Loyola University Chicago School of Law J.D. 2018
The number of Americans who purchase goods online is steadily rising. Recent data published by the U.S. Department of Commerce stated that retail e-commerce had increased by 16.2 percent in 2Q 2017 from 2Q 2016. The report also stated that as a whole retail e-commerce had risen from 3.5 percent of total quarterly retail sales in 2008 to 9 percent as of 2Q 2017. In hard numbers, 2Q 2017 e-commerce generated 111.5 billion dollars in sales. Showing strong growth in under 10 years, these staggering numbers indicate that e-commerce has started to creep up on the traditional brick and mortar (BM) style of retail which has so long dominated the retail landscape. One can only look at the financial data and stock charts of traditional BM stores as well as the REITs that own the malls and land these stores call home to see there has been some effect with this shift.
Amazon broke a record over the 2016 holidays, shipping more than 2 billion items for third party sellers, a 50 percent increase than the previous year. Etsy, a worldwide forum for e-commerce, announced the formation of a Congressional Microbusiness Caucus in March 2017, with bipartisan representation. Amazon and Etsy are two of the most well-known websites for e-commerce, and Amazon is a huge driver of sales and traffic. A recent study shows that the estimates for Amazon’s Prime subscription service have topped 80 million people. This subscription service, designed to streamline the delivery system, also enables faster sales for retailers on Amazon’s site. The growth is obvious and the market is thriving.
With growth comes challenges
There is quite a lot of potential for upside in the e-commerce arena, but every small business owner or inquiring entrepreneur must be aware of the regulations and compliance issues that come along with participating in e-commerce. With every opportunity there are obstacles, and the savvy entrepreneur has to keep all of these in mind, sidestepping the obstacles to latch onto the profits. Understanding potential compliance issues an entrepreneur may face would be highly beneficial.
For some e-commerce sellers, their main interaction with compliance will deal with which state they choose to incorporate in and in what form of business they wish to register as with said state. Possibly down the road, they may need to hire an employee, introducing them to employment regulations. But these are concerns that affect any business or any kind. There are some concerns particular to the e-commerce realm that may not affect a BM store in the same way or at all. Understanding these different concerns and how to address them is the difference between success and finding yourself in a pitfall, wondering what signs you missed. For that reason, the e-commerce seller must stay abreast of changes in the regulations.
What you should know and what you should do
With this in mind, we wanted to create a series of articles touching upon some of the important and immediate concerns for an entrepreneur in the e-commerce field. These articles will be in overview style, with additional places for those interested to delve further into the issues. The topics addressed will apply to both someone starting out in the e-commerce realm as well as someone who seasoned with experience.
The following list (subject to change) are the topics that will be covered:
- The proper way to collect and report sales tax
For the e-commerce retailer, a potential customer could be anywhere, however sales tax varies by state by state. Understanding the reporting rules is paramount.
- Data Management Risks
As someone who sells solely via the internet, it is only natural for an e-commerce retailer to deal with a customer’s sensitive data, such as credit card information, addresses, bank accounts, and other items of data that must be kept secure.
- FTC advertising regulations
Regardless of where a seller is on their journey, whether they’re starting out or they’re entrenched in the market, advertising and marketing is important and valuable for success. This is not necessarily an issue for a seller that is starting out, but for someone who is more established whether they’re selling their own products or reselling, advertising and marketing can be a needed way to drive traffic to one’s site. Staying ahead of the issues is paramount.