Insights to Help Your Business

Revolutionizing eCommerce: UPS Capital Unveils AI-Driven Future of Shipping and Customer Satisfaction

Rapid eCommerce growth drives unprecedented shipping challenges

Woman sitting on the couch, opening a box.

In a new report by UPS Capital, surveyed merchants reported a staggering 30% increase in shipping volume driven by eCommerce growth over the past two years, confirming that the shipping and logistics sectors are at a critical junction. The explosive rise in online shopping, expected to grow  by more than 10% annually through 2027, has introduced significant challenges, including increased risks of lost, delayed and stolen packages. These issues threaten not only merchants’ bottom lines but also their ability to deliver exceptional customer experiences, which is vital for maintaining brand loyalty.

The Future of Shipping: A Path Paved by Innovation and Personalization Report, commissioned by UPS Capital, uncovers valuable insights into how the rapid growth in eCommerce has influenced merchants’ approach to shipping and explores key trends that are shaping the future of logistics.

More Packages, More Challenges

The recent surge in eCommerce has led to a significant increase in shipping volume, with over half (54%) of surveyed merchants reporting a rise of more than 30% in the past two years. This aligns with customer trends, as 48% of surveyed consumers intend to increase their online spending in 2024.

This influx of packages in the network has introduced more disruptions, with merchants facing financial impacts and challenges in meeting customer expectations and ensuring satisfaction. 

Top Three Challenges Surveyed Merchants Anticipate as eCommerce Volumes Rise:

  • Fulfillment speed challenges
  • Managing spikes in demand during peak periods
  • Enabling more real-time shipment tracking and transparency

AI is Delivering the Future of Shipping

In this rapidly evolving landscape, technology is playing an increasingly pivotal role in supply chain and shipping dynamics — with AI emerging as a crucial solution. The UPS Capital report discovered that three in four (77%) of surveyed SMB decision-makers have implemented some form of AI-enabled technology.

Surveyed merchants anticipate AI-driven solutions will reshape the shipping industry by enhancing efficiency (67%), reducing human error (58%), and improving inventory management in warehouses (44%), showcasing AI’s enormous potential in transforming the shipping landscape.

Customer Experience Is King

The focus has shifted beyond shipping to enhancing the entire post-purchase journey, with companies doubling down to cultivate and retain customer satisfaction. To stand out amongst competitors, surveyed merchants are implementing customer loyalty programs and exploring more ways to elevate the returns experience.

Loyalty Programs Matter More Than Ever

By offering tangible rewards and exclusive experiences, loyalty programs serve as more than incentives for repeat business. They play a pivotal role in shaping brand image and customer perceptions.

This is why nearly half (49%) of surveyed consumers rank loyalty programs as one of the most appealing benefits that retailers offer, second only to free shipping (81%). Consequently, more than half of the merchants surveyed are prepared to offer exclusive discounts (55%), redeemable rewards (55%), and early access to new products/services (54%).

Making Lemonade Out of Lemons in the Returns Process

Returns are an inevitable part of the online shopping experience, with 60% of surveyed merchants acknowledging that over 10% of their orders end up being returned.

Interestingly, while an impressive 92% of merchants in the study express confidence in their returns logistics, they also candidly report encountering significant challenges in processing returns, such as time, cost, customer service impact, and inventory management.

Top Challenges Surveyed Merchants Face When Processing Returns

  • Processing time (50%)
  • Cost of reverse logistics (43%)
  • Identifying root causes (36%)
  • Customer service impact (36%)
  • Inventory management (33%)
  • Financial forecasting (30%)

Surveyed merchants see data analytics and automation as potential solutions to alleviate some of the challenges posed by returns. Specifically, they see these technologies as instrumental in optimizing inventory management (50%) and reducing return processing costs through optimized return shipping (37%).

Packaging It Up

The surge in eCommerce has emphasized the importance of shipping for both merchants and consumers alike. The post-purchase journey carries immense weight, influencing customer satisfaction and retention, and ultimately, the overall financial well-being of businesses. As merchants navigate this intricate landscape, effective risk management becomes imperative.

In response to these evolving challenges, InsureShield® Shipping Insurance by UPS Capital Insurance Agency, Inc. has launched DeliveryDefense™ Address Confidence, a groundbreaking predictive analytics solution. DeliveryDefense predictive analytics represents a significant leap forward in eCommerce shipping, offering merchants a proactive tool for risk mitigation. By assessing the likelihood of successful deliveries before a label is created, the DeliveryDefense tool helps avoid common issues like porch piracy and problematic returns, paving the way for smarter decisions, boosted revenue, and yielding better customer satisfaction.

For more data on post-purchase trends and insight into how merchants can master the shipping experience, get the full report.

For further media inquiries, please contact khensler@ups.com

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Unless otherwise noted, all statistics used herein are derived from or based on information contained in the Address Risk Report, which is based on a compilation of two independent studies conducted by Dynata in December 2022 of 1,000 U.S. consumers aged 18+ and 500 U.S. SMB owners and decision makers whose businesses report $750K - $100M in revenue.

DeliveryDefenseTM services are offered through UPS Capital Corporation. UPS Capital Corporation reserves the right to change or cancel any DeliveryDefense service at any time. Each DeliveryDefense service is governed by the applicable terms and conditions and certain limitations and exclusions apply. This document/site is for informational purposes only, is intended only as a brief summary of the services, and does not constitute a contract, agreement, or offer of any kind, with respect to any DeliveryDefense service or other subject matter described herein. DeliveryDefense services may not be available in all jurisdictions. Statistics are valid as of the last day of the most recently ended calendar quarter. Actual scores are based on delivery, claims and other data collected during the 24 months preceding the date the score is rendered.