Beware the complex world of online trading

Over 14.3 billion dollars was spent online by Australians in the past year to July 2013, with total spend is growing annually at 14.1 per cent. PwC forecasts that Australians will spend $26.9 billion online each year by 2016.

In a report on the online shopping market, authors PwC and Frost & Sullivan suggest that “Retailers are going to have to adapt the current retail operating model if they are going to meet the demands and engage with consumers.”

Gilkes says that while it is comparatively easy for businesses to operate in an online context, Small-to-Medium Enterprises (SMEs) need to grapple with complex commercial and legal issues at a very early stage in their operations if they wish to survive in a fast-paced, international digital world.

“In particular, there are several challenges associated with trading online internationally, such as needing to comply with the laws of multiple jurisdictions, protection of intellectual property (for example, preventing cyber squatters), tax-effective repatriation of income back to Australia, and transferring consumer data between jurisdictions,” Gilkes says.

“Online trading issues in general must be confronted much earlier in the online context than in a more traditional trading model.”

In addition to this, Gilkes highlights that changes to privacy laws regarding how customers or users’ personal data is stored and protected and the issue of data protection must be front-of-mind at all times throughout the running of an online business.

“The new Australian Privacy Principles (APPs), implemented as a result of recent changes to the Privacy Act, will come into effect on 12 March 2014. APP 8 governs the transfer of personal information offshore. In order to comply with this APP, if customer data is stored and controlled on a cloud server which is located outside Australia, the small business or enterprise must disclose this information to their users, and get consent to the transfers. If SMEs fail to obtain this consent, the Australian SME could be held responsible for breaches of the APPs, and face significant fines,” Gilkes says.

Information security is not just an issue for small businesses: global companies such as LinkedIn and Adobe have had their customer data comprised online. According to a survey of 583 US companies by the Ponemon Institute, 90 percent of respondents had been hacked in the past 12 months. The report also revealed 41 percent of respondents lost the equivalent of US$500,000 or more in cash outlays, internal labour, overhead, revenue losses and other expenses related to the security breach, and 16 percent say they could not add up the amount.

Gilkes says there are a number of springboard programs and grants around which her clients have found useful in helping to set up or grow their businesses online through receiving quality advice. In Victoria, for example, the Department of State Development, Business Innovation (DSDBI) introduces small businesses to relevant advisors and connects them with overseas networks, making it easier to facilitate the online delivery of goods and service.

However, two pieces of advice Gilkes wishes to pass on to any small business owner are the most important, she stresses:

“Get good legal and accounting advice before you do anything else! There are so many things to consider and steps to complete not only just to set up a business but also to improve the chances of its success that it’s difficult to pinpoint one.

“Also, another piece of advice I will mention because many clients don’t think of it- I would encourage the SME to protect their brand in the short-and medium- term target markets as soon as their budget allows. The online world makes it so easy for someone overseas to rip off your brand, which either makes it an expensive process to get the brand back in that market, or prevents you from entering the market altogether.

"It tends to be much cheaper to pre-emptively protect your brand than to fight over it later!”