Shopping online might be easy, but receiving purchases in one piece is getting harder and harder.
According to SafeWise data cited by CNBC, 260 million packages were stolen last year, at a loss value of a staggering $19.5 billion. Meanwhile, 860 million packages arrive damaged each year. Consumers might curse the delivery companies, but brands usually draw the criticism if situations aren’t dealt with in a timely, transparent way. In fact, studies show that 84 percent of consumers won’t shop at a merchant again after a bad shipping experience.
Amid the rise of e-commerce and online deliveries, it’s become mission-critical to proactively protect purchases and ease the navigation of any problems — especially for digital natives impatient with cumbersome legacy claim-filing systems.
WWD caught up with Woodrow Levin, serial entrepreneur and founder and chief executive officer of Extend, which lets merchants offer extended warranties and protection plans through easy-to-integrate APIs or pre-built e-commerce applications like Shopify, Salesforce Commerce Cloud or others. The company has raised $325 million from investors like PayPal and American Express since its founding in 2019, and currently works with retailers One Kings Lane, Brilliant Earth, Peloton, Michaels, Adorama, Visionworks, Z Gallerie, Jomashop and more.
WWD: You didn’t come from the fashion or retail industries, so how do your past experiences inform your current?
Woodrow Levin: I started in options trading in Chicago, and then I started a video game company in a digital safe deposit box with permission sharing. Most recently with Extend, we started out focused on extended warranties and protection plans for durable goods. The connective tissue for me was always to find ways to use technology to improve on old processes or to solve problems. With Extend, think of us as AppleCare for everything.
WWD: What was the white space that you saw in the retail industry? Did you feel that other companies were approaching the problem incorrectly or not enough?
W.L.: We saw the largest retailers, both online and offline, offering extended warranties and protection plans on the products they sold to do two things. One, to increase margin on each sale, which is super important right now as all companies are focused on profitability, margin and competing with the behemoths of Amazon and Walmart and others. Number two, extended warranties and protection plans, much like shipping protection, increase customer peace of mind when making purchase decisions.
We saw that the top 1 percent of retailers were all offering these value-add services to customers at checkout, but the rest of the market wasn’t being served. We said, can we use technology to help transform commerce much like Stripe did for payments, or Affirm and Klarna and Afterpay did for buy now, pay later.
When we looked for inspiration on a successful paradigm, we came upon AppleCare — it was digitally native, modern, transparent, and the value was being driven to consumers rather than legacy companies who rely on breakage, confusion and hard-to-file claims.
WWD: Are consumers increasingly aware of porch piracy and the option for protection plans?
W.L.: Just look at areas starting to pilot programs with centralized locker centers where packages can be delivered because porch piracy has become such a problem. This is the local government saying we recognize this as an issue and here are secure lockers with a passcode for residents to go pick up their packages. It is absolutely something that people are aware of, and we see 52 percent of consumers elect to add shipping protection at checkout, with a 13 percent average attach rate for product protection.
Extend isn’t only for major purchases like furniture and jewelry and electronics, but can be for anything sold online — fashion, beauty, apparel, consumables — because the cost to protect them is pretty minimal.
WWD: So, what is the cost and process for protection?
W.L.: Shipping protection is offered to the consumer at checkout and is usually around 2 percent of the cart value. It’s a minimal fee for security and peace of mind for protection against lost, stolen or damaged packages during transit.
The majority of people dealing with an issue interact with Extend through our AI-driven claims bot named Kayley, who is available 24/7, 365 days a year, and the experience is like texting with a friend. She handles 98 percent of interactions in under 90 seconds. We do have a U.S.-based call center that’s available six days a week if someone prefers to pick up the phone and file a claim that way, but the majority of our customers like to just do it through their phone or a tablet or computer with Kayley.
WWD: So, ease of experience is the focus?
W.L.: People don’t like dealing with insurance companies. I know firsthand how frustrating it can be waiting for your packages to be delivered and then have them taken right off of your porch or apartment mailroom. We’re trying to make sure that after you purchase a product from a retailer, and a package is lost, damaged or stolen, that you have a white glove, hassle-free path to resolution as a consumer.
[Theft] is beyond a brand’s control. It’s even beyond the carrier’s control. So, how do you create the easiest path to resolution that reflects well upon the merchant, so the customer will come back and be loyal to the brand?
WWD: What makes Extend more seamless?
W.L.: Without Extend, there are usually three to five touchpoints with a customer before they have a resolution. Sometimes, the retailer will send a replacement item to “make the customer whole,” or they might tell them to file a police report.
But with Extend’s AI-driven chatbot, it literally takes 25 to 30 seconds to file a claim. Depending on how we integrate with the merchant, the customer usually gets an email with a virtual credit card to immediately go to that merchant and buy a replacement product. There’s no waiting for a prepaid debit card in the mail or a check to come. Consumers can immediately shop and get a replacement item, hopefully in time for their event if that is the case.
WWD: What is the benefit for merchants?
W.L.: Extend pays the merchant for that replacement product — plus sales tax and shipping costs to get it to the consumer. So, the merchant gets to record this as a net new sale, and keep that spend in their ecosystem. We’re turning that negative into a revenue-generating opportunity.
Merchants can also increase their margin because they get a percentage of each protection plan or shipping protection plan sold. It’s bottom-line net revenue, and there’s no performance obligation associated with it. Extend focuses on reducing operational overhead because we’re handling all of these clients. It’s removing the financial risk of shipping issues. And then it’s improving customer loyalty and lifetime value, because we’re turning a negative experience into a positive one.