Your guide to selling insurance services to e-commerce businesses

When you look at the world of e-commerce, it becomes apparent that plenty of online retailers don’t clearly comprehend the risks they face on a daily basis. The reality of not having to deal with customers in person can make business owners feel totally secure.

Related: The modern mall in the age of e-commerce

So, how do you communicate to e-commerce businesses that risk management strategies are critical and they need to take steps to mitigate the damage that could be caused?

Here are some compelling points to help educate owners of online stores that they need to make insurance a priority:

Inventory is vulnerable in any location

For retailers with myriad locations nationwide (or even worldwide), there are obvious security concerns. Each store is vulnerable to theft and requires monitoring, and distribution channels must be considered. However, the risks don’t go away if you move to a purely e-commerce-based model.

Related: The drive for same-day delivery: emerging risks for retailers

Products must be stored somewhere, whether it is in warehouses, shipping centers or depots. Using fewer locations may prove most cost effective, but it also renders each one more valuable. A full-scale robbery at one of many retail outlets is a problem, for instance, while a comparable incident at a main warehouse is disastrous.

Online stores share some product liabilities

While it’s true that the manufacturers are ultimately responsible for a majority of product issues, online merchants still have responsibilities that can land them in legal hot water. Product descriptions need to be accurate, for instance, which can be a particularly significant problem when handling a large inventory.

Should someone be injured by a product that had been mislabeled by the seller, the seller could plausibly then be held responsible. And if the manufacturer of a faulty item could not be identified or located (which can easily happen as items are imported and rebranded myriad times), the seller would likely end up bearing the brunt of any legal action.

Though there are various guides to e-commerce legal responsibilities (one example) out there, many e-commerce entrepreneurs won’t be fully familiar with them, and may be shocked to learn of their potential culpability. Clarifying the situation should make them understand why taking action to guard themselves would be a sensible move.

E-commerce data is a huge hazard

Top e-commerce stores gather, sort, filter and analyze vast quantities of customer data in order to find ways to optimize their sales funnels and generally increase their profits — and that data makes them extremely vulnerable to attack.

It’s dangerous enough that they store payment details, but it doesn’t stop there. Buying habits, addresses, even associated accounts from other services are vulnerable. E-commerce stores that have their data stolen can be extorted for large sums of money, or simply see the data released and their reputations ruined.

Related: Credit-card thieves move online as chiups thwart in-store fraud

Something some store owners may not realize is that hosting solutions (in most cases, at least) don’t cover insurance of this kind. Having their stores running on popular and regularly-updated online store frameworks like Shopify will guarantee regular updates (and make available some anti-fraud options, such as those pictured below), but won’t help them if their data is leaked.

That’s where something like cyber liability insurance become exceptionally useful. It gives companies the financial resources needed to deal with cyber security situations, whether by paying ransom money, hiring PR experts to assist with reputation management, or pursuing damages. They need to get custom quotes for their specific situations, and go from there.

Showing responsibility encourages trust

Back in the brick-and-mortar days, people wouldn’t really care all that much about the general activities of their favorite stores. Why would they? The customer/retailer association was basic; briefly and rapidly transactional.

But we’ve established that e-commerce collects a lot of personal data, plus it’s inarguably the case that customers expect more from their retailers now. The association is less formal, more customized and cordial. Social media in particular has blurred the formerly-clear lines. These days, people gravitate towards companies that share their values.

Making it clear on a store page that the business is comprehensively insured against loss of data or packages does a great job of reassuring the user that they’re dealing with a company that plans ahead and takes its future seriously. The sort of company that can become a mainstay in their online retail rotation.

Companies are always on the lookout for ways to boost customer loyalty and minimize churn, so this should be an effective strategy.

Insurance to avoid catastrophe

As with any other type of company, selling insurance to an e-commerce business is about making them aware of the dangers they face, and showing them specifically how insurance will help them avoid catastrophe should things go horribly wrong.

By focusing on persistent inventory vulnerability, the legal responsibilities of product sellers, the threat of customer data theft and the important of establishing and maintaining a strong public image, you’ll make a compelling case to any online store that they need to start arranging some coverage.

Victoria Greene is an e-commerce marketing expert and freelance writer who guards her electronic devices like precious jewels. You can read more of her work at her blog Victoria Ecommerce. Contact her at hello@victoriaecommerce.com.