to be. So not only are you protecting the profits and reputations of SMBs with interest shield, but you're also allowing them to spend more time doing what they love, which is running their business.
Glenn Gooding [00:23:18]:
Great. Eduardo, before we close, I just want to ask about one other pain point that I imagine is top of mind for any SMB today, and that's that dirty word, inflation. Do you think a tool like shipping insurance can help support SMBs during a period of inflation?
Eduardo Lopez-Soriano [00:23:33]:
And if so, oh, yeah, I think it does. We're all talking about inflation. We all see the numbers and we see the impact in our wallet, right, from an SMB, additional inflation and increasing prices, that turns into additional risk during the shipping process. If a package gets damaged, lost, stolen, and I'm an SMB and I have to repay for it out of my own pocket. Well, now the risk got higher. Now the pain, it's more hurtful to go and pay for that shipment. Now. It's not only that, what's happening for many SMBs is as the costs are going up, some of them have not been able to raise their prices at the same rate.
Eduardo Lopez-Soriano [00:24:22]:
So that results in thinner margins. With thinner margins. Now, in one hand, you had to pay for that package that was more expensive. On the other hand, you need to sell a lot more new products in order to cover that loss because of the thinning margins. So if you have insurance, well, you get all that pain away. You are now relying on a partner to help you pay for those packages and get that extra cost out of your balance sheet. So I would say that now it's the best time to consider insurance given the effects of the increase in inflation.
Glenn Gooding [00:25:04]:
I couldn't agree more. With peak season coming up, it's more important than ever to hone your customer experience to be at its finest. Shipping experience and shipping insurance in particular are key to this process. Eduardo, I'd like to thank you for joining us today. It was absolute pleasure speaking with you.
Eduardo Lopez-Soriano [00:25:22]:
Thank you Glenn. It was a great conversation. I appreciate the time.
Glenn Gooding [00:25:24]:
You bet. And for the listeners, please be sure to follow insure shield and ship caddy on LinkedIn and reach out if you have any questions. Thank you so much for your time. Until next time.
Glenn Gooding [00:25:39]:
Thanks for listening to parcel perspectives. Hosted by me, Glenn Gooding. I've been in the small parcel space for 37 years, starting with a deep and broad background, working for one of the major carriers as an operator and industrial engineer, later managing pricing at the highest level for the largest, most complex shippers in the world. Since then, I've been a national thought leader and worked to help drive strategy for clients from Fortune 50 companies to startup e commerce businesses, helping them more competitively align in this complex and expensive market. If you enjoyed the show, please subscribe and share with friends. Join us next time for more expert advice and strategies to stay ahead of the shipping game.
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