The couch arrives split open at the seam, packing foam spilling out like the box had travel sickness. The parcel gets lobbed over the front gate, after a Buddy Franklin-style handball from the back of the van.

These aren’t ‘one-offs’ that cause outrage in the tabloid press or your social feed; they’re an occupational hazard in our industry. As a logistics leader, few messages are worse than the one from your CEO asking: “Is this us?"

According to FreightSafe research, Australian businesses lose AUD$2 billion a year to damaged and lost freight. That’s a figure businesses can no longer chalk off as ‘out-of-our-control’.

In this week’s Delivered, Jonathan Bass, Director of FreightSafe, highlights the visible and invisible costs, explains where damage and loss actually happen, and what to ask before rolling out transit protection across your operation.

TL;DR

• The real cost of loss and damage isn't just the $2 billion that Aussie businesses write off in claims each year; it's the customers who never come back
• Most transit damage doesn't happen on the road; it happens in a distribution centre, long before a driver even reaches the customer’s door
• Not every business (or item) needs transit protection, but a few questions about order value, product fragility, and carrier reliability will help you decide whether you do

What does freight damage actually cost businesses?

$2 billion. Every year. That’s not an insignificant line at the bottom of a P&L.

According to Australia Post data, Aussies spent $82.6 billion online in 2025. That means for every $100 Australian retailers generated in sales, almost $2.50 was given back in the shape of a lost or damaged item. 

And that’s the direct cost only. There’s additional freight and labour costs associated with the re-delivery, as well as the quiet - but significant - opportunity loss cost too. 

According to Shippit research, 68% of Australian shoppers say they might not return to a retailer after a bad delivery experience. The gap between the loss you can quantify and the customer who simply doesn't come back is where most of the real damage happens. 

With acquisition costs continuing to rise and margins continuing contracting, the direct and indirect costs add up to a hit that businesses cannot continue to brush off as ‘uncontrollable’. 

“You might have Mr. or Mrs. Smith engage with you five times, but then you never hear from them again. And there may have been a loss there,” Jonathan explains. 

Is delivery the fastest route to a one-star review?

Damaged goods shift how shoppers view a brand afterwards. That’s not a hot take.

But they don’t just take it out on your customer support staff; delivery problems are among the fastest routes to a one- or two-star rating. Scroll through enough reviews and you'll see “arrived broken" or “lost in transit" again and again. 

“The buying process today is a very emotive one,” Jonathan continues. 

“People spend their time buying the things which are most precious to them. Gone are the days where they walk into a store - they're buying online, and I think the product they're buying includes that delivery experience. 

“So when goods are tossed over the wall or broken in ten pieces, that emotive element and disappointment of seeing something you were really looking forward to being destroyed, or not treated as you'd hope, is a big disappointment. It's not just the item; it's the whole experience, and delivery is very much part of that.”

Whose problem is it anyway?

Today, most businesses understand that, legally speaking, the contract is between them and their customer. 

“So those days, where a retailer would pass it on to a carrier and wish the consumer all the best, are disappearing,” Jonathan continues. 

“Legislation has come a long way in protecting consumers. We have unfair contract terms, among many other consumer protection laws, and it's not so simple anymore for a retailer to pass on the risk associated with goods being lost or damaged to the consumer.”

So if businesses can no longer pass the risk on, the obvious next questions become: where does that risk actually show up? And how can we protect against it?

Where does most transit damage actually happen?

Shippit data shows that delivered in full on time rates are as high as they’ve ever been. Of all the claims FreightSafe manages, loss accounts for only 20%. The remaining 80% is for damage. 

Geographically, the pattern mostly tracks with freight density: claims cluster in major metro areas because that's where the volume moves, with Sydney the biggest source, followed by Melbourne and Brisbane. 

But no postcode is immune. Claims arrive every day from the smallest regional towns across the country. So assuming your freight is “safe" because it isn't moving through a capital city is a risky bet.

But it’s not just on the road that loss or damage occurs. Far from it, in fact. 

Picture a modern DC: a box of champagne flutes might be unloaded from a truck, scanned, sorted onto a conveyor, diverted through an automated sorter, transferred by hand between cages, stacked on a pallet, moved by forklift, unloaded again, and finally loaded onto a delivery vehicle.

And all that while trying to adhere to internal fulfilment SLAs designed to meet consumer expectations for speed. It’s easy to see why those champagne flutes might not survive the journey. 

But the call to action isn’t to blanket insure every item leaving your DC.

Why is blanket transit insurance the wrong approach?

The old model of transit insurance was rigid: cover everything, or cover nothing. But now businesses can manage their insurance as intelligently as their inventory.

That means at a SKU level (by product category, value, weight, size etc), rather than blanket-insuring every satchel and pallet the same way.

“You can get very granular in how you manage risk, particularly for larger enterprise customers. They manage risk smartly, often with a large balance sheet behind them. 

“They can toggle on insurance for all goods above a certain threshold, for example $1,000 or $2,000. Or they can add it to fragile freight like solar panels or furniture. But if I'm a furniture retailer who also sells pillowcases, they can say ‘I don't want it on the pillowcases’.

“We find that once a customer turns on an insurance product or transit protection, they'll keep it on indefinitely. The reason customers keep it on is that it truly does solve headaches, and the cost of the insurance is often significantly cheaper relative to what they'd otherwise be paying out in claims or replacement items. 

“Ultimately, insurance is a way of making the customer promise good.”

Is transit protection right for you?

You don’t need me to tell you, but peak season is coming. Consumers’ already-low tolerance for damage and delay plummets. 

A late or damaged delivery in June is an annoyance; the same delivery two days before Christmas is a crisis, and the retailer who can't resolve it quickly becomes the scrooge that ruined someone's holiday.

“People's tolerance, their ability to rationalise what's happening, is significantly diminished when shopping for Christmas presents, relative to the rest of the year,” Jonathan explains.

Not every brand, vertical, or freight profile needs transit protection, though. To determine whether yo do, start with the following questions: 

• What our goods are worth: Does a typical order come to AUD$300 or more? Do single items in our range sell for AUD$300 or more? Would replacing or refunding one lost order wipe out the margin on several others?
• How our goods travel: Do our products break (ie glass, ceramics, stone)? Are our products bulky or heavy enough to need pallet freight or two-person handling? Have we improved our packaging, but seen no real change in our damage rate?
• How our carriers perform: Are our lost and damaged claims consistent, rather than one-off incidents? Do damage rates differ enough between carriers to influence how we allocate freight? Does our freight cross long distances, borders, or regional networks with multiple handovers? Do we keep ‘authority to leave’ switched off because parcels go missing?
• What it costs us: Are our carriers not liable for loss or damage, or is their liability cap below our average order value? Does someone on our team spend part of every week chasing claims? Do delivery failures show up in our reviews, support queue, or repeat purchase rate?

The businesses Jonathan sees getting it right are the ones who've realised that while they can’t stop loss or damage, they absolutely can improve their customer’s experience - and protect their bottom line - when it happens.

“Margins in retail are small and under increasing pressure," Jonathan says, “and if you're simply compensating customers for a replacement every time out of your own pocket, that's a very expensive way to manage risk."

The visible cost is the $2 billion. The invisible one is the 68% of shoppers who don't come back after a poor delivery. Transit protection stops you paying for both.

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