Package Pirates and Phony Products: Loss Prevention Strategies for the E-Commerce Age

Online shopping continues to grow in popularity, with over 20 percent of retail purchases expected to take place online in 2024, according to an eMarketer report. As the volume of packages shipped worldwide increases, so do the potential risks, such as damaged or lost packages, fraud and counterfeit, and more. Let’s dive into these growing threats and how retailers can not only survive but thrive with the right loss prevention methods amid this new era of shopping.

Surging Shipping Issues

According to a new report by UPS Capital Insurance Agency, Inc., merchants surveyed identify managing delivery issues — such as lost, damaged, late or stolen shipments — as their biggest challenge as shipping volumes rise.

Notably, a significant 61 percent of consumers surveyed think that porch piracy is on the rise, a notion backed by a quarter of merchants that see it as a major threat to their success. Nearly one in four consumers surveyed reported that receiving damaged items is their most frequent delivery issue, while merchants report package damage as their second greatest shipping concern after cost.

The rise of extreme weather events has only compounded this issue. Surveyed merchants report packages damaged during delivery (46 percent) and post-delivery (43 percent) as common weather-related shipping issues that pose the greatest threats to their business.

New Delivery Dilemmas

Almost half of surveyed merchants suspect that more than 20 percent of returns are fraudulent, and 32 percent of surveyed consumers believe returns fraud is on the rise.

Merchants frequently struggle to identify and prevent fraudulent activity due to inadequate fraud detection systems, with over two in five reporting difficulties mitigating fraud risks due to time-consuming manual verification processes.

However, consumers find counterfeit to be the real issue. A significant 41 percent of respondents believe counterfeit products are increasing, and 23 percent have received fakes instead of the authentic online orders. This problem is especially common for Gen Z shoppers, with 43 percent reporting personal encounters with counterfeit fraud.

Embracing Loss Prevention Methods

With these mounting risks threatening customer experience, reputation and revenue, merchants are seeking proactive strategies.

Nearly half (44 percent) are finding greater peace of mind with third-party shipping insurance offering comprehensive coverage for mishaps like porch piracy and concealed damage. Depending on the provider, policies can also include coverage up to the full value of the goods (including shipping costs).

Additionally, over four in five consumers surveyed are open to using alternative delivery locations, such as picking deliveries up from a shipping courier store, delivery locker, or a retailer’s store location. This option offers added security to protect against perils like porch piracy or weather, especially for expensive items like luxury goods.

Lastly, the rise of advanced technology has given merchants a crystal ball for deliveries. Predictive analytics, for example, can help predict the likelihood a package will arrive safely at its destination based on analyzing historic shipping data. This enhanced visibility empowers merchants to detect issues early and take proactive steps to minimize risk like adding insurance, requiring delivery signatures, or redirecting shipments to alternative delivery locations.

Powering a Positive Shipping Experience

For retailers, failing to address these growing shipping and delivery risks can have serious consequences, including dissatisfied customers, costly replacements, and damaged brand reputation. As consumer expectations for faster and reliable delivery rise, businesses that do not meet these demands risk falling behind. By leveraging the right loss prevention methods like shipping insurance, alternative delivery locations, and advanced technology, retailers can come out on top.

As vice president of strategy at UPS Capital, Archita Prasad develops and implements corporate strategy, leads growth initiatives, and leads the ongoing digital transformation journey.