7 Minute Read

In this piece, we will highlight the nuanced and exponential challenges of eCommerce in regulated industries to showcase how those challenges can be addressed and even averted. We will also cover what questions eCommerce retailers in this space should be asking themselves and eCommerce agencies they may be evaluating to position their business with the right strategic eCommerce agency partner.

What is a Regulated Industry?

Regulated Industries sell goods that come with certain rules governing how a company may market-specific products and product categories online. These regulations determine how, where, and to whom products are marketed. Among others, these industries include Firearms, Alcohol, CBD and THC, Vitamins, Pharmaceuticals, temperature-controlled Food and Beverage, and Tobacco. Regulations governing eCommerce are propagated by a number of governing bodies and agencies throughout international, federal, state, and local levels of government.

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In a landscape of ever-changing laws and guidance and with special interest groups, lobbyists, and corporations having a hand in how these industries do business, retailers have to keep a constant eye on regulations to ensure they stay on top of doing business appropriately and legally. If they aren’t, eCommerce retailers subject themselves to a wide array of consequences including fines and having to shut down their online stores.

The Most Pressing eCommerce Challenges Regulated Industries Face

Regulations have a tendency to change with administration changes, from federal all the way down to the local level. Also, with corporate lobbyists and special interest groups who promote new products, legislation can change swiftly and sometimes quietly. Addendums and riders to somewhat unrelated laws are common and sometimes unannounced. It is vital that business owners remain in tune with such groups and corporate interests in order to stay ahead of coming changes. It is also imperative that eCommerce agencies specializing in regulated verticals also keep a close eye out in order to stay informed and speak the language.

Retaining brand loyalty in regulated industries goes beyond consumers simply preferring one brand over another. Generally, customer retention is attributed to things like clean, flat layouts, mobile integration, simple searchability, enticing product imagery, and overall optimal ease of navigation. But customer retention is more nuanced in the regulated space and can be attributed to far more than just the UX.

Highly discerning consumers may note that a company utilizes a platform that doesn’t support product sales for all products available in a regulated industry. Highly enthusiastic consumers of regulated industries such as firearms or THC may boycott a site if they know the platform prohibits the sale of any of those items.

All this (and more) is why connecting with an informed and in-tune eCommerce partner is key to helping you navigate these nuances and elevating your brand loyalty.

How COVID-19 Affected eCommerce in Regulated Industries

With the global shuttering of brick and mortar stores due to COVID-19, business owners had to either ramp up their online store presence or delve into eCommerce for the first time.  Due to the fact that some regulations prevent shipping items across state lines, to certain counties, or even at all, regulated industries were impacted more than those that are unregulated.

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Firearms retailers, for example, had to learn how to ensure the legal online sale of weapons and accessories which included finding the right platform that allowed the sale of their products (i.e. some platforms allow the sale of handguns but do not allow the sale of semi-automatic weapons). These businesses also had to determine a process for safe in-store/curbside pickup as firearms and many of their accessories are federally banned from being shipped.

This same example also applies to the sale of CBD, Hemp, and THC products. With so many businesses shuddering during the pandemic,  in order to ensure continued tax revenue, laws were passed in some states allowing the sale of these items. This created considerable opportunities for new businesses to begin selling these products but required them to know the law, sell within the law, and learn how to safely and legally get their products to the consumer.

Key Factors in Building a Regulated Industry eCommerce Website

One of the most crucial factors in building a regulated industry eCommerce site is having an eCommerce agency that understands that industry from the get-go. This prevents businesses from spending time and money having a site built that not only does not serve their needs but also does not follow applicable laws and puts that business at risk of being shut down.

Finding the right agency to design an eCommerce site and remain a strategic partner who speaks the language whenever a business owner has questions is vital. The right agency not only guides business owners to platforms that best fit their business and answers questions swiftly with informed responses but also asks the right questions to make sure all appropriate business logic is incorporated into the eCommerce experience, ensuring the continued legal sale of regulated items.

The right eCommerce agency partner guides business owners through the decision of whether to utilize a Hosted eCommerce solution or to employ a SaaS platform. With a multitude of options available, such as Adobe Commerce powered by Magento, BigCommerce, Salesforce, Shopify, WooCommerce, and more, it can be overwhelming for a retailer to navigate and decipher the eCommerce platform to best support their current needs and future online growth.

SaaS vs. Hosted and What That Means

The biggest difference between these two options is functionality and control. 

SaaS options are typically faster to implement and offer more out-of-the-box features, the platform can be more easily maintained by the online store owner, and the upfront costs are generally lower. The benefits of SaaS come at the cost of a level of control and scalability more available by hosted eCommerce solutions. One result of this is that online retailers may find it more difficult to customize and fine-tune their customer journey with a SaaS platform making the sale of regulated inventory more difficult. 

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Hosted options also offer a plethora of out-of-the-box functionality but typically require significantly more development muscle. The choice to use a hosted solution means an online retailer may see higher initial investment and ongoing maintenance costs. Therefore, hosted solutions may not be the best option for smaller cash-conscious businesses still in the early phases of business. These costs include the purchase of the software, the back-end infrastructure costs, and development expenses. The expectations of growth should inform what these costs should be. A poorly developed or supported site could cost a retailer significant dollars in lost sales or costs to sustain with the growing inventory and website traffic. More importantly for those in regulated markets, a development company ill-equipped to navigate the world of regulation might cost their business months of income. 

It’s also important to note that some eCommerce platforms prohibit the sale of certain regulated items and/or their accessories. For example, Shopify, a SaaS platform, has banned the sale of some firearms and firearm accessories, whereas SquareSpace has never allowed the sale of any firearm whatsoever since the platform’s launch. Cigarette products are not allowed to be sold online at all, on any platform, but cigars are permitted for online purchases, depending on state and local regulations.

The decision to go with a hosted solution or a SaaS eCommerce solution could seem daunting. However, the online retailer that understands its business and future growth goals should be able to evaluate options and answer this question with the support of a qualified eCommerce agency partner.

To read more on SaaS vs. Hosted, check out our blog.

Enlisting the Services of an eCommerce Agency is the Smart Solution

Enlisting the services of an eCommerce Agency to provide guidance, build the best regulation-minded framework for a business’s eCommerce site, and remain an optimal strategic partner through changes in the regulatory landscape is always a Smart Solution. But how can a business owner know which agency is right for them? How does an online retailer decipher between an experienced and an inexperienced agency within their regulated vertical? The easy answer is this: Ask the right questions.

The first questions can actually be answered by visiting an eCommerce agency’s website prior to any conversation. If a company in business to sell firearms on their eCommerce site finds an agency professing to have experience in the regulated industries space but has a portfolio consisting only of Beauty and Fashion customers, this may not be the most appropriate agency for that business to partner with.

The next step, after reviewing the agency’s website and determining that they may be a contender for that business, is asking questions specific to their industry. Ask questions regarding challenges in a particular type of vertical, whether the agency has experience with shipping restrictions and hazardous material, or dealt with proof of age verification before customers can make a purchase. If the agency can answer these questions, can speak the lingo, and doesn’t need a hefty level of education on a business’s regulated industry, this is most likely the solution partner they’re looking for.

How Much Does Employing the Service of an eCommerce Agency Cost?

When exploring the cost of an eCommerce agency working in regulated industries, the company will undoubtedly receive estimates from agencies that mirror those provided for unregulated verticals. Like anything that is too good to be true, evaluate those agencies with a healthy amount of skepticism. The fact is, understanding regulations is only part of the equation. The eCommerce website has to be built to support the regulated transaction and subsequent distribution of the product. Ultimately, the difference actually comes down to the experience of the agency which is why asking the right questions is so important. 

The costs of selecting an inexperienced eCommerce agency can be astronomical. One example would be having your agency almost complete the design of your firearms-focused eCommerce site. Then you discover they did not know to implement capacity restrictions on ammunition magazine purchases. This will delay your site from going live and generating revenue which will cost you money each and every day it’s not online. This could have been prevented had you selected an eCommerce agency familiar with your business's specific industry and the items sold within your vertical.

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Another example would be if a business sells finishing materials (“a coating used in the wood furniture industry, including basecoats, stains, washcoats, sealers, and topcoats” according to LawInsider.com) but that business doesn’t think to mention to their agency that those materials are considered hazardous which means they can’t be shipped by air. An experienced agency would recognize that, ask the right questions, and build the framework within the eCommerce site that only allows for that item to be shipped ground. This ensures the site is built correctly from the start which saves on time and cost and prevents the business from being fined or even shut down for shipping violations.

TL; DR

Regulated industries with an eCommerce presence walk a fine line in staying up to date with the ever-changing landscape of laws that apply to their industry. From nuanced shipping methods that apply to certain states or counties but not others, to materials that can only be shipped via ground vs. air, to items that can only be sold online but must be picked up by the consumer in person with identification, and even to some items not allowed to be sold online at all, it can be difficult to keep up with changes. With all this to keep in mind, the last thing a business wants to learn or worry about is placing its eCommerce business on a platform that isn’t optimal for their vertical or in the hands of an inexperienced eCommerce agency.

The best thing any business in a regulated industry that's interested in developing or increasing its eCommerce presence can do is ask the right questions and align with an eCommerce agency that has the experience and knowledge to tend to their every need and remain their strategic partner throughout any regulation changes that arise.