Operating an e-commerce website creates plenty of opportunities, but it also comes with legal responsibilities. For instance, offline businesses are familiar that operating a bricks-and-mortar store comes with legal obligations, but they often forget that similar obligations apply in the online e-commerce business environment.

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Expected e-Commerce sales growth

Expected growth of retail e-Commerce sales worldwide up to 2025

How are traditional businesses faring against online retailers? While there are still consumers that prefer to shop in-store, especially for specific types of goods, there’s no doubt that online shopping is taking over. There was a sharp decline in online sales shortly after restrictions caused by the pandemic were eased. However, online spending still remained higher than it was before Covid-19 hit.

How e-commerce sales has performed in pandemic times? According to Statista data, e-commerce sales are expected to reach $6.3 trillion by 2024. In comparison, the worldwide sales from e-commerce were $4.28 trillion in 2020. 2021 is expected to end with $4.89 trillion in worldwide sales.

Whether you are trying to maintain your brand reputation and e-commerce business growth, please introduce a friction-free returns process, manage your cash flow, and reduce your process liabilities. This post provides some top tips on avoiding some of the most common e-commerce pitfalls we see.

1. GDPR compliance is a must

Compliance can be quite time-consuming you’ll need to do a mapping exercise, and understand where your data flows to, and all the third parties that have access to it. Doing this once and getting it right can help in the long run make sure that you can use GDPR as a tool rather than seeing it as just a regulatory hurdle to jump over.

Have GDPR and data protection had a huge impact on e-commerce businesses? Their impact is far-reaching covering things such as cookies, your choice of courier, your choice of payment gateway, and so on. Getting it right can have a huge benefit for the business enabling you to use exciting analytic tools.
But, getting it wrong can be disastrous especially as the consumers become more and more aware of their rights.

GDPR compliance impact

GDPR compliance impact

The e-commerce industry is regulated by digital customer data privacy laws such as CCPA, Data Broker Registrations, and GDPR among others. You must comply with the privacy laws applicable to your business, to avoid potential legal penalties and reputational damages.

It’s easy to use your e-commerce business platform to target consumers overseas, but, before you do so, have your eyes open to the risks and responsibilities, as well as the opportunities. For instance, by making small amendments to your website (e.g. by changing the currencies that you accept), you may find yourself opening yourselves up to liability to laws in other territories.

2. Be transparent on returns

Customers like to see your returns policy set out in a separate document, so align your website to the customer expectations as quickly as possible. The law also requires you to use cancellation forms and to clearly communicate how the returns process works. This should be communicated both in your terms, but also in the emails you send your customers as part of the order process.

Return policies that prevent people to buy

Return policies that prevent people to buy

Remember that if you want the customer to pay for the return costs of non-faulty items, you should set this out at the beginning. And do not forget that in the online environment consumers can return goods even when they are not faulty, with very few exceptions, just because they have changed their mind.

Shoppers behavior conditioned by your refund policy

Shoppers’ behavior versus refund policy

You must have good processes in place to communicate with your consumers through every step of the journey. Much of this can be automated in the use of emails or designated account areas in a common way to do it. You should tell them when you are taking payments when you are shipping goods. You should communicate a cancellation form and your returns policy. Make sure that they can, at a glance and very easily, find all the information they need to identify, like

# Who they are dealing with
# Their rights if things go wrong
# How much they are going to pay
# When they are going to receive the goods

Return rates in retail and ecommerce

Return rates in retail and e-commerce

3. Terms And Conditions Of Sale is a must

When a customer buys from you in the online environment, handing over their cash, they are taking a leap of faith. The law requires you as a business to put certain mechanisms in place to reinforce that faith, much of this needs to be dealt with in your Terms And Conditions Of Sale. This document needs to be clear as well as concise as possible and free of jargon.

The law requires you to have certain provisions included within your Terms And Conditions Of Sale. If you do not do this, your customers can return – with very few exceptions – the goods that they purchase for up to 54 weeks from the date of purchase. And, obviously, this can have a huge negative impact on your cost flow. Whilst it is a huge risk it can be easily avoided by making sure that your terms and conditions properly address the issue.

Remember though that there are certain provisions that you are legally required to deal with. Your terms should be a tool helping to make the customers’ journey as smooth as possible, do not bury them at the bottom of the site – be proud of them, and put them in your own voice so that they mirror the rest of the site. Don’t be afraid to use summary sheets either.

4. Terms And Conditions Of Use is a must

When running a bricks-and-mortar site you would have various obligations to your customers, think for example your obligations to look after their physical safety whilst they are on your premises. You would also expect the customers to follow certain rules whilst on your premises and it is no different on an e-commerce site.

On an e-commerce site, the easiest way to set out the ground rules on which a consumer can visit the site is to set them out in what is called the website’s Terms And Conditions Of Use. Website’s Terms and Conditions Of Use can be really helpful in stopping people from committing copyright infringements, linking to your site when you do not want to, or using your site for other nefarious purposes.

Free privacy policy

Free privacy policy

Such a document applies regardless of whether the customer buys anything from the site and simply says what they can and cannot do whilst at the site. Well-drafted website Terms of Use will also help you to comply with a number of your legal obligations, such as making it clear to the customer who they are dealing with. Some popular websites generate Terms Of Use and Privacy Policy for free, check them out.

5. Be careful with stock control

How you dispatch goods and when you take online payment matter a lot. For instance, taking payments for goods that you are not yet ready to dispatch can create major headaches for your e-business, mainly if your customer later tries to cancel their order. This issue may be usual in e-commerce stores based on the dropshipping model. Stор lоѕіng mоnеу frоm poor inventory mаnаgеmеnt. Learn seven іnvеntоrу management tесhnіԛuеѕ to maintain optimal stock levels:

1. (a) Calculate your inventory turnover ratio

Your inventory turnover is the rate at which your brand replaces inventory in any given sales period. A low inventory turnover can be indicative of weak sales or declining demand for your product. While a high inventory turnover would typically indicate products are selling fast and your goods are in strong demand.

Inventory Turnover Ratio = Cost of Goods Sold / Average Inventory for Selected Sales Period

2. (b) Run an ABC inventory analysis

Using the formula below to run the ABC inventory analysis for your entire inventory, you’ll be able to determine “the inventory value for each product”. And then, “Which category do your inventory items fall into?“, “which products deliver the highest value“, and “which items have the greatest impact on inventory cost”.

Annual Usage Value per Product = Annual Number of Items Sold * Cost per Item

Using the Pareto Principle, this analysis identifies the 20% of inventory that delivers 80% of the value as the products in your A category. Then, you should prioritize the products in the A category in your inventory management. Three categories are defined based on each product’s perceived value: A, B, and C.

# Products in category A: High-value goods deliver ~ 80% of the inventory value and comprise 20% of your inventory
# Products in category B: Medium-value goods deliver ~ 15% of the inventory value and comprise 30% of your inventory
# Products in category C: Low-value goods deliver ~ 5% of the inventory value and comprise 50% of your inventory

2. (c) Avoid just-in-time inventory

Just-in-time inventory is the process of producing an item only after a customer has placed an order. It keeps inventory levels low and cuts costs mainly for e-commerce start-ups or businesses unable to hold a large stock due to capacity or cash flow restrictions.

But, this management strategy may fall victim to both Supply Shocks (i.e., when there’s a sudden increase or decrease in the price and availability of raw materials), and Demand Shocks (i.e., when companies are unequipped to handle a sudden surge in demand for a product, resulting in unexpected delays, dissatisfied customers, and inability to fulfill orders at all).

2. (d) Plan your seasonal inventory

Many online retailers find product sales peak at certain times throughout the year, such as Black Friday or Christmas. Therefore, it’s important to lay out your inventory to account for seasonal peaks and drops. You can manage your seasonal inventory by:

# Calculating inventory expenses and how to manage the flow of seasonal stock
# Tracking historical data to determine product life cycle and demand at seasonal periods
# Automating orders and stock transfers to maintain optimal product stock levels
# Using the seasonal period to sell surplus stock at a markdown price or as a bundle

2. (e) Stay on top of your 3PL inventory

For large e-commerce, managing the supply chain can be both challenging and costly. Any errors or delays in the logistics stage can negatively impact the business. Third-party logistics (3PL) inventory management can alleviate such issues. Don’t simply outsource your inventory management to a 3PL partner and hope for the best. Rather keep analyzing performance and making sure your 3PL is

2. (f) Install an inventory control system

An inventory control system measures inventory levels (tracking the goods through the supply chain) and the cost of goods sold (COGS), to maximize inventory value and performance by keeping costs in check. The inventory control system can be:

# Manual inventory: A physical stock count is done frequently. It is the least accurate management and consumes the most time, money, and resources
# Periodic inventory: A physical stock count is done at set periods, usually quarterly or annually, which makes the report both outdated and inaccurate
# Perpetual inventory: Update inventory levels continuously and automatically every time a product is sold or received

2. (g) Switch to perpetual inventory asap

With perpetual inventory management, you’re able to see how much stock has been sold or received in real-time. It’s the most sophisticated inventory control system that allows you to automate numerous key activities, making your inventory flow more efficient and your life easier.

For example, the automatic update of reorder points as sales increase or decrease helps ensure optimal inventory stock levels at all times. It also recalculates the COGS each time a product change occurs, and purchase orders are automatically generated and sent to your supplier, which removes the middleman.

6. Don’t infringe the intellectual property

You could easily find yourself falling foul of intellectual property laws in e-commerce. For instance, if you are selling a brand product registered in the U.K. that is not registered overseas and you ship to territories outside the U.K., you could be committing an intellectual property infringement. Do your research, understand the laws in the territories that you want to ship to, and take advantage of the opportunities while staying on the right side of the law.

Let’s suppose you want to sell t-shirts with Star Wars characters on them, you will need to obtain the appropriate consent to avoid any legal issues. Similarly, you may be afforded legal protections that prevent other brands from using your intellectual property without your consent.

Here’s how the U. S. Patent and Trademark Office categorizes intellectual property:

1. 1. 1. - # Trademark: A word, phrase, symbol, and/or design that identifies and distinguishes the source of the goods of one party from those of others
      - # Patent: A limited duration property right relating to an invention, granted by the U.S. Patent and Trademark Office in exchange for public disclosure of the invention
      - # Copyright: Protects works of authorship, such as writings, music, and works of art that have been tangibly expressed

Some of the applicable copyright laws to e-commerce stores include any unique aspects of a custom e-commerce platform (e.g., a source code) that can be protected by patents and copyrights. As well e-commerce website design elements such as logos, custom illustrations, and visual content (including posts for social media) may also be protected by copyright laws such as Digital Millennium Copyright Act (DMCA).

In practice, some people adopt third-party services like a DMCA badge to protect their website content. A DMCA badge is a seal of protection placed on your website that deters thieves from stealing your content. With a registered badge, you have access to the tools, resources, and support to swiftly takedown any website that steals your content.

Protecting your original content

7. Protect your software, text, and images

Software code, content, and images on your site will most likely be protected by copyright. Copyright is a right that does what it says on the tin. It enables the owner to stop copying. The owner is likely to be the person that put pen to paper, the software developer, the marketing company, the photographer, the person that created the work, etc.

If you want to own the copyright, so you should make sure that you have control over it and the flexibility to use it commercially as you wish. You need to put in place an IP assignment with the person that created it.

How to protect your original content

Protecting your original content

8. Don’t infringe the images/text copyright

Even when you inadvertently infringe the third-party intellectual property, it can land you in hot water. Just because images or text are readily available online to right-click, copy, and paste, it does not mean that you should do it. If doing so, it is still a copyright infringement where you do not have the copyright owner’s consent.

The latter statement even applies to product images through e-commerce stores. Make sure you have differentiated the content of your website. Actually, aiming to reduce the risk of copyright infringement, you should rather produce your own images of products and/or services that you are planning to sell.

Gооglе regularly receives requests frоm соруrіght оwnеrѕ to rеmоvе ѕеаrсh results thаt lіnk tо соруrіght іnfrіngіng mаtеrіаl. In thе wееk оf Nov 5, Gооglе rесеіvеd 1.98M ѕuсh rеԛuеѕtѕ, аn аll time hіgh аnd a tenfold increase frоm оnе year аgо. Amоng the tор rероrtіng organizations were thе Recording Induѕtrу Aѕѕосіаtіоn оf America, thе British Rесоrdеd Muѕіс Industry, NBC Unіvеrѕаl аnd others companies ѕресіаlіzеd оn соруrіght protection.

The RIAA alone rероrtеd mоrе thаn 4.5M іnfrіngіng URLѕ to Gооglе. Thus, in Aug 2012, Google announced a сhаngе tо its ѕеаrсh аlgоrіthm thаt wоuld реnаlіzе dоmаіnѕ thаt hаvе been vаlіdlу ассuѕеd оf іnfrіngіng соруrіght. Whіlе content оwnеrѕ welcomed the decision, оthеrѕ wеrе ѕсерtісаl аnd fеаrеd thаt many sites could bе dе-rаnkеd bаѕеd оn unjustified copyright claims. Nowadays, Google still claims for relevant and unique content to rank websites.

With regard to textual information, you can prevent your business website from being accused of plagiarism (also called duplicate content) on the web. By definition, plagiarism іѕ the representation оf another реrѕоn’ѕ wоrk as one’s оwn. You can easily check for duplicate content on the internet just by using a number of free and paid plagiarism checking tools available now, such as

1. 1. 1. - 1. DupliChecker
      - 2. Grammarly
      - 3. Paperrater
      - 4. Plagiarisma
      - 5. Search Engine Reports
      - 6. PlagTracker
      - 7. Plagium
      - 8. CopyLeaks
      - 9. PlagScan
      - 10. Unicheck

9. Comply with the rules on marketing

Your web content and social media posts are all forms of marketing and as such, they need to comply with the rules on marketing.

1. 1. 1. - # If you make statements about your business’ products or services, be sure they are open, honest, and transparent
      - # If you make comparisons between your business and another one, be sure it is fair and in compliance with the rules. Don’t fall foul of any trademark legislation
      - # If you make objective statements that can be assessed, be sure you have the evidence to back them up (e.g., if you say that product X is the most popular line you need to have the evidence to statistically prove this)
      - # If you publish posts on social media, make it clear if there is a commercial connection between the person making the post and the post (e.g. a business owner posting about how great their business is could soon come into hot water if he doesn’t make it clear that he is the business owner)

10. Register your trademark

Trademark registration

Trademark registration

Whаt is a Trademark?
A trаdеmаrk іѕ anything thаt helps уоu identify the ѕоurсе оf a рrоduсt, іnсludіng a word, name, ѕуmbоl, dеѕіgn, ѕlоgаn, dеvісе, оr аnу соmbіnаtіоn оf thеѕе іtеmѕ. It соuld be something аѕ simple аѕ уоur ѕtоrе nаmе, the dіѕtіnсt соlоr оf уоur product, your lоgо, оr еvеn your mаѕсоt.

For еxаmрlе, Nіkе’ѕ famous ѕwооѕh appears оn аll of its fооtwеаr аnd оthеr products. It’ѕ trаdеmаrkеd аnd wаѕ fіrѕt аdорtеd as thе оffісіаl lоgо bу thе brand іn 1971. A student сrеаtеd іt fоr $35, аttеmрtіng to соnvеу “motion in іtѕ dеѕіgn.” Sіnсе thеn, аѕ Nіkе hаѕ grоwn, thе lоgо hаѕ accumulated ѕtаndаlоnе equity аnd rесаll value. It is now bесоmе іnѕtаntlу recognizable.

Many businesses fail to protect their reputation by registering their trademark. Many internet business owners believe mistakenly that they do not need to do this. They think instead that they are covered by domain name registrations, company name registrations, or trading history.

Only a trademark registration gives a government-endorsed monopoly, which enables you to stop other people from using an identical or similar marking respective identical or similar goods and services.
Consider getting your trademark registered as soon as possible to help you manage your reputation both online and offline.

Hopefully, this article has helped you to understand how online compliance can help you stay on the right side of the law, add a competitive edge, and reduce your risk when managing an internet business.

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This material is for informational purposes only and does not constitute legal, tax, professional or financial advice. PLIM Agency disclaims any liability with respect to this material, and the information on this website may not constitute the most up-to-date legal or other information. The information on this website is not a substitute for, and does not replace the advice or representation of, a licensed attorney or other professional. Please consult your attorney or professional advisor on specific legal, tax, professional or financial matters. All liability with respect to actions taken or not taken based on the contents of this site are hereby expressly disclaimed. This website contains links to other third-party websites. Such links are only for the convenience of the reader, user or browser; PLIM Agency  does not recommend or endorse the contents of the third-party sites.

10 Online Business Laws for Ecommerce Website