From seeing an influx of “new order placed” notifications to getting glowing product reviews, selling arts and crafts online comes with its highs and lows. As a savvy business owner, it’s crucial to consider the potential risks of running an e-commerce store so you can better protect yourself.
Here’s everything you need to know about the risks of selling art online and the best ways to lower your chances of facing a nightmare business moment.
Spoiler alert: you can cross off the last step right from your phone in just a few taps — done before your next package is ready to go!
The Risks of Online Selling Arts and Crafts Products
Product Liability Claims
Product liability is your legal responsibility for any damages your products cause once they’re sold. Think about your handmade beaded jewelry. Could a pendant fall off and become a choking hazard?
Maybe you crochet and hand-dye scarves. After wearing one of your products, a customer suffers an allergic reaction on their neck due to the dye. Even “natural” products can cause harm!
Every handmade product has the potential to injure a customer or damage their property, and any lawsuit-happy person can sue you if they feel wronged by your business. The kicker is that it doesn’t matter if you did everything right. You sold the product. You’re responsible!
Learn more about artist and crafter product liability claims examples.
Copyright or Trademark Infringement
Copyright protects original creative work (i.e., art, photography, original designs).
A trademark protects brand identity (i.e., company business names, logos).
The risk of intellectual property (IP) infringement goes both ways. You may unintentionally create products that overlap with someone else’s copyrighted work, which you legally must not do. If this happens, your listings can be taken down, and you may end up in court, paying for lost profits up to $30,000 per work.
But as an artist or crafter, you’re probably more concerned about others stealing your designs. Unfortunately, this is all too common in the creative industry. Take artist and illustrator Sam Larson’s story, for example.
Larson shared his frustration when he posted a side-by-side comparison of his Western-inspired artwork and a tee sold by a popular online retailer.
View this post on Instagram
Instagram post via @samlarson
Lost or Damaged Shipments
As consumers, we all know the frustration of tracking a “shipped” package that never arrives. As a business owner, you do your best to ensure clear communication and prompt delivery of your products.
Sometimes, though, your package lands on a customer’s doorstep damaged and unusable. Or it doesn’t arrive at all! Unlike vending in person, when you can physically hand a customer your goods after checkout, selling art online means extra travel and more risk.
Depending on your business policy, customers may demand a refund or replacement for lost, damaged, or delayed shipments.
“One of the biggest legal pitfalls artists encounter when selling their work online is not having clear terms of sale. Without a proper agreement, disputes over copyright ownership, usage rights, and refunds can arise.
Additionally, many artists unknowingly give away more rights than they intend to by uploading work to platforms with broad licensing terms. Always control the end use of your work.” – Nathan Moore, Esq., Moore Law PC
Negative Online Reviews
Another risk of selling art online is the potential for negative online reviews, both valid and unwarranted. Did you know 93% of consumers say reading online reviews informs their decision to buy?
Because your handmade art store is online, there’s a greater chance customers will check out reviews before they click “add to cart.” Your online reviews must paint a positive picture of what your customers can expect — if not, they might move on to the next seller!
A single one-star rating or social media post from an unhappy customer, even over a misunderstanding, can affect your future sales, so be sure to respond quickly to resolve issues and prevent negative online reviews.
Potential Customer Fraud
Imagine selling a piece at a crafters market. You hand the purchased product and the receipt to the customer. They take it and, to your surprise, say, “I never received what I paid for.” Of course, this wouldn’t happen when selling in person, but when you sell online, customer fraud is another risk to keep in mind.
A customer may claim that they didn’t receive their items or that the transaction was unauthorized. If they dispute the charge with their bank, the money from the sale could be returned to their account (also known as a “chargeback”).
For example, on Etsy, if the chargeback is resolved in the customer’s favor, the sale amount (plus processing fees) will be debited from your account. Some online platforms have protection programs in place to limit customer fraud, but your shop must meet shipping eligibility requirements, such as:
- Shipping only to the confirmed address
- Using trackable shipping with proof of delivery
- Meeting your stated processing times
Data Breaches
As an online seller, you accept payments and store customer information online. This puts you at risk of cyber attacks on your business operations, meaning your customers’ sensitive data, like addresses and credit card details, could get stolen.
If this happens, you can be held responsible for paying for credit card monitoring, financial losses, and potential settlement fees. You’d also lose out on customer trust — something that’s difficult to restore!
Using secure platforms and understanding cybersecurity practices is crucial to keep your online customers safe from potential data breaches.
Pro Tip:
Data breach insurance is an essential coverage for the aftermath of cyberattacks. It helps pay to notify customers if their data is stolen, plus any damages awarded to make things right. (Available as an add-on coverage on the ACT Pro policy)
Tax and Business Compliance
The final risks of selling online to be aware of are tax and business compliance issues. Because your sales are not limited to your state (as in, your customers are in other states and countries), you’re responsible for collecting and remitting sales tax in those locations.
Nexus: Whether or not you need to collect and remit sales tax in a state; typically determined by your revenue or the number of transactions in that state
Some platforms like Etsy, Shopify, and Amazon Handmade have built-in tax collection per sale, but as the seller, you’re ultimately responsible for ensuring everything is remitted correctly.
Depending on where you operate, you might also need a:
- Seller’s permit
- Business license
- DBA (“doing business as”) registration
Other things to know:
- If you have $400 or more in net sales, you must pay self-employment tax.
- Shipping overseas may trigger import duties (a tax placed on goods arriving in a foreign country). This cost usually falls on the buyer, so be sure to communicate this in your shop’s policies.
Not understanding these business requirements puts you at risk of unexpected fines or even having your shop shut down due to noncompliance.
How to Protect Your Business When Selling Art Online
Register Your Copyright
Wondering how to protect your work from copyright infringement? Consider registering a copyright claim on your original designs. It does cost time and money, but the extra legal protection is worth it if you:
- Sell digital art or prints that are easy to copy and resell
- Have a signature design or series you plan to sell at scale
- Already have issues with people stealing your designs
- Want to legally enforce your rights if your work is stolen
- How Much It Costs:
A single work (filed online): $65 - A collection of unpublished works (not yet for sale): $85
File through the U.S. Copyright Office website.
“Copyright is automatic once you create original artwork, but registering it with the U.S. Copyright Office gives you stronger legal footing if someone infringes on your work. For branding elements like a logo, distinctive artist signature, and artist name, don’t overlook trademark protection. The benefits of proper registration of copyright and trademark also include a statutory right to recover attorney fees from future infringement.” – Nathan Moore, Esq.
Display Copyright Notices
A simple way to protect your online art business is to add copyright notices everywhere your art is displayed: product images, descriptions, and packaging. This helps deter casual theft and reinforces that an actual artist (you!) owns the copyright.
While a copyright notice cannot physically stop another party from copying your work, it can strengthen your case if your work is used without permission.
Pro Tip:
Add “© [Your Name] [Year]” to all product listings to signal ownership.
Use a Digital Watermark
Always use a digital watermark on your work. A digital watermark is like a stamp on an image signifying its source. This can be as simple as adding a subtle logo or your name on product photos or digital previews.
The point of a digital watermark is to make it harder for others to reuse or sell your images without permission. For example, a dropshipper won’t easily be able to convert your digital illustration into a T-shirt if your store logo is placed on the art.
Try a free tool like Watermarkly to batch watermarks on all your product images. The only caveat to the free version is that it includes the Watermarkly logo in addition to your watermark.
You can also add a custom watermark through your digital art app, like Procreate. Simply add it as the final layer before you export your images.
Some watermark tools, like Imatag, also allow invisible tracking so you can see if your images are being used elsewhere on the internet.
Foster Clear Communication & Keep Detailed Records
Clear communication and recordkeeping are essential to protecting your online business. Clear, consistent communication builds trust during the sales process, and maintaining organized records helps safeguard you if you face a claim.
This includes:
- Accurate product descriptions to prevent customer misunderstandings
- Clear shipping and return policies so customers know what to expect
- Open communication with customers in case of questions or delays
- Detailed records of orders, communication, and shipping information
- Shipment tracking and proof of delivery to prevent disputes
“Have a visible privacy policy and terms of use that comply with the law, which may vary depending on where customers are located, especially if you collect viewers’ personal identifiable information, such as email addresses, names, credit card information, etc.
Have visible terms of sale/use, which discuss, among others, return policies and, if you are licensing works, the limits of that license.” – Nancy Del Pizzo, Co-Chair of Rivkin Radler’s Intellectual Property Practice Group
Get Product Liability Insurance
Carrying artist insurance for product liability is the most crucial step for protecting your online business against customer injury or property damage claims. Once your crafty products are out of your hands, there are so many ways they can cause harm — product liability insurance is designed to cover you when those risks become a reality.
Imagine getting the dreaded email one day that your handmade creation injured a customer, and they plan to take legal action against you! Without the right product liability coverage, you’d have to front the cost of defending yourself all on your own. Insurance is an essential safety net that supports you through situations like these.
Through ACT Insurance’s Pro policy, get year-round product and general liability insurance bundled from $24.25 a month! The peace of mind to share your creations and grow your business without worrying about the risks of selling online is priceless.
FAQs About the Risks of Selling Online
What if Someone Copies My Designs?
What Is the Safest Platform to Sell Online?
Is It Safer to Sell Online or in Person?
Each has its unique risks: online selling can expose you to fraud or shipping issues, while in-person sales can lead to general liability risks. Having craft liability insurance helps protect your business either way, covering claims like property damage or injuries caused by your products.
