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Starting an e-commerce business is both an exciting and rewarding endeavor that can provide a significant income on a small initial investment. Yet e-commerce still comes with its share of potential risks. Below we explore 4 situations that many e-commerce business owners often face that they’re often not prepared for.

 

 

Data Breaches

Depending on the method an e-commerce store uses for capturing and processing payment information, it may be putting itself at risk for a data breach. If your company accepts credit card payments and processes, stores, and transmits cardholder data itself, it is expected to be PCI compliant. It’ll have to follow all the rules and regulations set forth by the Payment Card Industry Data Standard.

If your network is compromised and cardholder information is stolen, this could potentially open you up to liability issues for failing to follow the complex required protocol. Having the right insurance in place in case of cyber loss is a good idea!

One of the best ways to protect your business against liability if you experience a data breach is by having a strong cyber insurance policy. Cyber insurance will protect your business from Internet-based risks that conventional liability insurance plans usually exclude, such as infrastructure issues and data breaches.

State Sales Tax

While in the past e-commerce businesses weren’t required to collect state sales tax outside of their home states, the 2018 South Dakota vs. Wayfair, Inc. ruling changed all that. Now the floodgates have opened for states to begin enforcing their state’s tax laws on any e-commerce company that conducts business in their state, regardless of whether they have a nexus in that state or not.

Due to this decision by the Supreme Court, e-commerce sites have been forced to retrofit their point of sale systems to ensure that they can properly account for each state's tax laws.

Customer Disputes

Although not exclusive to e-commerce, disputes and chargebacks are one the risks online business owners often ignore. Any time a purchase is paid via credit card, the customer has the ability to dispute the transaction afterward as fraudulent. If this happens, credit card companies will give the merchant the opportunity to show proof of the authenticity of the transaction, so it is important to keep accurate records of all sales. A high-level of disputes can make the merchant appear high-risk, leading to higher card processing fees.

SEO Algorithms

Even if you’ve worked hard to optimize your site’s search engine ranking, Google can change their algorithms without much warning, significantly dropping your traffic and conversion rate, and therefore your profits.

As you can see, e-commerce can come with many unexpected risks that traditional business models may not have to deal with. By planning ahead of time for the unpredictable, e-commerce business owner can be prepared for all the eventualities that may arise.

 

If your e-commerce business doesn't have general business protections yet, it's not too late to get your peace of mind from Alliance. Fill out the short form below for a quick chat.

 


Posted 3:50 AM

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NOTICE: This blog and website are made available by the publisher for educational and informational purposes only. It is not be used as a substitute for competent insurance, legal, or tax advice from a licensed professional in your state. By using this blog site you understand that there is no broker client relationship between you and the blog and website publisher.
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