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BizReport : Ecommerce archives : August 24, 2017

Challenges 3rd Party Sellers must address

Ebay, Amazon, Etsy, and many other sites make it easy for third party sellers to make a living. But there are risks to 3rd party selling that merchants must address or face losing their income and business.

by Kristina Knight

Kristina: We're continuing to see 3rd party sellers coming to sites like Etsy, Ebay, Amazon, etc. What is driving this trend?

Ted Devine, CEO, Insureon: Third-party sellers are flocking to sites such as Amazon, Etsy and eBay because that's where consumers are headed, too. The number of online shoppers grew by nearly 20 million between 2015 and 2016, while the number of online transactions rose by 115 million. And e-commerce will continue to grow; Business Insider Intelligence estimates U.S. consumers will spend $632 billion online in 2020 alone (up from the $383 million spent in 2016). Consumers driving this trend are opting to shop online for convenience and the ability to easily and quickly compare product costs and other factors.

Kristina: Are there any risks to 3rd party sellers using these types of sites?

Ted: Though they're often overlooked, there are a plethora of risks involved with selling on third-party sites. One of the biggest risks is that third-party sellers often do not consider themselves small business owners, and rarely even view their operations as a business. As a result, they often forget that the same rules and regulations controlling traditional retail companies apply to them, and therefore fail to take the necessary steps to protect themselves and their businesses.

Another risk third-party sellers face is that they are not guaranteed insurance. Sellers' products and their businesses are not automatically protected by the channel (or organization) through which they sell, so they need to seek out coverage on their own. Third-party sellers also often overlook the pure risk associated with selling to consumers, particularly if they make products themselves or re-brand products in their name. If a product causes a customer any harm, injury or sickness, the seller can be held liable. As a result, sellers can often face costly lawsuits that jeopardize their business' well-being.

Kristina: What trends are you watching with 3rd party selling?

Ted: The main trend I'm keeping an eye on is rise of counterfeits and unauthorized reselling on Amazon and other third-party sites. If sellers obtain products for their goods from other third-party vendors, they need to ensure those merchants are authorized and insured. Otherwise, sellers could run into issues if their items sold contain counterfeit parts, as they would be held liable for any harm or injuries caused.

To protect themselves, I recommend that sellers review vendor contracts to ensure they're not selling or reselling counterfeit or unauthorized products to their merchant customers. Additionally, sellers can bolster their own insurance coverage, ensuring that they're protected against vendors' product issues. A product liability plan, which covers risky situations such as product injury lawsuits, illnesses caused by toxins in products and property damage caused by defective products, is a good plan to start with. But before investing in any policy, talk with your insurance provider to find the right plan for your online store.

Tags: 3rd party selling, ecommerce, ecommerce tips, ecommerce trends, Insureon

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