When Ship Happens
Ensure business is smooth sailing in even the roughest seas
As a small e-commerce business, if your goods were lost at sea or damaged en-route while being shipped, could you afford to replace them? We explore the risks, benefits and protections required when outsourcing shipping.
With the next generation of digital natives rising up as a shopping force, the demand for an instant online shopping experience is bigger than ever.
By the end of 2017 online shopping in Australia accounted for 8 percent of total traditional retail sales with a growth of 19.2% from the previous year. Australia Post's Inside Australian Online Shopping report predicts that by 2020, one in 10 items will be bought online. 48% of consumers say they shop on a mobile device at least once a week according to the Telstra Small Business Intelligence Report.
With customers expecting speed and convenience from providers, small-to-medium enterprises (SMEs) have to consider how best to ship orders, and how to protect goods at all stages of fulfilment.
Your options as an SME
Handling your order fulfilment in-house is the cheapest option but it takes time you might not have to spare.
Alternatively, you could dropship, which means you have products advertised on your website that you don't actually have in stock. When customers order these products, the orders go straight to a third-party supplier who ships them directly to the customers.
The risk here is that you'll be accountable for safe delivery in whatever timeframe you stipulate, relying on the third-party to honour your promise. You also have to trust that orders are insured if goods are damaged or destroyed; or make sure you have your own insurance in place.
The third option: 100% outsourcing
You may choose to work with a logistics company that handles all of your warehousing and fulfilment. There are many in the market who can pick, pack and ship your orders, and you'll get the benefit of leveraging their buying power on packaging and shipping costs.
It's rare that they'll cover you for major losses though. They might actually specify you need to organise a certain level of commercial insurance at your end.
In June 2018, 81 shipping containers fell off a cargo ship travelling along the coast of New South Wales, spilling debris for kilometres. It's perhaps a dramatic example, but if there was an accident en-route and your goods were damaged beyond repair, could you afford to replace them?
When you're working with suppliers, warehouses, or distributors you need to read and understand your contracts to figure out where you're covered by their insurance, and where you aren't.
If you're shipping inventory in large batches you may need to look at additional "transit" or "inland marine" insurance to cover goods transported over land, or "ocean marine" insurance for sea and air transportation. Or a combination thereof.
It can be a good idea to get an expert to look at your business from the get-go to identify your exposures, and tailor-make a policy for you. There are brokers who specialise in commercial insurance; find one who's worked with companies in a similar line of business.
Then if you do engage a third party for fulfilment and shipping, your broker can point out gaps in your existing coverage and recommend how to manage the risk.
For a relatively small outlay, you can pass that considerable risk onto an insurer and eliminate at least one worry as an SME owner.
Find a broker to suit your needs here.
Advisr does not provide advice and does not hold a financial service license (AFSL). All information above has been provided by Andy Jamieson.