The Top Risks Your E-Commerce Business Could Face This Year


Running an e-commerce company has no shortage of rewards and challenges at the same time. Every business has some level of risk, but the rewards far outweigh the problems.

The government estimates about 50% of all small businesses fail by their fifth year, and only 30% survive past the 10-year mark. Knowing what some of the top risks are for e-commerce businesses allows you to navigate choppy waters without drowning in debt.

While it’s impossible to figure out every potential risk you might face, some common issues crop up over and over again. Here are some challenges you should keep an eye out for and how to overcome them.

Risk #1: Losing on Chargebacks

Whether you have a generous return policy or you go through a third-party online retailer, such as Amazon, returns and disputes can eat into your profits quickly. About 30% of chargebacks happen because the buyer purchased the item with a stolen credit card. Unfortunately, the e-commerce store is out both the item and the money not to mention shipping costs. You may also have to pay a chargeback fee to the credit card company.

The Top Risks Your E-Commerce Business Could Face This Year

To avoid chargebacks, verify all information and make sure the credit card company authorizes the charge before you ship it out. Don’t charge the items until you ship them. List your refund policy in an easy-to-find place to avoid misunderstandings.

Risk #2: Getting Hacked

Any online business is also at risk of data breaches. When hackers get into your system and steal personal information, customers tend to lose trust in you. It’s impossible to foresee every potential data breach situation. However, there are some proactive things you can do to protect your website and your customers’ information.

Secure your computers with antivirus software. Make sure you have all security measures in place, such as encrypting data and putting your site behind an SSL certificate. Monitor your site regularly for intruders. If the worst happens, inform your customers immediately so they can take steps to protect themselves. The GDPR requires you only keep essential data, and that you have measures in place to secure that information.

Risk #3: Selling Faulty Products

You might do everything in your power to put out a quality product, but at some point, one or more items will not pass muster. Depending upon what you sell, the faulty item might even cause injury. There are four distinct ways product liability comes into play.

  • Problems with the design
  • Issues with manufacturing
  • Inaccurate marketing
  • Improper warnings

Protect yourself from lawsuits by being aware of the potential failure points of your product. Enlist your legal counsel to come up with appropriate warnings. Thoroughly test all products before releasing them on the market. It’s better to over-test than under-test.

Risk #4: Missing Delivery Dates

The logistics of getting orders from your warehouse to the customer isn’t an easy process. Thanks to retailers such as Amazon and their Prime program, people expect delivery faster than ever before. About 82% of the businesses that fail do so because of cash flow issues, which will tend to crop up as your business grows. If you scale up too rapidly, you’ll suddenly have more orders, more unpaid invoices and need more product to fulfill it all. You may also need to hire help to keep up with the growth, which adds to your costs.

The Top Risks Your E-Commerce Business Could Face This Year

When business is steady, set aside savings to cover cash crunch periods. If you have any outstanding invoices, reach out to those customers and ask when you can expect payment. Sometimes invoices do get lost in the shuffle, so it never hurts to reach out and request payment. Ask for at least half the money upfront to avoid cash issues in the future. As for hiring help, you can always hire temporary employees. At least it will save you money on benefits, and if the work isn’t yet steady, you won’t have to later lay a permanent worker off.

Risk #5: A Lacking Customer Service Approach

You may assume the people you hire share your philosophy toward customer service. However, this isn’t always the case, and you can quickly develop a reputation for poor customer service. Spend time outlining your customer experience philosophy. About 96% of customers globally cite customer service as the leading factor that drives their loyalty to a brand.

Focus on better customer service and on leaving visitors wowed. Begin driving loyalty and create lifelong fans who will purchase from you time and time again.

Some things you can do to improve the customer experience of your e-commerce store include:

  • Installing chatbots for instant answers to questions
  • Going above and beyond customers’ expectations
  • Handling complaints quickly and with a resolution that leaves customers happy

Risk #6: Marketing Issues

In the online world, it’s hard to know what marketing campaigns are working and which ones are merely a waste of time and money. Fortunately, Facebook and website analytics allow you to see traffic flow and how you might improve each ad for the next time it runs. Track results carefully with unique codes, specific landing pages and studying which customers order and which ones bounce away from your site.

To avoid marketing issues, come up with an annual plan for your marketing campaigns. Set a strategy and some specific and measurable goals. Make sure your marketing fits in your overall budget. You don’t want to spend so little that you don’t gain new leads, but you also don’t want to spend so much that you create a cash flow issue. Social media is an inexpensive form of marketing with built-in tracking. Only you know how much your business can afford.

Risk #7: Losing Customers

When your business is new, people want to try it out. You’re likely offering specials to bring in new business. However, if you don’t keep them, you risk losing out on a big part of revenue in the form of repeat sales.

There are many things you can do to keep customers coming back for more. Start a loyalty program where you reward customers every time they order from you. Gather their email address and send them reminders when you have new items or a special of any sort. Reach out to customers on their birthdays and other special occasions just to let them know you care. Keeping the customers you have while adding new ones is the key to long-term growth.

Risk #8: Employee Churn

Loss of valuable employees may cost your company more money than you might think. In a study on the cost of employee turnover, researchers found replacing an employee with a $45,000 annual salary costs companies about ,000 per employee lost. Not only will you lose money trying to recruit a new employee and train them, though, but you’ll lose the skills the more experienced employee learned in their time on the job.

Anything you can do to increase the length of time an employee stays with your e-commerce brand is worth the effort. You’ll save money, and you’ll keep an employee who understands the way you do business and is already part of your company culture. Invest in your employees train them, reward them, give them benefits as you can afford them.

Risk #9: Not Upgrading Your Website

When you first opened your e-commerce store, you may have gone with a shared hosting plan and a simple website design. However, as your brand grows, you should invest more in your website. If your site is slow, for example, you risk losing customers. If your website design looks outdated, they may not trust you with their information such as phone or credit card numbers. Upgrades should be ongoing as you can afford them.

Start by conducting speed tests and seeing how your site measures up to your competitors. Search for terms your typical customer might search for so you can see how you’re ranking in search engines. Make improvements as needed and hire experts if you aren’t sure how to improve your results.

Risk #10: Ignoring Competitors

It’s easy to get so caught up in running your business that you forget to observe the competition. People now have a choice of where they buy from more than at any other time in history. Not only are you competing against local retailers, but all the online retailers across the globe. If you don’t study the competition and what they do well, you risk falling behind.

Make a list of your closest online and offline competitors. Is there anything they do better than you do? How can you catch up? Is there anything you do better? How can you keep that edge and highlight it as your unique value proposition?

The Risk Is Worth the Payoff

Even though running an e-commerce store comes with risks, the payoff and nearly endless possibilities of working for yourself are well worth the possible failures. Focus on the risks you can control, and put safeguards in place for the ones you can’t. With a little attention to detail and a lot of planning, you’ll navigate any issues and come out on top.