Digital marketplaces have made it overwhelmingly simple to open up an online store and sell products online. Between Etsy, Shopify, eBay, and a host of other online marketplaces, it’s never been easier to make your products available for your customer base. These online marketplaces often manage the online legal regulations for starting an online e-Commerce store, but there are times when sellers/shop owners are the ones responsible for knowing and following the rules and regulations for selling.
Before you set up shop and make your first online sales, there are several legal mandates to consider. For example, there are rigorous restrictions for shipping certain products like nail polish, alcohol and dry ice, and if you are operating the business out of your home, you need to know the zoning laws in your state. The following list of things to consider is by no means comprehensive, but here are five legal things you should know before selling online.
1. Have an informative, concise Terms of Service
Your customers deserve transparency about the way your business operates and what rights they have as users. If signing up for your service or purchasing your product online comes with weekly emails, recurring charges or an auto-renewal, this should be outlined in your Terms of Service and presented conspicuously to your customers.
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It is important that customers are given notice of and can acknowledge the Terms before signing up; otherwise, your new business runs the risk of having unenforceable Terms and increase the possibility of a class action suit. Having notifications about the contents and updates of your Terms of Service is an easy way to build trust and transparency with your customers.
2. Protect your users’ data
Just like any retailer, online retailers must have reputable payment gateways. If your online marketplace isn’t using third-party companies (PayPal, CashApp, Venmo, etc.) for payment, it is your responsibility to be compliant with local data protection standards. If you serve customers that are based in the EU, for example, you must protect users’ data in accordance with the GDPR. While the U.S does not have a nationwide privacy law, California law requires web sites that process the data of California residents to follow CalOPPA, and starting in January 2020, CCPA.
Non-compliance is an expensive lawsuit waiting to happen. Become PCI compliant, understand the steps you need to take to encrypt credit card data for your checkout flow and do away with other purchasing data.
3. Insure your product
Whether you’re selling software, a service or materials, it’s important to protect your product or service. In some cases, this might mean having delivery insurance and an exchange policy. In others, it can be as simple as providing customers with a cancellation policy upfront, or a process for service review and feedback.
Good communication is important; no one wants to be left in the dark, particularly a customer in the digital age. Nurture customer relationships like you would any other — with trust and accountability. If everyone is aware of how they are being held responsible in this two-sided relationship, there is less room for legal blunders.
4. Protect your intellectual property
Before you set up your online store or even before you begin selling, it’s crucial that you put legal standards in place about your intellectual property. This means trademarking, patenting and copyrighting your logo, your content, your brand in general. This prevents others from passing off your hard work as theirs. Even more important, putting these legal measures in place will help you double-check that no one else has already claimed your business name. Take the necessary steps to research your product or service, and make it legally official.
5. Have excellent recordkeeping in place
None of the previous four tips matter if there is no record of transactions or of which customers agreed to your Terms before completing the transaction. Easily accessible records of online interactions with customers go a long way in helping you establish expectations between yourself and customers. It is as much for your protection as it is for theirs. Exceptional digital recordkeeping is too often an afterthought and lands companies in hot water. Telling customers how you are protecting them is not enough; your company needs to record when and how customers were notified of your online terms in order for any of your legal efforts to be considered legitimate.
Doing your research and protecting your business before you even start it will help you get further faster and protect you from potential litigation. Starting an online business is easy enough; however, without the proper legal protections in place, you might start losing money before you make it.
As Co-Founder and CEO, Eric Prugh oversees product, customer success, solutions engineering and partnerships at PactSafe, a SaaS company that securely powers high-velocity acceptance for contracts. Prior to his current role, Prugh spent seven years at ExactTarget and Salesforce supporting sales exceeding $30 million in sales, worked for two years in Australia developing the APAC business which grew over 10X during his tenure, and led product and engineering for content management products for what became Salesforce Marketing Cloud.
