3 Common eCommerce Risks Businesses Face
⏱ Reading Time: 10 minutes
Ecommerce has for some time been one of the fastest-growing industries. The retailers realize the importance of being able to adapt to the needs of modern customers. This can be done by offering them a way to purchase goods online. And with the coming of the pandemic, the trend of retailers focusing on online sales has seen an unprecedented rise. To physically walk into a brick-and-mortar establishment is a thing of the past. Everybody is online, and that is the case with businesses too! Let us help you with few tips on how to reduce eCommerce risks if you are a bit late to the party.
If you’re looking to learn more about what eCommerce can do for your business but are also concerned about eCommerce risks, read on!
According to the Adobe 2021 Digital Economy Index report, eCommerce sales have soared since the onset of the pandemic. The ensuing lockdowns, and the inherent need to purchase goods online, which was greater at the start of the pandemic than ever before. COVID-19 report states that eCommerce had an extra boost of $183 billion in 2021. That is nearly the size of the 2020 holiday shopping season where $188.2 billion was spent online.
With booms in business come increased cybersecurity threats in eCommerce. According to a VMWare Carbon Black report, attempted cyberattacks against online retailers increased by 20% during the holiday season. As a result, more than half of the companies in the report claimed that they were going to increase cybersecurity staff.
And while cybersecurity is certainly the preeminent risk associated with running an eCommerce business, it’s definitely not the only one. If you’re new to eCommerce or looking to finally move your retail business to the Internet, let’s take a look at some of the most common eCommerce risks your business faces. Also, let’s look at some of the recommended ways to mitigate them!
1. Cybersecurity Risks
Given that eCommerce businesses conduct most of their operations online, these risks are probably the most significant and prevalent for them. According to this 2020 survey on digital retail transformation, 34% of respondents said that concerns surrounding cybersecurity were their primary when entering into the world of eCommerce.
The good news is that these companies are usually aware of their risk, and do invest in cybersecurity systems. However, if you are unsure about the most common online threats that your business is exposed to, let’s have a look at what they are! Also, how you can minimize your company’s exposure to them.
- Malware attacks: This is the prevailing type of cyberattack that comes in many forms. As technology advances, hacking attacks become more sophisticated and more difficult to detect. It can sometimes take companies months to discover a data breach, by which time cybercriminals can do a significant amount of damage. Some of the most common types of malware are viruses, worms, trojans, and ransomware. According to the 2021 IBM X-Force Threat Intelligence Index, ransomware was the top threat type, comprising 23% of attacks.
- Social engineering attacks: Social engineering attacks are much more subtle than malware attacks. They rely on manipulation techniques when trying to infiltrate their victims’ networks. Phishing is a typical form of a social engineering attack in which the attackers try to trick people into clicking on suspicious links. Also to download infected files. These attacks usually come in the form of an email demanding urgent actions from employees. Supposed sender of the email is often one of the company’s executives, making the email look legit and urgent.
Picture 1. Cyberattacks put a company’s entire infrastructure at risk
Mitigate the Cybersecurity Threat
Perfect protection from cyberattacks doesn’t exist, but here are a few steps you can take to mitigate the threat they pose to your company:
- Educate your employees and invest in awareness training: This is probably the most significant step you should take since most cybersecurity breaches result from human error. Ensure that your employees know how to recognize a phishing attack and properly report it to your security experts. You should also instruct them to create strong, unique passwords for all their work accounts.
- Use password management software and multi-factor authentication: Password management software stores all your passwords in one place, so there is no need to remember them. It can also generate unique passwords. That ensures that you don’t have any duplicates that could endanger the safety of your accounts.
- Only store necessary confidential data and limit access where possible: It is probably for the best that you only store the data essential for your business to run smoothly. That will significantly lower the risk of exposure in case of a breach. You should also determine clearance levels! Make sure that everyone has access to the data they need to do their jobs properly.
- Regularly update your antivirus and firewall software: Purchase the antivirus software that best suits your needs and keep it up-to-date all the time.
- Create and implement a robust cybersecurity policy: Work with experts to design your cybersecurity risk management policy! Make sure your employees are familiar with it and follow its recommendations in their everyday work.
- Obtain a cyber liability insurance policy: Insurance will not protect you from cybercrime, but it will provide financial support. Especially in the case of a successful attack that could cripple your business. A comprehensive insurance policy would cover the cost of data loss and recovery, business interruption, notification costs. But also, credit monitoring, legal costs, and civil damages, among other things. If you purchase a third-party policy as well, it will pay for the losses incurred by all victims, typically your customers and vendors whose data might have been compromised in the attack.
2. Downtime Risks
Ecommerce businesses cannot allow downtime on their websites. Especially during the busiest times of the year, such as the holiday season or big online shopping events such as Black Friday and Cyber Monday. Imagine preparing your store for a holiday sale, from which you expect to see record profits, and just as the sale kicks off, your website crashes. This would cause significant losses to your business, both financially and reputationally.
There are a few things that could cause your website to go down. However, these two are the most prominent culprits:
- Server or software issues: Traffic on your website surges in these busiest seasons and your server may get overloaded. This can lead to temporary service interruptions. Your hosting provider can experience some issues on their end that could also cause downtime for you. Another thing that could fail you at the most inconvenient times is software plugins that could take down your entire website if they malfunction.
- DDoS attacks: Distributed denial of service (DDoS) attacks happen when hackers flood your website with unwanted traffic that your server cannot support. This results in downtime that can go on for hours or days until your cybersecurity experts manage to remove the threat and restore your website.
Picture 2. Assess your webpage downtime risks!
Mitigate the Downtime Risks
The website hosting market is well served, so you shouldn’t have any problems finding the best option for your business. Do your research and include help from experts to ensure your selected server is reliable. Additionally, that it can take the sudden surges in traffic your website might experience.
Antivirus and firewall software is very important for your website’s protection. Therefore, allow yourself to be choosy in the search for the perfect solution. Also, make sure not to add too many plugins and only use well-reviewed ones that come recommended by experts in the field.
If your protective measures fail, quick detection and swift solutions are of the utmost importance when it comes to restoring your website after a DDoS attack. You will inevitably suffer some losses, but you can transfer some of your financial burden to a third party by purchasing a cyber insurance policy. Your insurer will help you deal with the consequences of the attack and investigate the source of the incident to minimize future exposure.
3. Product, Warehousing, and Logistics Risks
Some of your eCommerce risks are connected to the products or services you sell and things related to your supply chain. Even if you’re not selling your own products or don’t own warehouse space or transportation vehicles, you are in the distribution chain. Remember that you can be held responsible for any malfunctions, delays, or mistakes. These are some of the risks you face related to your products or services:
- Product malfunction risk: Whether you’re selling tools, kitchen equipment, or software, you could be held liable in the event of their malfunction. Injuries resulting from defective products and failure to provide adequate warnings or instructions for the product or service are the most common reasons for liability claims.
- Warehouse risks: The warehouse where you store your products is also an important part of the distribution chain. Any kind of unfortunate event, like a fire or a flood, can cause serious financial harm to your business. A simple case of excessive humidity can damage your products and you could end up losing a lot of money.
- Logistics and customer experience: Buyers like to know when you will deliver their order, so setting deadlines and keeping them is crucial to the customer experience. Any disturbance in the delivery process means that you risk missing delivery dates and losing your clients’ trust.
Picture 3. Any disturbance in the delivery process means that you risk losing your clients’ trust
Mitigate the Product, Warehousing, and Logistics Risks
Here are some of the areas you’ll need to focus on in order to mitigate these risks:
- Hire quality control experts: Having a team that is focused on the quality of products you’re selling could lower the risk of product malfunctions. However, production glitches are not something you can fully control. There is always a possibility of some kind of product failure occurring. This is not limited to businesses that sell physical products. Services should also fulfill quality requirements and customer expectations.
- Use inventory management software: Inventory management software is a helpful tool to make sure you’re keeping track of your inventory and products. That way you always know what you do and don’t have in stock. This will help you deliver customers’ orders on time. Also, it will save you from the many inconveniences that can arise from poor inventory tracking.
- Good customer service: Customer service is one of the crucial departments in any eCommerce company. Especially, when it comes to mitigating the consequences of any malfunction or mistake. Always try to exceed your customers’ expectations to ensure they’re satisfied with your company and its products or services. Maybe the omnichannel platform is a great start!
- Buy adequate insurance policies: Insurance is there to provide you with support and peace of mind in the case that liability claims arise. Product liability insurance responds to claims related to product malfunctions and the resulting injuries. If you own a warehouse or any storage facility, you should also consider buying commercial property insurance. It will cover any damage to the building itself and to the goods stored in it. If you’re selling a service or an intangible product, think about purchasing a professional liability policy that would respond to claims from unsatisfied customers about the service you provided.
You can implement all these steps in a broader risk management strategy that can serve as a guiding policy for all your employees. Ecommerce businesses have a unique risk profile, so your response plan should be detailed and well thought out. Most importantly, it should be tailored to the specific risks of your eCommerce company.
Risk is not something you should be afraid of, but it is something you should take seriously and plan for in advance. Chances are that your business will be more successful in coping with difficulties and unexpected events if you are aware of your risk profile and are taking the appropriate steps to mitigate them both in terms of prevention and response.
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