Effective Risk Management For Retail Stores
Nothing is ever set in stone for retailers. While your business might be running great today, tomorrow might present a whole new dynamic. In fact, 96% of businesses are bound to fail within their first decade of operation. Although businesses fail due to a variety of reasons, poor risk management initiative is a huge reason for failure.
Every business has to co-exist with a diversity of risks, and gaining a competitive advantage is reserved for those businesses that manage to deal with these inherent risks in the right manner. As a retailer, you ought to first understand the kind of risks that your business faces and come up with the ad hoc controls to limit the chances of these risks coming to life.
Here are some common risks retailers have to go through, and how you can best defend your business against them:
Data Breaches And Digital Theft
Over the years, eCommerce has become all the rage, with more businesses picking it up. While it increases the ease at which you can get your products to your customers, it also introduces an increased risk of cybersecurity breaches as well as fraud cases. In fact, a 2017 report indicated that credit card fraud had increased by as much as 30% from the previous year. Hackers have been looking for crafty ways to tap into the sensitive data that retailers store, both on servers as well as on the cloud.
It can be very easy for hackers to send out phishing emails to employees and gain access to customer databases. They can also launch DDoS attacks that can maim your business operations for a while. Mitigating this risk requires you to be serious with your cybersecurity posture. This includes hiring a cybersecurity professional to audit your IT assets and identify loopholes that could lead to a cyber-attack.
It might also pay to educate employees on cybersecurity best practices, and how to protect your business. Invest in cybersecurity tools too to help you have a grip on your security posture. Lastly, buy cyber liability insurance to cover you from the losses that can occur in case a cyber-attack is successful.
Cyber theft isn’t the only type of theft you have to worry about if you have a physical store. It can be quite possible for people to shoplift in your retail store, but some conventional methods can help reduce these cases. For instance, you can train employees on how to identify thieves and install posters that warn against shoplifting. If you are looking for more sophisticated solutions, investing in state-of-the-art video surveillance systems might suffice.
You should also consider combining this with sensor-based product tags, locked display cases, and alert systems that inform you if a customer leaves the store without paying for an item. However, theft will forever be a risk that physical retailers have to deal with. This is why investing in property and inventory insurance that is specific to your industry is essential.
While it might seem trivial, competition can be a fatal risk for your retail business. Failing to keep tabs on what the competition is doing can lead to you lying behind in the competition curve, leading to huge losses. For instance, you might be pricing your product higher than your competition, even though pricing it more competitively wouldn’t harm your expected profit margins. In this case, customers are bound to side with the competition.
In case your competition has chosen to launch a website to bring their business close to the customer, you will be lying behind if you ignore this. Ideally, competitive analysis is an essential part of understanding the kind of situation you are in within your industry. Focus on implementing controls that help you understand your competitive position. You should also consider attending industry-related workshops and events to help you identify loopholes that you can make use of to remain competitive.
Although it might be tough for your online customer to sustain injuries while shopping from your website, physical customers can actually get injured. From slippery floors to loosely placed items on your shelves, there is no telling what could happen to your customers. In some cases, the resulting injuries might be so severe that customers can sue your business, which could result in huge losses.
Even worse, some situations could result in your reputation being harmed as a business. The best step forward would be to make a list of common issues that could lead to the injury of your customers. You should then implement controls to prevent the occurrence of these injuries. For instance, you should place warning signs of slippery floors whenever you are wiping the floors in your stores. When coming up with this list of common causes of injuries, be sure to involve your employees as they can point out non-obvious issues and come up with amazing ideas.
Risk is a necessary evil for any retail business. The only difference between a company headed for failure and one poised for success is how they both approach risk. Focus on the risk posture on your retail business and implement the necessary controls to improve the sustainability of your business.
Contributed by Jordan MacAvoy is the Vice President of Marketing at Reciprocity Labs and manages the company’s go-to-market strategy and execution. Prior to joining Reciprocity, Mr. MacAvoy served in executive roles at Fundbox, a Forbes Next Billion Dollar Company, and Intuit, via their acquisition of the SaaS marketing and communications solution, Demandforce.