Online merchants allot endless resources to bolster their capabilities and infrastructure. Business insurance for e-commerce should be an integral part of any contingency plan to help e-commerce companies mitigate the risk of 3rd party downtime.
It’s November. Sales are ramping up toward the apex of the holiday shopping season - Black Friday and Cyber Monday.
In the world of e-commerce, holiday season shopping reigns supreme. For the average online retailer, It is valued at 20% of annual revenue, so the stakes are high. Any glitch will send months of work down the drain, not to mention tremendous financial loss.
So it’s no wonder online merchants allot endless resources to bolster their capabilities and infrastructure. But what about 3rd party services? What can be done to ensure those don’t fail in crunch time?
Last year, online sales on Black Friday totalled $9B in the US alone. Three days later, American merchants bagged another $10B on Cyber Monday. Add to that Thanksgiving and Small Business Saturday, and you reach an astounding $29.6B in revenue in the US alone. And according to Deloitte, e-commerce holiday sales will grow 11%-15%, compared to the 2020 season.
A quick calculation using the conservative 11% lift from last year’s totals puts 2021 holiday weekend revenue at ~$30B. That translates into $250M an hour over the course of five days.
Those figures will obviously vary by industry. Every online seller can calculate hourly revenue based on historic performance, and the expected uptick as a result of resources that went into preparing for the upcoming season.
Which brings us back to our original question - what does your business do if the cloud crashes over the Black Friday Cyber Monday weekend?
The short answer is - there isn’t much you can do. If you bolstered up your infrastructure and your site still crashes - all you can do is pray the business interruption is very short. If it isn’t, the damages could mount - from the revenue loss, to frustrated customers who will scramble to buy on a website that’s up and running.
But, you have insurance for that, don’t you?
Many businesses have Cyber insurance or Error & Omissions policies. Both usually contain clauses that cover business interruption. But a careful read will reveal these policies kick in after 8-24 hours and the triggers are limited (i.e. downtime has to be the result of a cyber attack.) If you manage to get past these delimiters, you're faced with a grueling, resource intensive claims process, where you'll need to prove damages in order to get paid. It can take months to get indemnified.
There's an obvious, unaddressed coverage gap. But Parametrix Insurance provides a policy to fill in the gap for 3rd party public cloud outages.
Online merchants invest many resources to ensure smooth operations during the most important time of the year. Mitigating the risk of 3rd party downtime should be an integral part of any contingency plan, and that includes securing the most robust infrastructure, but also to acknowledge that downtime happens, and to consider ways to insure and manage such situations.