How to Protect Your eCommerce Business and Minimize Risk in 2023

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If you’re running an online store selling tangible goods, you know that proper inventory handling and promotional planning can lead to big boosts in sales and a head start come the new fiscal year. However, if businesses are uninsured, they could be opening themselves up to the potential harm that comes with an increased sales volume.

Let’s have a look at some of the main potential risks facing eCommerce businesses that are magnified throughout the busiest shopping time of the year, like the holiday season.

Spoiler alert: there’s only one thing that can protect you against any fallout from these risks, and it’s properly insuring your business.

4 risks your business should prepare for in 2023

Here are four risks to look out for to help close the gap on any potential liability your eCommerce business may face:

1. Malfunctioning products

A malfunctioning product can land an eCommerce company in all sorts of legal trouble, from a customer filing a lawsuit to damage to the merchant’s reputation. Businesses can be held liable for a malfunctioning product that is:

  • Defective and causes injury
  • Recalled by the manufacturer
  • Counterfeit
  • Mislabeled

If an eCommerce merchant is selling products known to be defective or prone to breaking, they could be held liable if a customer is injured while using it. If a product breaks and causes injury, the merchant could be sued for negligence.

To avoid any legal issues, it’s important for eCommerce merchants to thoroughly test their products before putting them up for sale. This is especially true for products that are heavily discounted on as they’re likely to sell more.

2. Products containing hazardous materials

When eCommerce merchants sell products containing hazardous materials, there’s always the risk of running into problems. Of course, this is true for any day of the year, but especially during the holidays when shoppers are looking for the best deals and might be skipping important details like reading the hazardous materials in the products they’re buying.

When something goes wrong with a product, the merchant could be held responsible. Some examples of how include:

  • If a customer buys an item that’s flammable and the customer is injured in a fire
  • If a product isn’t correctly stored or handled and the customer is exposed to the hazard
  • If the product is used in an unsafe manner, the customer could be injured or killed
  • If the products aren’t stored or shipped properly, they may leak or spill and cause environmental damage

Merchants should always do their best to ensure that they are only selling products that are safe and clearly labeled. While this may seem obvious for merchants selling items like cleaning products that are known to contain hazardous materials, it’s still important to conduct your due diligence. For example, some companies might be unaware that products as innocent as air fresheners contain chemicals that can cause serious harm. Therefore, it’s best to be prepared in advance by going the extra mile to protect your business, such as with eCommerce insurance, no matter what products you sell.

3. Meeting regulatory standards

If your business offers products that need to comply with regulatory standards, this also adds a level of risk, especially during the holiday shopping craze when the stakes are higher. This is because the increased demand during this peak shopping period can lead to product manufacturing being rushed and sold when they don’t meet the regulatory standards. The result? Potential injuries or damages.

Products can be held to different regulatory standards based on region, so it’s also important to research requirements in the areas you ship to. Some products that are commonly subject to regulatory standards include:

  • Food
  • Drugs or supplements
  • Cosmetics
  • Apparel
  • Medical devices
  • Electronics

To avoid this risk, merchants should make sure that they have adequate staff and resources leading to ensure that all products being sold comply with the relevant regulatory standards. In addition, a seller needs to have the proper insurance in place to manage liability.

4. Cyberattacks

A cyber attack can spell a variety of legal troubles for businesses, including data breach laws, consumer protection laws, and privacy laws. If a website isn’t secure, it may be vulnerable to cyber attacks, such as denial of service attacks or data breaches. If customer data is compromised, the merchant may be liable for damages.

Companies can minimize risk by taking steps to ensure that their website is secure and ready to handle traffic, especially when it peaks over the holidays. Having a plan in place and taking precautions to protect customer data is important. Still, in the event of a breach, insurance is the only way to protect against liability and cushion the blow of any legal fees.

eCommerce insurance: your solution to minimizing shopping risk

Protecting your online business against potential losses is crucial, and eCommerce liability insurance is just the thing that can stand between you and a liability lawsuit leading up to painful debt. These strenuous lawsuits can be triggered by faulty products, injuries, accidents, damages, or legal fees.

While eCommerce insurance isn’t required by law, it’s highly recommended for any online business, especially since something going wrong can make or break it.

There are many different types of eCommerce liability insurance policies available, so it’s important to choose one that meets your specific needs. Make sure to compare policies and rates from multiple insurers before making a decision.

Spott Insurance, for example, offers comprehensive eCommerce Liability Insurance for retailers who want to minimize any risks that may arise as a result of selling products online. Spott also offers Amazon Seller Insurance for merchants who sell products through Amazon’s marketplace.

To wrap up

A retail business focuses on growing sales volumes and ending the fiscal year on a strong note that can be pushed back due to all sorts of liability charges, and an online business can be exposed to such charges even more so on account of the perils accompanying dependence on web traffic.

Busy shopping periods, like the holiday season, bring along an increase in sales and can have detrimental impact on a company’s bottom line, but only if they’re not prepared to handle the fallout. eCommerce insurance, such as the one offered by Spott, is one of the best ways for any online business to help protect against potential losses during the holiday season and beyond.