Running an online business is no child’s play. You have a lot on your plate: keeping the site optimized, driving higher sales, and improving user experience. Amid all this hustle, compliance may sound like just another checkbox. It is indeed a time-consuming task to maintain regulatory compliance.
Did you know that a majority of small businesses in the US are spending a huge chunk of their time on compliance tasks? The truth is that regulatory requirements are increasing each year.
They can easily become a massive headache, provided you have a strategic plan for regulatory requirements as an e-commerce vendor. In this article, we will discuss six ways to stay on top of all regulations and master regulatory compliance.
Understand Applicable Laws and Regulations
There are certain regulations that all e-commerce businesses need to comply with. Then, some are only applicable based on the industry. First, understand which laws are relevant to your business operations.
In general, e-commerce firms must comply with regulations governing data protection, taxes, payment info, import/export, etc. Besides these, you must look to your industry for further guidance.
Certain industries are highly regulated due to the nature of their business. A good example is the healthcare industry, where e-commerce businesses must comply with additional laws surrounding patient safety and waste disposal.
A similar example, but one that may apply to various industry verticals, has to do with chemical regulatory compliance. In recent years, strict laws have been laid down to control and (eventually) eliminate the use of per- and polyfluoroalkyl substances or PFAS. This is due to the chemicals’ toxicity and bioaccumulation.
The PFAS lawsuit has helped raise further awareness, pressuring government agencies to take strict action. The EPA introduced tight advisories for PFAS levels in water bodies, whereas the FDA banned PFAS-coated food packaging.
E-commerce companies selling products containing PFAS must comply with laws that require the removal of these chemicals throughout the product lifecycle. Which companies will be impacted? Those that deal in the following products, as TorHoerman Law points out:
- Non-stick cookware
- Stain-resistant garments or upholstery
- Cleaning products
- Electronics and home appliances
- Cosmetics
Based on your industry and unique business operations, find out which laws and regulations are relevant. Accordingly, you can take steps to maintain compliance. This will help you to navigate global markets and avoid legal repercussions.
Use Compliant Marketing Practices
The world of marketing, especially when digital, is fast-paced and cut-throat. Staying ahead of rivals requires more than just useful products or innovative marketing strategies.
In a rush to expand their digital footprint, many e-commerce businesses overlook marketing compliance. The complex landscape of marketing regulations, though difficult to navigate, plays a crucial role in retaining customer trust and safeguarding business reputation.
E-commerce companies that fail to comply with relevant marketing laws risk losing customer confidence and may end up in legal disputes. There are many ways an e-commerce company may fail to maintain marketing compliance. Some of the most common ones include misleading claims, failure to obtain consent, and non-disclosure of sponsorships, among others.
You cannot afford to join the list of those who suffer the consequences of non-compliance. So, here’s what you need to do:
- Avoid false or misleading advertising claims. Ensure all product descriptions, testimonials, and offers on your website are truthful.
- If a product is sponsored or a part of an affiliate program, disclose that.
- Always obtain explicit, opt-in consent before sending promotional emails, SMS messages, or push notifications.
- Use transparent and accurate pricing, including any extra charges for shipping, taxes, or handling fees.
- Train employees regularly to stay in step with legal requirements and ethical marketing rules.
- Audit your marketing content regularly, including email lists, ad copies, and landing pages, to ensure ongoing alignment with laws.
A recent report found that nearly 75% of Americans believed that businesses following ethical marketing practices would be successful in the long run. However, 31% even believed that present-day companies use more unethical marketing practices than they did five years ago.
You want to leverage the first statistic and avoid falling into the latter category. When you maintain ethical marketing standards, success will follow.
Implement Strong Data Security Measures
This next step is also non-negotiable since e-commerce companies handle huge volumes of sensitive customer data. Every year, the US suffers thousands of cases of data breaches. In 2024 itself, nearly 3,158 cases were recorded affecting 1.35 billion individuals.
Such unfortunate incidents lead to millions in financial loss. Small businesses face the risk of being wiped out of the market. Besides the money, companies stand to lose their reputation and customer trust. A single breach’s negative publicity can make customers seek alternative e-commerce platforms.
In light of the possible damage, it’s vital to implement strong data security measures. They will automatically help with regulatory compliance, too. Let’s look at what data security measures you should take:
- Secure all data in transit using TLS/SSL certificates.
- Ensure your entire website, including its login and checkout pages, uses HTTPS.
- Implement strong two-factor authentication through unique passwords.
- Store sensitive data like passwords and payment info using encryption algorithms.
- Use tokenization to avoid storing raw card information.
- Follow the principle of least privilege by allowing only authorized personnel to access sensitive customer data.
- Conduct regular security audits to patch any vulnerabilities.
- Educate customers about phishing scams and safe browsing.
Provide Accurate and Transparent Product Information
Another crucial aspect of regulatory compliance (briefly mentioned above) involves being 100% transparent with customers. It helps them make informed purchase decisions and prevents costly legal repercussions.
Disclosing accurate product information is something e-commerce companies across all industry verticals should practice. It may take various forms, as listed below:
- Correct product details – Labels must accurately reflect the product’s name, contents, dimensions, weight, and other info.
- Visible display – The details should be visible not only on the product’s packaging but also on the e-commerce website’s product pages.
- Language requirements – Companies are required to use the specific language of their target audience on the labels.
- Words of caution – Information like warnings, risks, and safety instructions should be provided.
Compliance in this area will demand standardized product data entry, high-quality, realistic photos, and honest descriptions. Transparency is particularly important in industries like food & beverage and healthcare.
You can keep refining this strategy based on customer feedback as well as manual/automated audits.
Maintain Comprehensive Records
There’s no escaping comprehensive records for e-commerce businesses. A complete and organized collection of all business-related data is necessary. The data should be supportive of daily business operations, customer service, and regulatory compliance.
This means your company must have accurate records of:
- Payment gateway transaction histories
- Sales and revenue data
- Invoice and receipts
- Contact details and shipping addresses of customers
- Order details and payment confirmations
- Return and refund histories
- Supplier and vendor details
- Inventory info
- Conversion rates
- Legal documents related to business registration and privacy policies
- Staff schedules and payroll information
- Standard operating procedures and internal workflows
The major benefit of such records is that they keep you prepared for any audits or reviews. When done internally, the records streamline the process and help you make informed changes based on accurate details.
External audits may also take place by tax authorities, financial institutions, and regulatory agencies. You can simply offer your extensive records as quick access to the required information.
Auditors will be able to verify the accuracy of reported data, which means you avoid paying heavy fines or penalties. Such a practice also reflects transparency, helping you build a good reputation before auditors and stakeholders.
Generally, auditors review records from several years back. So, it’s good to have a comprehensive archive for historical reference.
Stay Up-to-date With Regulatory Changes
Regulatory requirements applicable to US companies change every year. The George Washington University shares that in 2024, Federal agencies issued a wide number of significant rules and regulations. In April alone, nearly 66 significant rules were laid down.
This only highlights the importance of staying on top of any regulatory changes. If not, you may have mastered compliance in the present year but are at risk of facing trouble in the future.
So, how can you stay up-to-date with the changing regulatory landscape? Below are some effective strategies:
- Subscribe to industry newsletters and legal updates. Examples include updates from the International Trade Administration.
- Ensure you follow relevant government and regulatory websites like the US Federal Trade Commission and local tax authorities.
- Utilize compliance and legal monitoring tools that share legal updates frequently.
- Have regular check-ins with legal advisors.
- Attend relevant webinars, conferences, and workshops that feature regulatory updates.
- Set Google alerts and use hashtags on social platforms like LinkedIn for data privacy updates and so on.
Companies, e-commerce or otherwise, that fail to maintain regulatory compliance pay a heavy price. The International Compliance Association (ICA) shares some of the major screw-ups of 2024. These included big names like Boeing, Hyundai Motor, and Costa Coffee.
Such dishonorable mentions are lessons on the importance of complying with all laws and regulations. The tips we have discussed will make you feel empowered to avoid legal pitfalls and build enduring customer trust.
What Is EcomBalance?
EcomBalance is a monthly bookkeeping service specialized for eCommerce companies selling on Amazon, Shopify, eBay, Etsy, WooCommerce, & other eCommerce channels.
We take monthly bookkeeping off your plate and deliver you your financial statements by the 15th or 20th of each month.
You’ll have your Profit and Loss Statement, Balance Sheet, and Cash Flow Statement ready for analysis each month so you and your business partners can make better business decisions.
Interested in learning more? Schedule a call with our CEO, Nathan Hirsch.
And here’s some free resources:
