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A Spike in IoT has Merchants Seeking Tylenol

By: James Gagliardi

Last modified: September 7, 2017


This was originally published in Business2Community.

The widespread use of the Internet of Things (IoT) is systematically impacting worldwide growth in online transactions, and research from Gartner underscores that this trend shows no signs of waning.

This compounding growth in connected devices and their use in online transactions has created new challenges for merchants trying to stay compliant with a complex web of global ecommerce regulations that vary by country and state.

As merchants bear the burden of regulatory compliance, they need to be able to quickly adapt to changes to ensure competitive advantage and sustained success.

Take the popular “driver for hire” company Uber. A few years ago in India, Uber’s largest market behind the U.S., the government closed a loophole in a 2009 law. The amended law required two-step authentication (with verification codes sent via text or email) for any “card not present” transaction. In other words, the ease of the Uber app’s payment system was now illegal for the sake of added consumer protection.

This not only put the company at risk of noncompliance in India, but the change could have shut down the company’s operations in India altogether. Even though Uber acted quickly and updated its app, consider the potential negative consequences had it not been able to pivot: heavy fines, potential lawsuits or, even worse, allowing an opportunistic competitor to strategically enter the region. The ability to nimbly pivot when facing unexpected changes is what has, in part, given industry leaders like Uber market dominance.

This past November, the EU introduced legislation banning unjustified geo-blocking between European member states to boost ecommerce across the region.

Geo-blocking is a discriminatory practice preventing customers from making online purchases outside of their resident nation. With the new legislation, a consumer in France, for instance, can purchase goods off a German ecommerce site instead of being re-routed to the French site, where prices may be higher.

This measure was made to promote — rather than restrict — commerce in the EU , forbidding traders from blocking or limiting customer access to their online interface based on nationality or place of residence. And while the new legislation provides a tremendous advantage for the consumer, it forces merchants to adjust how they’d previously done business. Opening up the market, merchants not only lost their price discrimination leverage, but also had to ensure they updated their payment processing and other systems to avoid business disruption and remain compliant. Ultimately, those that are flexible enough to address these requirements will thrive over less nimble competitors.

One thing is certain for merchants: as consumers buy more online, merchants need to prepare for the unexpected. The previous examples just scratch the surface when it comes to adjusting for new ecommerce regulations. Many questions remain unanswered when it comes to commerce and consumer protection, namely:

  • Will products enabled with automated subscription services (think Tide detergent ordering replenishment pods) have a required notification period before an order is placed?
  • Will a consumer’s electronic signature be required before an order is authorized, as in the Uber example above?
  • Does information that is collected and related to health and wellness, such as fitness tracker/health band data, fall under the protection of additional medical regulations like HIPAA (in the United States)?

How merchants navigate this murky regulatory landscape is critical. Each new regulation can reset the competitive playing field, making flexibility a company’s most important asset.

Companies have every reason to be opportunistic as regulations shift and new opportunities arise. The trick is to put your company in a position to turn the inevitable complexity of global commerce compliance into a competitive advantage — something that may be giving merchants headaches now, but will be well worth the pain once the groundwork has been laid.