Should your Online Store insure its shipments?
Shipping is one of the most important parts of an online store, since it’s the only point of contact with consumers and is, effectively, the process that ensures that the packages get to the hands of consumers. So there are several factors to have in consideration when handling the shipment part of your business.
‘Is my shipping method the most cost-effective? How quickly should my clients receive their orders? Did I choose the right carrier(s) for my eCommerce business?’ But one of the most common questions for an eCommerce owner is ‘Should I insure my shipments?’
So keep on reading to get to the bottom of this last question.
How Insurances work
There are several factors to keep in mind before deciding to ensure your parcels or not. However, before we get to that, we thought we should cover the basics of insurance in eCommerce.
In order to protect the consumer – in this case, the online store – as far as the Iberian Peninsula goes, there are laws that require carriers to provide its customers with a basic insurance, which covers items until a certain declared value (the worth that is attributed to the package).
The declared value that is covered often changes amongst shipping companies, on the type of shipment (national/international), among other factors.
However, although carriers only consider one main aspect when it comes to insurance, that doesn’t mean that the owner of an online store should do the same when thinking of adding an extra insurance.
What an eCommerce owner should consider
When pondering if you should ensure the shipment of your products or not, there is one thing that jumps to mind: the value of the item. But that’s not the only thing you should acknowledge when making this decision. You should also think about the destination of the package, the time of the year in which you send it and the carrier in which you’ll insure your shipments.
Value of Item
Let’s start with the most obvious factor to consider.
When an online store is deciding whether or not to insure, the first factor they to look at is the price of their products.
For example, if a brand sells highly customized and expensive watches to its clients, their declared value is high, so chances are they are willing to pay some extra money to ensure that, if their watches get lost or damaged, their company isn’t hurt by it.
However, if a company sells an item with a low declared value – for example, socks – this will probably mean that the product is included in the shipping company’s basic insurance, so no need to add an extra insurance on top of that.
Nevertheless, if your product is not on either end of this spectrum – if it is, for instance, fishing gear or specialized athletic clothing – choosing to ensure isn’t as black and white. So you should look at other factors to make your decision.
As unfortunate as it is, there are some areas in the globe, and even in Portugal and Spain, in which packages are more likely to be stolen. Or if they are countries far from you, there are higher chances for the package to get lost.
So, for example, if your company sells often to Brazil or to China, you may be more inclined to add an extra insurance compared to shipping your package nationally, or even within the EU.
Time of the Year
We know this might not seem to fit here, but bear with us.
Ecommerce is a trend that has been growing more and more every year, but there are seasons in which online sales double (or even triple!). That’s right, we’re talking about the holiday season.
And so, when there is a period of the year in which online sales get a lot more orders, carriers also get a lot more orders. And when carriers get increasingly busier, the room for error gets bigger – which can be translated in higher chances for losses and damages.
So if there are higher chances of something going wrong, stores can decide to play it safe and to add some extra security to their shipments.
As mentioned previously, not all carriers work the same. The conditions of the basic insurance depends on a shipping operator’s policy, the price of some extra insurance changes from carrier to carrier, and the reimbursement method of calculation also changes, among many other things.
So, in order to decide whether or not to insure, an online store needs to take in consideration their delivery partner and the conditions they offer on this matter.
Conclusion: Should your Online Store insure its shipments?
If you sell high-priced jewellery to a faraway country during Christmas time, we recommend so.
If you ship smartphone covers during summer to your neighbouring country, you might think twice on the subject.
However, if you are anywhere in between these two situations, we advise you to take a hard look on your carriers’ policy concerning insurance and to make a deep introspection on your stores’ characteristics.
But, as a general rule of thumb, if you’re really indecisive between insuring your shipments or not, we hope you allow us to tell you: you’re better safe than sorry.