5 Important Laws and Regulations You Need to Know Before Starting Your Ecommerce Business

Introduction

Creating an Ecommerce business is a great financial opportunity that one can explore in recent times. The move or craze towards ecommerce has been accelerated by the Coronavirus pandemic. According to one study, the global sales from ecommerce platforms cumulatively hit a little over $3.5 Trillion in 2019. 

Just to put this figure into perspective; of the total retail sales in 2019, 14% came from ecommerce alone. This goes to show that consumers are changing their purchase behaviour and engaging with ecommerce platforms like never before. 

In this article, we are going to look at five important legalities; you need to pay attention to before starting your ecommerce venture. We will also look at why these rules and regulations are important for your business interest. 

Also read: How to Know If Your Business Is Really Profitable

Why starting a New Ecommerce Business is a great idea in present times

The rise of digital and social media has fuelled the ecommerce mind-set of most people. If you have been paying close attention, you will realise how an entire ecosystem has been built around social media and ecommerce. 

For example, you have brands using influencers on ecommerce. You browse social media, see the influencer trying out something new and click on the link. The link takes you to the brand’s ecommerce site (or to Amazon) and you make the purchase. You can also enter the coupon code given the influencer and get additional discounts. 

Digital has made it possible for human beings to find, compare, browse, gather information and buy the product. Ecommerce, along with other digital channels has altered our consumption patterns. Human beings now want the highest quality of products at the best prices and with instant delivery. 

An ecommerce platform, which is able to deliver that can make you the richest person in the world (ahem ahem!). From an economic standpoint, an ecommerce business makes a lot of sense, especially when you do not have to invest in educating the consumers. Bigger companies have already done the same.

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5 Laws and Regulations you need to know before starting your Ecommerce Business

1. State Tax Nexus Laws-

One of the primary rules and regulations you need to be aware of is the State Tax Nexus laws. As an ecommerce company, you will be having consumers in different states within a country. This is where state tax filing become a critical component to ensure the state authorities do not fine you. 

Nexus laws mean that for you need to collect state taxes for your sales from consumers and pay them over to the state. This depends upon the amount of sales and the number of transactions. Ecommerce companies, which do not pay attention to this, can be fined or have their licenses taken away. 

2. Data Privacy Laws-

Every Ecommerce company collects, stores and uses data of its consumers. This can be their names, email ids, addresses, buying patterns and financial details. This not only helps companies make the user experience better, but also engage in upselling through offers, email marketing and other avenues. 

Governmental regulators are very strict on the exact nature of data, which can be collected, stored or processed. While the GPDR is a global benchmark, country as well as state specific data privacy laws do exist. It is important that an ecommerce company pay attention to them. 

3. Trademark, Copyright and Patent Laws-

If you are starting an ecommerce aggregator platform, you will be dealing with multiple vendors. If you are working remotely, then you might not always have an opportunity to maintain strict quality controls. Vendors too can pass of fake as well as counterfeit products as real ones on your platform. 

This might lead to litigation, when a brand comes across its fake products on your platform. In most cases, the issues are surrounding trademarks, patents and copyright infringements. It is necessary to have a clear understanding of them to protect your business from fines. 

4. Shipping and Delivery Laws-

If you have an ecommerce company, shipping, transportation and deliveries will always be at the top of your mind. However, you need to understand that there are multiple governmental laws and regulations when it comes to shipping particular types of products. 

For example, many vendors and states do not allow items like e-cigarettes, perishable goods, etc. within their territory on an ecommerce license. They either are banned, or would require you to take some new permits and licenses. If your ecommerce platform deals with such items, you need to be well prepared in advance. 

5. Consumer Age Restriction Laws-

In most countries, users below the age of 18 are not allowed to use ecommerce or make sales from them. This is why ecommerce companies need to ensure that the signing up process considers this factor. This is something, which platforms dealing with alcohol, and CBD related products need to pay close attention to. 

Selling things to underage consumers or using their data on ecommerce platforms can invite major fines and legal issues. If you want to be safe from such hassles, it is best to set a defined age limit on who can and cannot use the platform. 

Conclusion

While no one likes dealing with so many rules and norms, the fact of the matter is that there is no escaping them. Ecommerce companies have to adhere to a long list of regulations, if they plan to have a handsome presence. It is true that there are many more regulations, which can be added to the list above. However, as a start, experts feel that these five are form an important starting point.

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