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Selling your goods online can be an excellent way to turn a hobby into a small side-business or grow your startup in online markets. Whatever your background, the low point to entry for online selling means that anyone can take advantage of the Internet for eCommerce. However, there are things you need to be careful of, to:

  • successfully grow your business;
  • avoid alienating your potential customers; and
  • comply with your legal obligations.

Therefore, you need to make sure you are aware of any laws applicable to the goods you are selling online. For some guidance, this article will go through five mistakes to avoid when selling goods online in New Zealand.

1. Failing to Tell Customers You Are in Trade

When you sell consumer goods to customers for personal use and are in trade, you need to comply with New Zealand consumer law. Consequently, you are in trade if you:

  • regularly sell your goods or services;
  • buy or make goods to sell them to customers;
  • have employees for sales;
  • register for GST; or 
  • sell from a company or other business structure.

Legally, when you are in trade and sell goods from your online shop, you need to tell your customers this fact. That way, they know that their consumer rights (such as consumer guarantees) apply to any sales with your online business. In addition, if you do not disclose your trade status, you can mislead your customers and face fines under consumer law. Therefore, you need to tell your customers that you are in trade.

If you sell your goods on an online marketplace like TradeMe, they often have buttons or banners for online sellers in trade to display on their store page. Be sure to take advantage of these services that online marketplaces provide.

2. Poorly Presenting Your Products

When customers purchase your goods from your online business, all they have to rely on are the pictures you supply and the descriptions you give. They cannot test the product themselves or see it in person as they would in a physical store. Therefore, you need to ensure what information you do give about your products is:

  • clear;
  • easy to understand;
  • truthful; and
  • accurate.

Try to take pictures of your products with a good camera and in front of a white background, particularly when posting to social media. If your pictures or claims about your products mislead your customers, you can face financial penalties under the Fair Trading Act.

For example, if you claim that your products are made out of a different material than they are in reality, this is misleading your customers. They have a right to demand a remedy from your online store and potentially to pursue legal action, depending on the facts of the case.

3. Not Having a Clear Returns Policy

As a seller that is in trade, you need to guarantee the quality and function of your products meet the legal standard, which the Consumer Guarantees Act sets out. If your goods do not meet these standards, you legally have to give your customers a:

  • refund;
  • replacement; or
  • repair.

For example, if you sell a customer a faulty product, then you have broken the consumer guarantee regarding selling goods that are fit for purpose and of acceptable quality. Therefore, depending on the severity of the fault, you should give the affected customer an appropriate remedy.

You may decide to allow product returns in situations outside of what the law requires to generate customer goodwill and satisfaction. Whatever you decide, outline your returns process in a clear and easily findable returns policy on your website. A good returns policy allows for greater clarity for your customers and a structure for your employees to follow when managing product returns.

4. Failing to Thoroughly Read Through Third-Party Contracts

Depending on how you sell your goods, you likely will have partnerships with various third parties to manage how you:

  • source the materials for your goods;
  • manufacture your products; and
  • deliver your goods.

You should have contracts with these third parties to manage your business relationship. These contracts become crucial if something goes wrong with a product and a customer (or your business) has an ensuing grievance. Examples of these situations include: 

  • product damage in transit;
  • poor manufacture;
  • intellectual property concerns; or
  • poor customer relations.

Because you sold a customer a product from your website, they are the first person they legally turn to for compensation. Therefore, you need to find a way to fix their problem, even if you did not cause it yourself.

As a result, it is imperative that you have provisions in your contracts with third parties to account for these situations. If your manufacturer or supplier caused a fault in a product and you lost out because of it, you should have some way of getting compensation for that loss. When you do not agree on these provisions in your contracts beforehand, it can lead to complex and difficult negotiations later on when there is a problem.

5. Underestimating Security Concerns

Finally, when you sell goods online, you will be dealing with your customers’ personal information, such as their names and delivery addresses. Therefore, you need to make sure you have appropriate security measures to protect their personal information and comply with your privacy law obligations. Otherwise, you run the risk of privacy breaches and facing legal penalties.

Key Takeaways

Selling your goods online can be a great source of revenue for your existing business or an efficient way to break into the market as a new startup. First, however, you need to make sure you plan for problems accordingly and comply with your relevant legal obligations. If you would like more information or help with selling your goods online, contact LegalVision’s eCommerce lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What is personal information?

Personal information is any data that you can use to identify a living person. Examples include names or email addresses.

What does in trade mean?

In trade refers to your status as a commercial trader. When you are in trade, then you must comply with consumer law’s requirements when dealing with consumers.

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