How to Minimize Risks in Online Business


By Jayaram V

In my experience, I found the most troublesome customers are those who make mistakes in choosing their products and services or those who do not pay attention to detail and later complain that they have been misled. In case of online business, such mistakes are more common and so also complaints from customers want to pass on the cost of such mistakes to the sellers. If you are doing online business, you know how difficult it is to protect your online reputation. Years ago, Amazon introduced customer reviews and the practice was picked up later on by several. While the reviews help new customers to make intelligent purchase decisions, they also make many online merchants vulnerable to threats, fraudulent claims  and bogus complaints. It is very easy for a customer to threaten an online merchant with a bad review and get away with it. If you want to spoil the reputation of an online merchant, you have many avenues available to you to do it and you can leave behind a trail of destruction which will be difficult for the merchants to erase. While big companies may manage to deal with such situations with the help of money and a team of lawyers, small merchants and fledgling companies have fewer options to deal with them and survive.

Friction points

Here are a few instances how online businesses can come under pressure.

1. A Customer chooses a wrong product. After the product is shipped, the customer informs the seller that he or she was shipped a wrong product. The customer would blame the merchant for providing false information or wrong information, even though the product information is showing correctly the product details. For example, in one instance, a customer ordered an artificial bamboo plant and later complained that she received an artificial plant instead of a real bamboo plant! That particular site specializes in selling only artificial plants and therefore it was not clear why the customer thought she was buying a natural plant while the product itself was placed in the category of aritificial plants. Returning the plant back to the warehouse meant heavy shipment costs, since the plant was about 6 feet and weighed over 15 pounds and the customer demanded that the merchant should bear the entire two and fro costs, since it was their fault!

2. Customer provides a wrong billing address. The shippers fail to deliver the product at the address since the address does not exist or the place is vacant. The shipper may or may not return the package back to the merchant or the new occupant at the address collects the package and does not bother to return. Customer demands full refund or files a chargeback stating that she did not receive the product. Since no signature was obtained, which is usually the case fo small packages, the merchant ends up refunding the customer.

3. Customer complains two or three weeks after delivery that she did not receive the packagte although the tracking information clearly shows that the package was delivered at the specified address. Obviously someone stole the package from the mail box or from the multistory apartment complex where the customer lives. Merchant is forced to refund the entire amount, since no signature was obtained at the time of receipt of the package, whch is again the norm for most small order items.

4. Customer places an order, but forgets about the order. A month or two later contacts the bank and raises a chargeback. The merchant is forced to fax all the documents to the banker to prove that an order was placed and fulfilled.

5. Customer places an order for an expensive product. On receiving it she decides to return the item. She reviews the merchant's return policy and notices that the return costs are to be paid by the customer. She calls the merchant and demands that the shipping costs should be paid by the merchant because she received a defective product or probably a "fake product."

6. Customer chooses a wrong shipping option and then blames the merchant for over charging him if she has chosen an expensive shipping method or for delaying the shipment if she has chosen the standard shipping.

7. Customer is unfamiliar with the online payment process or a provides wrong pin number or wrong street address during credit card processing and blames the merchant for keeping the transaction on hold or for having a faulty payment gateway. Alternatively, even though no transaction took place, she would demand that since the merchant has collected the payment he should ship the order

These are a few instances, where small online businesses and merchants can come under pressure for no fault of theirs. It is not that the customer is always wrong or the merchants are always right. Sometimes, merchants do make mistakes in fulfilling the orders and cause inconvenience to the customers. Some merchants may also indulge in unethical business practices or fail to provide correct product information. These examples are provided to illustrate how small businesses that manage their businesses ethically can come into friction with some customers and find themselves in hot spots. They are relevant to our discussion because in the end they cost small merchants time, money and reputation. They may also severely interrupt their normal business operations, as most of the businesses are run with tight budgets and limited staff.

Bad Reviews

Online merchants have also to cope with bad reviews. While satisfied customers rarely bother to leave their positive remarks, disgruntled customers promptly file a bad review and pour out their anger and frustration in no uncertain terms. It is tough to manage online business for this very reason. Say if you have filled a thousand orders and of them you had problems with ten. you can expect that those ten will most likely leave negative remarks while the rest 990 may say nothing about their experience. Therefore, when a new merchant visits your site, he will most likely see the negative reviews and form a negative opinion about you.


While you cannot complete eliminate problems such as these, you can minimize them to some extent by improving your communication with the customers and by specifying your business terms and conditions clearly on the website. The following suggestions are used by many merchants to minimize the risks inherent in online business.

1. Lay down your terms and conditions clearly.

2. Make your return policy, shipping policy and taxation policy as explicit as possible.

3. Make sure that the customer receives a copy of the order as soon as it is placed with full details.

4. Where customer provides different billing and shipping addresses, do not fulfill the order unless you contact the customer and verify the details. If the order amount is high, you should even ask for a copy of photo ID.

5. Send the customer tracking information as soon as the order is shipped. If the order amount exceed $250, make sure that you ask the shipper to collect customer signature.

6. Resolve disputes with customers in a timely fashion. Even if the customers are at fault, it helps if you show them leniency and resolve the matter to their satisfaction. Most customers who make mistakes know that they have made a mistake and they readily respond to a positive and amicable solution on your part.

7. Learn from your mistakes. Improve product information based on your experience and minimize the scope for ambiguity and misundestanding.

8. Where you are at fault, accept it gracefully, even if it may cost you money.

9. Avoid gimmicks and misleading offers.

10. Keep visiting online forums and discussion forums to know how other businesses and merchants are dealing with similar problems and what remedies and suggestions they are following.

11. Encourage customers to leave reviews and feedback. Send them reminder emails a few days after the order has been shipped and delivered. Follow up with a few more reminders.

Prserver all communication with the customers. You may need it later in the event of a dispute

12. Make sure that your online systems and E-commerce website are user friendly, robust, secure and reliable.

Online businesses have many drawbacks. It is very difficult for them to build customer loyalty even with exceptional service. In the online world, good service is taken for granted while bad service is seldom forgiven. Whatever may be the level of your service, know that customers are attracted primarily to the lowest prices and reviews from previous customers. Other things being equal, even pennies matter. So if you are an online merchant, it is natural on your part to feel frustrated, seeing and knowing that while customers expect the highest level of service, they do not usually reward it with a repeat order. On the top of it, you may have to answer for the mistakes they may make in choosing the products or returning their orders. You have to be therefore doubly careful of what you do and say to them in the course of your business through the website, emails and personally over the phone. In case of transactions, customers also enjoy many advantages from the credit card companies, government agencies, customer protection platforms and the various opportunties and avenues available to them on the internet to vent their feelings and opinions. Therefore, whatever you do, know that customers matter, their opinions matters and no matter who is at fault, it is your duty to resolve the problems. You have to keep in mind that the environment in which you operate as a business owner, is heavily pitted against you and least forgiving.