Retail and E-commerce Are Not the Same in Class Code Terms

Many agencies confuse retail and e-commerce operations when selecting a class code for workers' compensation. While both involve selling goods, the physical presence, employee functions, and operational risks differ. The class code you choose directly affects the rate and the premium — and getting it wrong can lead to underpricing or overrating. If you're underwriting a business that sells via an online store or through a digital platform, you need to identify whether it's truly a retail business or something more digital in nature. Retail stores are assigned class codes like 8013 (Store — Jewelry), 8010 (Store — Hardware), and 8071 (Stores — Books Retail), among others. These codes are based on the physical retail space and the types of goods sold. E-commerce businesses, however, may not be so clearly defined and may need a different code.

Understanding Retail Class Codes

Retail class codes are assigned based on the type of goods sold and the physical space where the business operates. These codes are part of the National Council on Compensation Insurance (NCCI) system and are used to determine the base rate for workers' compensation. For example:

  • 8013: Store — Jewelry — This code is used for stores selling jewelry and related items. It considers the nature of the goods and the typical risks involved in handling them.
  • 8010: Store — Hardware — This code is for hardware stores and similar retail operations that sell tools, building materials, and related items.
  • 8071: Stores — Books Retail — Assigned to bookstores and similar retail operations that primarily sell books and periodicals.

These codes vary by state. For example, California uses 8017 for certain retail stores that other states might code as 8010. Always verify the code in the business's state of operation. If the business has a physical storefront and sells goods in person, it's likely a retail class code. If it operates mostly online, then the classification is different.

E-commerce Businesses May Need a Different Class Code

E-commerce businesses often operate without a physical storefront or with only a small office or warehouse. These businesses may not fit neatly into a traditional retail class code. Instead, they may fall under a more general code, like NCCI's 8017: Store—Retail NOC (Not Otherwise Classified), used for retail businesses that don't fit a specific category, or under a classification for the warehouse or office work they actually do. When evaluating an e-commerce business, consider what the employees physically do. Always confirm the class code with the carrier or through your underwriting resources, especially when the business model is unconventional.

Why the Class Code Matters for Workers' Comp

The class code you assign to a business directly affects the workers' compensation premium. The base rate for each code reflects the typical risk profile of businesses in that category. For example, a hardware store (8010) has a different risk profile than a jewelry store (8013). Retail class codes are typically higher risk than office-based operations because of the physical nature of the work and the potential for injuries related to handling goods, customer interactions, and store operations. E-commerce businesses, on the other hand, may have a lower risk profile because employees may be working from home or in a small office. However, this can vary depending on the nature of the business and the types of goods being handled. Always consider the full scope of the business, including any warehouses, delivery operations, or customer service activities, when selecting the class code.

How to Determine the Right Class Code

When determining the right class code for a business, start by identifying the primary activity and the physical location of the business. If the business has a physical storefront and sells goods in person, it's likely a retail operation. If it operates online and doesn't have a physical storefront, it may be an e-commerce business. Once you have the code, the Cennairus platform takes the submission to several carriers and specialty markets. Always verify the code in the business's state of operation, as class codes vary by state. If the business is a hybrid — with both a physical store and an online operation — check the state rating bureau's rules on whether the work is rated under one classification or split.

Common Mistakes and How to Avoid Them

One of the most common mistakes agencies make is assigning a retail class code to an e-commerce business. This can lead to overrating the premium or underpricing the risk. Another mistake is using a general code like 8017 when a more specific code exists, which misprices the account. To avoid these mistakes, always verify the primary activity of the business and its physical operations. If the business is primarily online, classify it by the work its employees actually do. If the business has a physical location, use a code that reflects the type of goods sold and the nature of the operations. Always consult with the carrier or use a resource like the NCCI database to confirm the correct code for the business in its state of operation. Getting the class code right is essential for accurate workers' compensation pricing and compliance.