Real dangers and risks that eCommerce businesses face today

There are various predictions out there that say eCommerce will be the only dominant business model in 3 (or 5 or 10!) years from today. Many of those predictions have been around for the past 10 years now, and yet the old bricks and mortar business model still prevails. In fact, over the past several years, brands like Warby Parker,n Dollar Shave Club BonobosGlossier and eCommerce giant  Amazon have all continued to expand their physical store footprint.


Could it be that these savvy online brands are hedging their bets against the real dangers that eCommerce businesses face? Read on to learn why taking your business online may be fraught with risks.


Five eCommerce risks you can’t ignore


It’s tempting to jump on the eCommerce bandwagon, especially when digital marketing vendors paint a rosy picture of what lies waiting for you on the other side of cyberspace commerce. But before you embrace an eCommerce strategy, consider for a moment whether the advice to embrace eCommerce wholeheartedly comes from impartial sources. Or, do these “advisers” have a vested interest in simply “getting you online” – for a fee?


Not that going online is necessarily bad – but doing so without considering the perils and dangers awaiting you on the other side of the digital highway would be a huge mistake. Here are five eCommerce risks that you shouldn’t ignore. Sadly, you won’t hear digital marketers, eCommerce platform sellers or web service providers talk about these real risks of doing business online:


1)      Online security: Before you embrace eCommerce wholeheartedly, be aware that there are a wide range of security threats out there that you have little control over. Phishing attacks, malware, spam mail and hacking are just the tip of the iceberg. Unfortunately, there’s little that individual businesses can do to protect themselves. Why? Because 3rd-party providers host most of the cloud-based eCommerce infrastructure and systems today. Your online security is therefore only as good (or bad!) as someone else allows it to be!


2)      Data breaches, fraud and customer privacy: How many times have we heard about customer data compromises? From Experian LiveJournal and  Nintendo, to  GoDaddy Marriott Hotels Virgin Media, and even the U.S. Defense Information Systems Agency – the lists go on, and on, and on! According to the Insurance Information Institute (III), instances of identity theft and fraud have been steadily climbing since 2015, up by 46% between 2018 and 2019.


As a company involved in eCommerce, you must be aware that data breaches don’t just happen to large companies. In fact, 28% of all recent breaches impacted small and medium enterprises (SMEs)[i], with the average cost of such breaches amounting to over $200K[ii] – putting many SMEs out of business! Each time an SME suffers an incident of these eCommerce crimes, they suffer victimization yet again by their insurance companies, who promptly increase premiums – sometimes by double digits!


3)      Dispute resolution: It’s great that eCommerce allows the world (and not just those who can travel to your bricks and mortar store) to shop with you. However, unlike an in-person, over-the-counter transaction, resolving eCommerce customer disputes is a real challenge.


Your shipper may not have delivered to the right address. The delivery agent may have mis-handled and damaged the product. The payment processor might have over-charged. Dishonest customers may claim they received incorrect products or quantities. It’s comparatively easier to address these issues when doing business in-person; but doing so via email or over the phone is costly and time-consuming for eCommerce businesses.


4)      Protecting your IP: Cyberspace is vast, and largely un-policed. Since over 25% of the world’s population shops online, it’s hard to track where (which websites, what geography/location) they buy your product and service from. This encourages many counterfeiters to copy your products and offer them at discounted prices. Intellectual property thieves even copy and distort content and images from your website and eCommerce stores. These factors go largely unnoticed by eCommerce operators, but they do tremendous brand damage and cut into potential sources of revenue.


5)      Storage, distribution and logistical challenges: Remote sellers, such as eCommerce vendors, typically don’t have physical warehouses at every location they serve. In the case of bricks and mortar shops, you can quickly do a top-up run and buy more inventory to stave off a stock-out situation. Due to the diverse geography between seller (you), stocking location and ultimate consumer (online buyer), inventory planning and logistics in an eCommerce model is extremely challenging.


These are only the tip of the iceberg of risks and threats facing eCommerce store operators. There are a host of other challenges, like compliance with the content publication rules of other jurisdictions, and accounting for appropriate taxes and levies in locations where you don’t have a physical presence – but do have customers. The reliability of cloud service providers and Internet Service Providers (ISPs) also leaves eCommerce store owners more vulnerable than bricks and mortar stores.   


Buyers and sellers beware


The risks highlighted above are equally applicable to eCommerce store owners as they are to online shoppers. For example, while businesses might find the logistics of supplying, stocking and shipping challenging; online buyers continually complain about the nightmare they face when returning non-conforming products.


The same is true with eCommerce data breaches and privacy-related risks. While consumers might sue their eCommerce vendor, or may receive free credit monitoring for three or five years following a breach, they (online shoppers) suffer immense mental, psychological and financial trauma as a result of these dangers inherent in the eCommerce model.


Now that more than 25% of the world’s population shops online, the challenges inherent from  transitioning business online are set to explode.  So, if you are a business with a physical store footprint, and are looking to move your business online, don’t rush into the transition just yet. Even though your eCommerce platform provider might offer you an “amazing deal” to embrace eCommerce, make sure you ask them some tough questions about the five real risks discussed above. And only once you’ve received satisfactory answers and assurances should you contemplate transitioning your business to an eCommerce model.