Thanks to the internet, retailers have more opportunities to reach customers than ever before. Ecommerce enables you to serve people around the world while making it easier for local customers to browse products, place orders, make payments and receive goods—all without setting foot in your store.
Your customers’ online shopping preferences may be inspiring you to shift your business model and change the way you bring new products to market. In fact, eMarketer expects retail ecommerce sales will increase to $4.058 trillion in 2020, making up 14.6% of total retail spending that year. This represents the continuation of a significant sales trend impacting retailers across the industry. If you’re among them, keep in mind it’s impacting your insurance needs too.
Broaden the Scope of Your Business Insurance
Standard property and general liability insurance is essential for retailers. A great place to start, this coverage is designed to protect you from losses associated with structural weather damage, for example, or customer slip-and-fall injuries. But new business risks come along with conducting sales in cyberspace. That’s why all retailers—from virtual operations with no physical storefront to traditional brick-and-mortar stores who are now offering ecommerce—may need to widen their insurance umbrella. They need to ensure they also have coverage to protect their business from the costs related to product failures, service failures, data security and business interruption. These exposures exist for brick and mortar retailers as well as those that transact online.
1. Product failures
A customer may not personally pluck your product off of a store shelf, but they’re still purchasing a physical product from you. What if they receive a defective item or one that causes them harm? A child can swallow a small part, a jagged edge can drive a deep cut into the skin, or ingestion can lead to an illness. Any of these things can provoke a lawsuit, and you could be named in it, even if the product originates from a manufacturer.
2. Service failures
These can happen as the result of technical errors, network damage or code glitches. For example, a step in your checkout process may contain a programming “bug” that keeps an order from being packed and shipped—and a customer never receives their order, despite making a payment. Or your site could go down and a business partner (an advertiser, distributor or manufacturer) sues you for lost profits.
3. Data security
Ecommerce exposes customer data to risk, let alone valuable business data, even if you’re depending on a secure IT environment. Customers input sensitive information into your platform—their addresses, credit card numbers and more. But mistakes are made and breaches happen. If so, you’ll need coverage for incident investigation, anti-fraud protection for customers, legal fees, settlements and more.
4. Business interruption
If you’re using a third-party provider to assist you with shipping or internet service, you could suffer losses as a result of issues occurring on their end. Unexpected events that bring your work to a standstill can cost you revenue—and you need coverage to protect your cash flow.
If you need help determining the coverage you need for your ecommerce business, please contact your local independent agent appointed with Acadia Insurance. To find an insurance agent near you, visit our agent locator.
Acadia Insurance is pleased to share this material with its customers. Please note, however, that nothing in this document should be construed as legal advice or the provision of professional consulting services. This material is for general informational purposes only, and while reasonable care has been utilized in compiling this information, no warranty or representation is made as to accuracy or completeness.