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Five Ways Retailers Can Limit Risk In A Volatile Shipping Market

15 November 2021

Perez Morris

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COVID-19 and pandemic restrictions changed how our society
purchases and transports consumer goods.

Before the pandemic, shopping online was steadily growing. The
pandemic restrictions caused individuals who never shopped on their
mobile phones and computers to set up digital shopping carts at
their favorite online stores. For example, Target's online
sales jumped 141% from the previous year, and in the month of
April, 2020, Target's average day sales surpassed the prior
year's Cyber Monday sales. The trend continued
through the 2020 holiday season, as record numbers of people
shopped exclusively online, despite deep-rooted traditions of
sharing in the holiday bustle at shopping centers and malls.

Consumers were forced to overcome the barriers that formerly
slowed their use of online markets, and as a result discovered the
convenience and benefits of e-commerce shopping. Consequently, many
have fully embraced online shopping, and it may have forever change
how they shop. This change increases delivery demand and requires a
strong focus on residential deliveries (or final mile delivery),
vastly altering the transportation landscape.

Although we're still in the midst of the pandemic, up to
this point the surge in e-commerce business has caused retailers
merely to keep up with demand. But now, over a year into the
constant peak, it's time to adjust business models to sustain a
heightened e-commerce market.

To this end, companies are evaluating how to more effectively
and efficiently get their products to consumers. This is a
difficult challenge in a transportation environment already
burdened with limited capacity, weakened bargaining power,
increased risk shifting to the shipper, higher amounts of cargo
loss and damage, and increased returns - all at an increased cost.
In the face of the increasing demand, providers also struggle with
how to boost their efficiency, despite limited resources of
equipment and personnel.

Together, shippers and providers search for ways to limit their
risks and loss in a difficult market. While the following options
aren't new, they should be reconsidered to eliminate and reduce
potential risk in the present e-commerce transportation market.

Start with a negotiated contract. 
Negotiated contracts have traditionally been the best way for
shippers and providers to manage risks with transportation, as they
address the standard of services, liability, insurance, and
indemnification obligations. While the use of negotiated contracts
is a standard part of operations, the pandemic has greatly changed
the discussions on rates, capacity, standardization, equipment,
return processes, and decreased ramifications for service failures.
Opportunities to renegotiate terms in light of the changing
landscape presented by the pandemic should therefore be considered.

Carry adequate insurance.  Insurance
remains an important tool for addressing risk. As in the past, to
succeed in today's transportation environment, supply chain
risk should be evaluated and managed from purchase through
delivery. To the extent that shippers assumes the risk of their
cargo, it's critical that they carry adequate insurance.
Transportation providers, depending on their scope of operations,
are required to assume some risk for loss or damage to cargo
arising from their negligence, and must carry a minimum level of
insurance. In addition to the traditional lines of insurance for
transportation services, due to the increase in online orders and
home delivery, cyber insurance has begun to surface to address any
improper handling or sharing of consumers' personal

Revaluate your packaging.  Packaging is a
key element that can affect safe delivery of freight. To a greater
degree than in the past, the responsibility for proper packaging
for transportation is being shifted to the shipper. Care in
securing new cartons that better fit the size of the contents, and
filling empty space within the carton with packaging protection,
has been found to markedly prevent damage during transportation.
Shippers should therefore reevaluate their packaging and update as
needed to better insulate themselves from risk exposure.

Prevent unnecessary risk when it comes to personal
Protection is required whenever any
type of personal information about the consumer is disclosed,
shared, processed, or used. Processes that limit the amount and
type of disclosure to only the information necessary for the
transportation service will prevent unnecessary risk. Once so
disclosed, data-security efforts to prevent disclosure or
unnecessary retention of such information would be beneficial.
Given the ever-evolving e-commerce world, an updated risk
evaluation of customer data protection processes is

Implement a consumer-friendly return
Loss, damage, and returns remain key
considerations, as all have vastly increased with the boom in
e-commerce deliveries. The sheer volume of final-mile
transportation requirements has led to more retailer mistakes,
parcels being damaged with handling, misdeliveries, and package
theft. These issues are compounded by the removal of signed
deliveries upon dropoff, in an effort to provide
"contactless" deliveries. Because online sales are
returned with 30% more frequency, a consumer-friendly returns
process - arranged in advance between shipper and provider - is
important for a positive customer experience.

Returns, or reverse last-mile logistics, are critical to the
success of an online business, but the process is complicated and
costly. So much so that at various times some retailers have told
the consumer to simply throw away the item to be returned, and
issued a "returnless refund." It's estimated
that 65% of all returns are the result of the
retailer's mistake because the product was damaged at the
onset, or the wrong item was sent to the customer. Greater
care to inspect and package goods at the onset can reduce the
losses that are experienced with returns. Policies and procedures
should be implemented with a focus on this early stage of the
delivery process.

As COVID-19 restrictions lift, there's no indication that
the e-commerce peak will subside greatly, due to persistent
consumer fears about the virus. Shoppers might also continue to
take advantage of the convenience of online ordering and home
delivery, rather than return to in-store shopping. As we continue
into year two of the pandemic, and retailers evolve in line with
changing customer habits, the above-addressed options should be
considered. Flexible companies will be able to embrace the changing
shopping landscape, and attempts by shippers and providers to adapt
to the continued e-commerce peak with techniques that address
transportation risk will lead to greater efficiency and

Originally published by Supply Chain Brain on
21st of May, 2021.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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