Whether you own a brick-and-mortar business or an online store (or both), you need to think about risk management. The retail industry can take severe hits in multiple forms. We’re all aware of the damage retailers have taken during the coronavirus pandemic; they’ve had to find various ways to survive the crisis.
Traditional businesses have to be especially alert as consumer tastes change, and 90% of the youngest generation — Gen Z — strongly prefer shopping online.
So here are some of the major risks in this industry that you should account for when developing your risk management strategy.
Online Security Breaches
Cyberattacks and other security breaches can seriously damage an eCommerce store. However, this type of attack is a major risk for physical stores too as a hacker could get into your Point-of-Sale (PoS) system and threaten customers’ credit card information and other personal data. Malware used in these kinds of attacks is getting more and more advanced.
Another way criminals can get their hands on customer data is through phishing scams through which they could disable your key systems such as your website, core system, email, etc., with Denial-of-Service (DoS) attacks. To avoid these scenarios, keep your systems updated and hire a professional to strengthen your security.
Theft in Physical Stores
One of the biggest problems for anyone in retail is organized retail crime (ORC) that seems to always be on the rise. For example, the National Retail Federation found that in 2019, retailers have experienced an increase of 68% in ORC compared to the previous year. While online attacks are common, theft of physical products, i.e., shoplifting, is still a major problem.Detecting shoplifters can be difficult without proper technology. That’s why you should have security cameras installed as well as sensor-based product tags and even locked display cases for valuable items. Pro tip: warning signs around the shop can be enough to deter some people from stealing.
Being in compliance with all the regulations in retail can be daunting, and you need to stay informed at all times as laws and regulations tend to change quickly. They can concern anything from labor and contracts to product liability, consumer protection, and environmental considerations. You need to make sure to adhere to all the rules or you can suffer serious penalties, which can damage your business or even lead to your store’s closure .
Class actions against retailers are on the rise, so you need to take a proactive approach when it comes to getting informed about the latest regulations and your compliance.
Your business depends largely on the purchasing power of your target customers, and we live in a highly unstable economic climate. You never know what can happen to start a global or local crisis, as we all experienced in 2020.
Last year in April, the U.S. saw the highest unemployment rate since the beginnings of data collection on the issue — a staggering 14%. That meant that people had to focus on the bare necessities, and their purchasing power dropped quickly and unexpectedly.
This is one risk against which you can’t really safeguard. The best way to prepare is to have a backup business plan and enough savings to weather the storm.
There are many unpredictable elements in retail, and the worst thing about them is that when they hit you, your business suffers great damage. One such risk is damage to your inventory. No matter if you’re a brick-and-mortar or an eCommerce, you have to store your products somewhere, be it your storage facility or a warehouse.
Whichever the case, if a natural disaster or catastrophic event hits, you could lose a large part or all your inventory in one go. That’s why it’s essential to insure your inventory. It will cover your loss in case of a natural disaster, such as a flood, hurricane, fire, for example, as well as cover for the damage caused during the handling of goods.
As many as 75% of consumers prefer to buy from brands that offer personalized options. By catering to your customers’ needs and wants, you win their lasting loyalty. If they’re satisfied with your service, chances are they’ll keep coming back.
However, it’s so easy to lose that loyalty. One mishap is enough to make thousands of customers turn away and leave you almost out of business. This can be a security breach, a practice perceived as unethical, poor customer experience, or something else.
You can make sure your customer support is top-notch by training your staff and scaling your support by implementing chatbots. Make sure everyone is heard and acknowledged.
Today, consumers expect a perfect shopping experience, whether they’re shopping online or offline. What’s more, their tastes and preferences are ever-evolving and ever-changing. This is especially true now that the internet facilitates mass communication and dictates new trends all the time.
Whether you’re opening an online branch, providing same-day delivery, offering tech innovations, or supporting a social cause, it’s important to keep fighting for consumers’ attention and approval. Falling out of step with current trends is another major risk that can hurt your business badly.
Keeping Up With the Competition
With the rise of major online platforms such as Amazon, and global shipping becoming more affordable, the competition in retail is steep. Consumers are bombarded with products everywhere, especially on social media where they are targeted for their specific tastes.
Since there are now numerous and diverse retailers offering the same as you, you need to be competitive all around: price, quality, speed, customization options, and anything you can think of.
The cost of entry into the market is at an all-time low, which is why retailers are springing up left and right. To keep up with that kind of competition, you need to continue researching your competitor and the market and always find new ways to stand out and please every customer.
The world of retail is harsh and full of potential risks, but if you plan for them and invest in risk management, you can succeed.
About Michael Deane
Michael has been working in marketing for almost a decade and has worked with a wide range of clients, which has allowed him to discover different industries and approaches. He has recently rediscovered a passion for writing and hopes to make it a daily habit. You can read more of Michael's work at Qeedle.