What Are Your Risks with Online Supplement Sales?

What Are Your Risks with Online Supplement Sales?
Online sales for dietary supplements have continued to increase over the last several years as more and more of the buying public move toward a digital retail experience. As much as there is a transition from brick-and-mortar establishments, retail companies need to make sure that they have the correct liability coverage for working in this new internet marketplace. 

 

Larger dietary supplement (DS) and nutraceutical companies may have the resources to build and maintain their own online sales distribution programs. However, it is far more likely that smaller companies will use the existing infrastructure of the big online retailers. This last year, Walmart.com saw a significant uptick in their online DS retail presence and it is probably safe to assume that competitors like Amazon.com and Jet.com will have growing presence in the industry in the years to come.

 

As more and more of your future business moves into cyber transactions, what do you need to know about your insurance coverage prior to signing up to sell your product through a large online retailer? Here are some tips:
  1. This is an excellent time to expand your business into the online retail marketplace. The costs of entry of being an online dietary supplement company is far less than its physical counterpart, and the reach of potential customers is far wider. Additionally, the industry has benefited from a period of low claims, which have kept insurance rates down and more affordable to retailers.
  2. It is important to know that the liability insurance requirements for various online retailers will all be different. Factors such as company size, volume of sales, types of products and included ingredients will determine the expected insurance coverage that you will need. Also, don’t assume that the coverage expected by Jet.com will the same as Amazon.com or Walmart. Each company will have their own expectations for a General Liability policy which may require you to make some adjustments to your coverage.
  3. Each of the online retailers will have different ways of enforcing their liability requirements. Some are relaxed with little or no enforcement, while others are quite strict. Keep in mind that it is important to disclose any contracts with online vendors with your insurance broker so they can ensure your policy will meet all of the vendor requirements.
In the next few years, it will become more and more common for retailers to do business either partly or wholly online. By expanding a company’s potential customer base and reducing the necessary infrastructure required for being a viable business, the potential rewards are enormous. However, one barrier to entry for all online businesses will be having the correct liability policy to offer the right Additional Insured coverage that may be requested.

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Having appropriate coverage within the dietary supplements industry is crucial to protecting your reputation and business. For more information about common dietary supplement insurance issues, check out our resource page. If you have further questions, please feel free to reach out to me or Greg Doherty at the Bolton Dietary Supplement Group at 626.535.1459.

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Chris Morey

About Chris Morey

Chris is a Certified Sports Nutritionist who focuses on the needs of clients within Bolton’s Dietary Supplement Practice Group. With more than seven years of customer service experience, Chris looks to find the right insurance solutions for his clients in the Health and Fitness industries.

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