5 Reasons Dropshipping Businesses Need Insurance

Dropshipping has always been a good business idea, especially for entrepreneurs looking to mitigate risk. This is a retail fulfillment method where the store itself doesn’t keep the products it sells in stock. Instead, when a dropshipping company sells a product, it purchases it from a third-party supplier – using platforms like Shopify or AliExpress –  and ships it directly to the customer, ensuring minimal overhead and no need at all for inventory storage.

The simple and smooth nature of this kind of industry is perhaps why dropshipping as a concept is being used more and more by companies in the US, and it’s also the reason why insurance – something that is usually a necessity for businesses – is being continually overlooked.

There are many companies out there, for instance, that believe insurance is unnecessary when they’re not handling the physical products themselves. Perhaps they’re working remotely, or perhaps they only have a handful of employees – or no employees at all. But while it might seem tempting to overlook insurance and save yourself a few dollars every year, there’s every chance a decision like that will come back to bite you in the near future.

Employment Is Still Your Responsibility

If you’re running a dropshipping business and you’ve hired employees, whether that’s freelancers or employees working remotely, you’re still responsible for what happens to them. If they feel they’ve been wrongfully terminated, or if there’s ever a wage dispute, you’re still going to be held accountable as the employer, and that’s why it’s so important to consider something like EPLI insurance to protect your business from any financial fallout.

Marketing Is Still A Risk

Just as employment is your responsibility, it’s also your responsibility to ensure your marketing tactics don’t harm any other businesses or individuals. If you use any copyrighted images or content, for instance, you’re risking legal action and perhaps even the loss of credibility that your company has worked so hard to build up. It’s easy to make all kinds of mistakes in the marketing process, but being covered can ensure you don’t have to pay if those mistakes result in costly settlements or legal fees.

Liability Still Lies At Your Doorstep

It’s also important to remember that liability still lies at your doorstep. Even if you’re not manufacturing or even touching the product yourself, you can still be held legally responsible if the product in question causes injury or damage. You have to remember, of course, that you’re the one selling it. Because of that, you’re essentially making a vote of confidence that the product is safe, functional, and fit for use, and customers, regulators, and courts will treat it that way. If something goes wrong, the blame can still land on your business, which is why having the right general liability insurance in place is not just a smart move, it’s an essential one.

Customers Will Still Blame You

Following on from this, it’s important to remember that customers have bought through your company, and, therefore, will blame you if things go wrong. If there’s a late shipment, advertising that they feel is misleading, or unfulfilled orders, you’re still going to be in the firing line, and, without insurance, that means you’ll be covering the cost of refunds, legal disputes, or reputational damage.

You Still Depend on the Supplier

The nature of the dropshipping industry means you’re always relying on the supplier to get things right. This means the most crucial parts of your business are, essentially, out of your control. You can never ensure your supplier will get things right – shipping the wrong item to the wrong person, missing a delivery deadline, sending a defective product. These are all things that can happen and, if they do, you’re going to struggle to manage the fallout if you don’t have insurance on your side. Even though it’s not your direct fault, your customers will hold your business accountable at all times, so make sure you have insurance on your side and you can always recover when things go wrong.

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