Whether you’re thinking of starting an e-commerce company, or you’ve been in the business for a while, selling your products and services online is the move of the future. Thanks to online marketplace platforms like Shopify and Amazon, starting and running an online business is more accessible than ever before.
E-commerce businesses continue to experience rapid growth; with anything new and revolutionary that occurs, there are risks and exposures that may not have existed in the past. All it takes is one mistake to risk becoming victim to a data breach or product defect that could hurt your revenue and negatively affect your reputation and relationship to your customers.
What are some of the top threats online retailers are faced with?
Data Breaches and Security Threats
One of the largest issues that e-commerce companies face is the threat of data breaches. Online sellers store sensitive customer information such as credit card information, mailing addresses, email addresses, usernames and passwords. This can leave your company vulnerable to cybersecurity threats such as phishing, malware and distributed denial of service (DDoS), which can quickly wreak havoc on your business. All it takes is one successful entry from a cybercriminal to take down your entire network and cause significant revenue loss for your business.
Fortunately, there are ways you can safeguard your e-commerce company. Making sure your systems and devices are up-to-date with the latest software releases, backing up your data regularly and avoiding opening emails that seem suspicious are all ways to keep your company secure. You should also encourage your employees and your customers to create strong passwords to use on your e-commerce site.
Even with the best precautions in place, things can still go wrong, but fortunately there’s insurance to help. Having cyber and technology errors and omissions insurance can aid in recovery costs, notification expenses, business interruption, third party liability, and even ransom costs.
Similar to brick-and-mortar retailers, any product that e-commerce businesses sell can have a defect or malfunction and cause damage, injury or harm to a customer or their property. If you don’t take the proper precautions to protect yourself from product liability claims, your business could be held liable for hefty legal fees. As an online retailer, this type of claim could also damage your brand reputation and cause you customers to seek out other options.
If you import any of your products from overseas, you could find yourself with even more liability risks.
Product liability claims can be mitigated by providing detailed and accurate instructions, warnings, and labeling for the products you are selling, and of course by also having a solid product liability insurance policy. If you work with a distribution chain of manufacturers and suppliers, it is a good idea to confirm that they are also adequately insured, and that you are listed as an additional insured on their policies.
A relatively new threat has appeared for those participating in third party distribution through online marketplaces like Amazon and Walmart. If you depend on market access, volume and efficiency as an online retailer, you know there is threat of suspension from these marketplaces. Sometimes, this suspension can happen from just a few negative reviews or product returns. This is one of the most complicated threats to defend against, and it can devastate your business’ sales.
One way to protect yourself as an online seller is to diversify where you are selling your products online, rather than depending solely on large online marketplaces. By diversifying your distribution strategies, you reduce your overall vulnerability to any one single channel.
E-commerce retailers must understand the risks involved in selling products online and take the necessary steps to protect their corporate data and inventory. Since the risk profile of an e-commerce business is quite different than a traditional brick-and-mortar retailer, you need an insurance program that addresses the unique risks of your company. The experts at Fuse Insurance can provide customized insurance packages with coverage that you can rely on. To get a quote today, use our online form or call 1-866-387-FUSE (3873) to get in contact with a Fuse Insurance broker.