How to Manage Ecommerce Risks in Your Online Business with Ecommerce Insurance

It is getting easier to start your electronic commerce (e-commerce) business. With marketplace platforms such as Lazada and Qoo10, or software such as Shopify or WooCommerce, you can start selling online within minutes.

When you sell online, you are running a business. While selling online is simple, managing a business can be much more complex. There are many hidden risks that you might not be aware of when you first list your product.

In this article, we will share the common business risks faced by eCommerce sellers. You will also learn how to manage them to achieve business success.

ECommerce Business Risks

Product Risks

The first major risk you face is product risk – not being able to sell your products online. Choosing what product to sell and market them is key to eCommerce business success.

Here are some tips on choosing the right products:

  • Do not sell untested products. Only sell products that have been proven to sell online. You can check out Amazon Best Sellers if you want to find product inspirations.
  • Work out your profits before deciding to sell. Find out the cost of the product from the supplier. You should try to have a selling price at least double of your costs. You can use the huge buffer for discounts and refunds.
  • Always order samples of your product from the supplier. Do not bulk order from your supplier before seeing samples. Be sure to check reviews from other buyers if you are purchasing from online platforms such as Alibaba.
  • Do not sell commodities. Try to sell items with value that are controversial. You will be able to establish your brand easier later on.

When you first start to sell online, it will be easier to start with marketplaces like Amazon, Lazada or Qoo10. However, in such marketplace, reviews and pricing are very important. So you have to check out your competitors and be more aggressive in building reviews initially.

Cyber Risks

If you are operating your eCommerce business with your platform, you will also face information or cyber risks.

Cyber risks include:

  • Unauthorised access to your eCommerce platform resulting in leakages of users or customers personal data;
  • Credit cards information are intercepted in transit; and
  • Denial-of-service attack on your eCommerce platform, resulting in system’s downtime.

To manage cyber risks in your eCommerce platform, you can:

  • Install Secure Sockets Layer (SSL) certificate in your eCommerce platform. SSL will encrypt information when your customers send sensitive information from their browser to your web server. You must have SSL certificate if you require your users to log in. Check with your host provider or platforms if you are unsure how to do it.
  • Set a different username and complex password. Do not use common names, such as ‘admin’ as the login user name. Also, set complex passwords that you can recall.
  • Limit the number of login attempts to your eCommerce platform. Beyond a certain number of failed logins, block the IP address temporarily. Having a limit in login attempts can prevent brute force attack to your website. If you are using WooCommerce, you can check out WP Limit Login Attempts.
  • Use third-party payment gateway. It is expensive and troublesome to setup your payment gateway. If you are just starting, using third-party payment gateways will reduce your setup costs, and improve the security. Popular third-party payment gateways include PayPal or Stripe.

To understand more cyber risk, check out our article on managing your company’s cyber risk.

Product Liability

Product liability is the risk of lawsuits from your customers if the products you are selling cause personal injury or property damage. When you sell defective products, your customers will look for you first.

You can manage your product liability risks by:

  • Avoid selling products that you do not know their origin;
  • Provide adequate warning if your product can cause hazards or health issues;
  • Buy a product liability insurance;

You can understand more from our article on product liability insurance.

Business Interruption

In setting up your eCommerce business, you are likely to rely on third-party providers such as hosting company, payment gateways, shipping and delivery services.

When they experience an issue, your business is going to be affected. When these issues continue, you might even experience reduction in sales and profits.

To manage business interruption due to third-party downtime, always have a backup to switch to if your current vendor is having issues. For example, ensure you can integrate your payment gateway with at least 2 vendors. When one run into issue, you can easily switch to another vendor.

Insurance Needs of an eCommerce Business

While you can take every effort to reduce your risk, undesirable events will still happen. This is the reason why businesses need insurance to transfer the risk. We recommend you to consider the following insurances to safeguard your business:

Business Liability Insurance

You should at least purchase a general business liability insurance. This insurance includes product liability insurance, public liability insurance, professional indemnity insurance, etc.

Work Injury Compensation Insurance

If you have employees doing manual work, for e.g. delivery, or employees doing non-manual work earning less than S$1,600 per month, you will need a Work Injury Compensation (WIC) Insurance under Work Injury Compensation Act (WICA).

Under WICA, employers face a potential liability when their employees suffer work-related injuries or illness. A WIC insurance helps you to compensate your employees when they are injured at work.

Marine Cargo Insurance

If you ship your goods in bulk from your suppliers or to your customers overseas, it might make sense for you to get a marine cargo insurance.

Marine cargo insurance pays you for any unexpected damage of your cargo during transit.

Directors and Officers (D&O) Insurance

If you operate your business as a limited liability company, you might want to consider buying a D&O insurance.

Being a director, you may be sued in your personal capacity when your company makes a mistake, or your company did not comply with Companies Act. A D&O insurance will cover for these risks.

Getting Professional Help in Your Insurance Needs

Business insurance can be complex to understand on your own. Do not shy away from getting professional advice on your business insurance needs. A professional insurance agent will be able to advise on your required coverages, recommended insurance products that are specific to your business and industry.

Anthola Singapore has more than 30 years of experience in Singapore advising our clients on corporate insurance. If you are looking to manage your risks with insurance, feel free to contact us for a free consultation.

Conclusion

Selling online is easy. Managing online business is not. There are many risks that you may not consider when you first start to sell online.

Fortunately, once you are prepared, these risks will not affect your business operations in a major way. With the tips in this article, you should be prepared to launch and scale your online store.

If you need any insurance, please feel free to contact us for a free consultation. We love to speak to you!