The e-commerce industry is booming. Global e-commerce sales are projected to hit $4.2 trillion as consumers continue to shop and buy online. But with that staggering success comes many risks. It’s important to be aware of the most common ones so you can proactively work on mitigating them.
What are the major risks for online retailers, and how do you prepare for them?
1. Data Breaches
The first risk is data breaches. Some 43 percent of businesses targeted for cyberattacks are small businesses, and 60 percent go out of business within six months of the breach. That means that if you experience a data breach, your business could crumble, too. One way to safeguard against this is by implementing good cyber security practices and investing in the right tools.
2. Delinquent Online Buyers
The second risk is loan defaults or collections from delinquent online buyers. If a person purchases something but doesn’t make payment on time, it can be difficult for any company to collect these funds; even more so when working with international clients who aren’t subject to U.S. laws. You should consider hiring collection agencies or other third-party companies to alleviate some pressure involved in collecting monies owed.
3. Intellectual Property Theft
Intellectual property theft, such as copyright infringement and trademark violations, among others, may present themselves across various mediums. That includes social media channels like Facebook and Twitter, as well as online marketplaces.
To protect your business against this, ensure that all of your branding materials are legally registered and trademarked. You should also monitor the internet for any instances of IP theft and report them immediately to the authorities.
4. Payment Fraud
Another big risk is payment fraud. This can include fraudulent orders placed by customers, fraudulent payments made by buyers, or identity theft. There are various ways you can combat payment fraud, such as using secure payment gateways and employing fraud detection tools.
5. Shipping Delays
A fifth risk is shipping delays, which can be caused by weather conditions, port closures, or even labor strikes. The best way to mitigate this risk is to have a solid contingency plan in place, which includes the use of reliable third-party shipping companies.
6. The Competition
The sixth risk is competition. Your business may be successful right now, but that doesn’t mean it will always stay that way! You should make sure to keep up with your competitors’ strategies and never get complacent to avoid falling behind or even losing market share altogether. A great way to do this is by regularly monitoring online retailer rankings like those found on Google Trends (for example). This can help you gauge where your company’s at in relation to your rivals’.
Earning a high ranking for relevant search terms related to your products/services can also significantly impact how visible you are online. This results in more potential customers discovering and engaging with what you have available. This way, you can still ship products on time even when faced with inclement weather conditions.
7. Defective Products
The next risk is faulty or defective products. This can be a huge issue, especially if the product in question is a high-ticket item. To protect yourself from this, you should require your suppliers to have quality assurance processes in place and only work with reputable vendors. You should also consider implementing a return policy for products that are found to be defective after they’ve been shipped to customers.
Another way to mitigate the impact of this claim is to look into insurance companies providing general liability, which covers legal fees. Some companies specializing in insurance even offer custom coverage for Amazon sellers.
8. Buyer Complaints
Another issue that can arise is when buyers make claims about items not being as described or being counterfeit despite clear labeling on the product itself. To deal with situations like these, you’ll need evidence, such as photos and videos, of the product, before it was shipped, correspondence between you and the buyer, and/or an expert’s evaluation of the product in question.
A ninth risk is chargebacks. Buyers can initiate this for various reasons, such as not receiving the order or not being happy with it once they’ve received it. To protect yourself from this, always require a signature upon delivery and have a clear return policy in place.
Additionally, you can work with your payment processor to implement measures that will help reduce the likelihood of chargebacks occurring in the first place.
10. Business Interruption
Finally, we come to one of the biggest risks: business interruption. This could be caused by anything from natural disasters to cyber-attacks. To protect your business, you should have a comprehensive disaster recovery plan in place. This should include measures such as data backup and restoration, employee training on how to respond to an emergency, and the use of cloud-based services.
As you can see, many risks come with running an e-commerce business. But by being aware of them and taking steps to mitigate them, you can significantly reduce the chances of them causing serious harm to your company. Start preparing now.