4 minute read 9 Nov 2022
close-up of wine bottles in shop

How regulated products will be the next wave of e-commerce

By Arryn Blumberg

Senior Manager, Business Consulting, Ernst & Young LLP

Commerce transformation leader. Industry executive. Strategist. Leads organizations through complex change. Passionate about creating a better future.

4 minute read 9 Nov 2022

Embracing a comprehensive enterprise platform can help organizations stay ahead of evolving regulatory, legal and customer expectations. 

In brief
  • E-commerce experiences must be equal parts seamless and secure to resonate in the world of regulated retail products.
  • Achieving that balance can help regulated product retailers seize emerging opportunities. 
  • Comprehensive, enterprise platforms allow retailers in this space to meet customers where they already are effectively — and safely.

Safe, secure, and scalable e-commerce platforms are now paramount to the success of retailers selling regulated products in increasingly complicated digital marketplaces. Anything less exposes enterprise merchants operating in this space to extremely costly financial, regulatory, and reputational risks.

Dramatic transformation is shaking up the risk landscape. Customer — and compliance — are now king. Regulated products (i.e., read: any goods or services that are controlled, regulated, or monitored) now represent a nearly US$120b global sales opportunity[1]. These constitute pharmaceuticals, health care, beverage alcohol, cosmetics and cannabis (in jurisdictions where it has been legalized). As regulations evolve, each of these industries faces new opportunities to engage directly with consumers through digital channels. That addressable online market only grows when you layer in non-traditional regulated products, including any goods associated with intellectual property, brand provenance or authenticity considerations (such as luxury items).

This evolving regulatory landscape and massive shift toward digital is opening up the very first meaningful opportunities for regulated product retailers to build direct-to-consumer relationships and sales. That said, embracing this moment also means navigating a ton of complexity. What does that look like? 

Regulations are nuanced, complicated and changing fast

On the one hand, a loosening of certain rules is creating new pathways for retailers. On the other, it is also generating a number of emerging considerations that simply did not exist when regulated products were sold nearly exclusively in the physical world. A veritable network of municipal, provincial, state and federal laws dictates which regulated products can legally be shipped and where. Presale regulations determine which products can be considered safe, legal or compliant.

Payment gateways are not universally equipped to support the sale of regulated goods. The list goes on. Importantly, failing to comply with any one rule can open regulated product retailers up to expensive fines and detrimental penalties. This ramps up the importance of building an e-commerce platform capable of meeting and exceeding customer expectations, while ensuring merchants are operating in a continuous state of compliance. This is significant for regulated product retailers hoping to make the most of digital channels now. 

Safety takes on new meaning within this unique sector

Customers and retailers have long been preoccupied with security features, especially where personal information is concerned. EY research shows that while consumers feel they have more options available to them in the digital world, more than 70% have concerns about sharing information on a website or app. Just shy of half say they worry about creating an online account with a company or brand.

Translate those fears into the regulated product ecosystem and they represent additional risks. Here, safety means regulated product retailers must know (and prove) who they’re selling to. It also requires consumers (whether fulfilling a medication prescription or purchasing a high-end purse) to prove their identity at the point of sale. In addition, retailers must be prepared to authenticate the goods sold so that consumers and regulators alike know items are the real deal. Furthermore, merchants must balance this need to comply while still delivering seamless and friction-free customer experiences that feel easy, accessible, and smooth.

Platforms represent a very real target

The best commerce platforms offer regulated product retailers the opportunity to build and strengthen direct-to-consumer relationships online — generating useful data that can fuel personalized customer relationships, customized experiences, and brand loyalty. Done right — and in compliance with the industry-specific regulations that affect these retailers on a state-by-state, province-by-province, and county-by-county level — this capability can drive new markets and sustainable growth.

The problem is that the stakes of getting compliance wrong are now incredibly high and extend well beyond lost potential alone. Why? Platforms have become increasingly attractive litigation targets when things go sour. In recent years, one online retail platform was forced to destroy more than US$2m in counterfeit products. Another purveyor of cottage industry goods came under investigation after a journalist successfully purchased a COVID-19 vaccination card online. In an environment like this, regulated product retailers cannot afford to rely on niche or custom-built e-commerce platforms that often lack the modern features needed to spot fraud, mitigate risk and ensure compliance. Seizing on the e-commerce opportunity calls for a platform much more suited to today’s online reality. 

How can the right platform support secure business growth? 

Regulated product retailers must build their ecommerce channels on platforms that foster compliance and business growth in equal measure. You simply cannot have one without the other. The EY organization has teamed with Shopify and its leading commerce platform to align flexible compliance, effective risk management and proactive monitoring of regulatory environments. Applicable across sectors, this global commerce platform is relevant for any client that manufactures, produces or sells regulated, controlled or monitored goods. This alliance-based solution empowers these retailers to: 

  • Stay on the right side of regulatory change, despite frequent shifts in regulatory environments.
  • Meet and exceed consumer’s desire for truly secure digital commerce channels. 
  • Proactively uncover fraud to minimize legal exposure.
  • Enter new markets safely in pursuit of sustainable growth and profitability. 
  • Allow for the provenance verification of products being sold. 

We see those upsides play out with clients on a daily basis. By the numbers, Shopify’s platform has already proven capable of increasing omnichannel revenue by more than 30%, growing conversion rates by 15% and expanding average order value by 20%.

What is the bottom line for regulated products today? 

Complexity abounds for regulated product retailers seeking to capitalize on the transition to e-commerce. Embracing a comprehensive, best-in-class enterprise platform can help these organizations embark on the digital journey while dialing down the related risks. Doing so now can employer industry players with the chance to meet customers where they already are — while staying ahead of evolving regulatory, legal and customer expectations. 

  • Show article references

    1. iPharma market size: https://www.globenewswire.com/en/news-release/2022/06/27/2469415/0/en/Pharmaceutical-E-commerce-Market-is-projected-to-record-a-CAGR-of-14-3-during-2022-2032-Future-Market-Insights-Inc.html, Beverage Alcohol market size: https://www.globenewswire.com/en/news-release/2022/07/28/2488073/0/en/Global-Alcohol-E-commerce-Market-To-Hit-173-8-Bn-by-2031-Allied-Market-Research.html, Cannabis market size: https://www.fortunebusinessinsights.com/industry-reports/cannabis-marijuana-market-100219


Retailers are navigating the shift towards digital and the evolving regulatory landscape, building direct-to-consumer relationships and sales.

About this article

By Arryn Blumberg

Senior Manager, Business Consulting, Ernst & Young LLP

Commerce transformation leader. Industry executive. Strategist. Leads organizations through complex change. Passionate about creating a better future.