The Rising Tide of Fraud in Last-Mile Shipping

What 3PLs and Retailers need to know before peak season

In the fast-paced world of e-commerce, last-mile delivery is a critical differentiator in customer satisfaction and, unfortunately, a hotbed for fraudulent activities. To give you a sense of the size of the problem, according to the British Retail Consortium, 53% of retailers reported an increase in online theft; last year, online fraud increased over threefold to £99.7 million from £30 million.

To top it off, we're heading into peak season, and as Sendcloud discovered, there is a 41% higher probability of lost parcels during the final quarter of the year compared to Q3.

As we race up to peak, understanding and starting the work to mitigate these fraud risks is vital for both third-party logistics providers (3PLs) and retailers alike to start now.

Let's dive deep into the increasing fraud in last-mile shipping and what concerns should be at the forefront of our minds.

1. Porch Piracy and Package Theft

One of the most prevalent forms of fraud in last-mile shipping is porch piracy, where packages are stolen from customers' doorsteps. With the surge in online shopping, especially with the increasing popularity of Black Friday, Cyber Monday, and shopping online generally, incidents of package theft have skyrocketed. Porch pirates target homes where deliveries are left unattended, leading to significant losses and customer dissatisfaction. There has been a 57% increase in this type of theft in the UK alone.

2. Fake Delivery Scams

Another growing concern is the rise of fake delivery scams. Fraudsters posing as delivery personnel trick customers into paying additional fees for bogus reasons or stealing packages directly. These scams result in financial loss and tarnish the reputation of the retailer and even the 3PL involved.

In these scams, criminals pose as legitimate delivery companies to convince victims they need to pay additional fees or reschedule a delivery in a bid to access their cash, personal information, or bank details. According to Citizens Advice, of the 40 million UK adults targeted by scammers in the first quarter of 2023, almost half (49%) encountered this scam.

3. Address Manipulation

Address manipulation is a sophisticated fraud in which the fraudster alters the delivery address after the order is placed but before it is shipped. This can be done through various means, such as hacking into customer accounts or intercepting communications between the retailer and the logistics provider. The manipulated address often leads to an untraceable location, making it difficult to recover the stolen goods.

4. Return Fraud

Return fraud involves customers or fraudsters exploiting return policies to claim refunds for items they never purchased or received. This can be done by using stolen credit cards, returning counterfeit, stolen goods and empty boxes, or even claiming non-receipt of high-value items. This type of fraud can cause significant financial strain on retailers and disrupt inventory management for 3PLs.

In 2023, fraudulent returns increased to an estimated 13.7%, and according to the Centre for Economic Business and Research, the UK retail industry lost £11.3bn ($14.30bn) to fraud last year.

There are several things 3PLs and Retailers can explore implementing to help mitigate the challenges, including:

1. Enhanced Verification Processes

Implementing robust verification processes for high-value items can be helpful. These include multi-factor authentication for customer accounts, verification of delivery addresses before dispatch, and requiring ID verification upon delivery. These measures can significantly reduce the risk of address manipulation and identity theft.

2. Advanced Tracking and Security Measures

Real-time tracking, secure delivery lockers, and tamper-evident packaging can help mitigate the risk of porch piracy and fake delivery scams. Additionally, offering customers the option to reschedule deliveries or pick up packages from secure locations can enhance security.

3. Regulated Insurance

With the increasing amount of fraud, there is a corresponding risk. Understanding your acceptable risk level and ensuring you have the right regulated insurance coverage is no longer nice to have; it is about ensuring business continuity and protecting the bottom line. From a risk perspective, if your average basket size is over £250 or you’re doing a significant amount of daily transactions, you are likely to have a high-risk status as a retailer. The cost of this risk is often spread, hidden across the business, between different cost centres. Still, if you look holistically at the issue and benefits of regulated insurance that also offers automated claims, it makes the decision actually a cost-effective solution. You can’t think of insurance as a cost but rather accountability.

Find out more about how we compare to courier insurance in our blog here.

Also you might need a combination of insurance - For example, we can't cover you for porch thieves, I'm afraid, but we can cover you for loss and damage with a 98% payout rate. But we're a great combo with PorchPals who do!

4. Using data

Data can help analyse patterns and flag anomalies in order behaviour, payment methods, and delivery instructions. By following data patterns, you can start to be more proactive in your approach, with the goal of preventing fraudulent transactions before they occur.

What is often forgotten is that insurance is not just peace of mind; it's about doing better business. One fundamental way Anansi delivers on this promise is by generating, collating and presenting data from every protected parcel. Our solution uses digital technology to track and record packages along with loss, damage, and theft, and that data can provide critical insight into trends, hot spots, and potential risk factors.

5. Educating Customers on policies

Unfortunately, some fraud is direct from your customers, who may not always understand what they are actually participating in, so ensuring they have clarity of policies with clear repercussions is essential. It's always best practice to outline return policies and set strict guidelines to help deter abuse. Since 91% of online shoppers review return policies before purchasing, prominently displaying these policies can set clear expectations.

Also, it is vital to educate customers about potential fraud risks and provide guidelines on protecting themselves. This includes advising them on secure delivery options, warning them about common scams, and encouraging the prompt reporting of any suspicious activity. An informed customer is less likely to fall victim to fraud.

6. Strengthening Partnerships

Collaboration between retailers and 3PLs is key to tackling fraud effectively. Sharing information on fraud trends, coordinating on security protocols, and establishing clear lines of communication can help both parties stay ahead of potential threats. Joint efforts in investigating and addressing fraud incidents can also lead to more successful recoveries and prevention strategies.

This is another benefit of the increasing use of Anansi across 3PLs and Retailers. Across the industry, Anansi can act as a centralised integrator of multiple data points to provide industry insights that can be fundamentally useful in helping combat the growing threat of fraud.

In conclusion, the increasing fraud in last-mile shipping poses significant challenges for 3PLs and retailers, especially as we head into peak shopping seasons. Businesses can mitigate these risks by first rejecting the status quo, stating that this is the cost of doing business, and instead taking proactive measures to safeguard against the rising tide of fraud and protect financial interests and customer trust.