COVID-19 has wreaked havoc on the retail industry, and things may take years to get back to what we perceive as normal. But even before the global pandemic hit last year, there were a number of critical risks that threatened the retail industry.
We take a look at what we believe to be the three biggest threats for the retail industry in the next decade.
Natural Disasters… and we’re not even talking about COVID-19
Global warming has been the cause of many disasters in the past few decades, and analysts predict that they will only get worse in the next ten years. Wildfires, hurricanes and earthquakes are just some of the calamities that can affect retailers. When a natural disaster hits, it can cause heavy damage to property. Retailers are suddenly faced with damage to their brick-and-mortar operations such as their stores and warehouses, and that’s even before they count the damage to their products and data loss. Stores are typically in the front line in major weather events.
In a recent Reuters report on the damage caused by Hurricane Dorian which battered the Bahamas in September last year, it was noted that insurers faced record bills from hurricanes, earthquakes and wildfires of over $135 billion in 2017!
What can retailers do to keep damage to a minimum ahead of predictions of more frequent natural disasters?
- Coordinate and train. Have an emergency operation command center which monitors weather using information systems that track geographies and events.
- Train managers how to make decisions in the face of disaster.
- Determine how quickly staff can return to work after a natural disaster.
- Have additional capacity warehouses as a backup plan.
- Diversify the network system.
The Digital Threat
Digitalization has transferred the way that consumers shop and the way businesses engage with their customers. The most obvious example is Amazon, and even the biggest physical retailers are under immediate threat from this online shopping giant. Amazon currently accounts for over half of the entire e-commerce market, and there is no doubt that retailers should perceive online shopping as a real threat to their businesses. Even the biggest brands are finding it hard to compete with the presence of the likes of Amazon and AliExpress, and have been unsuccessful in bringing their products online. Some have even had to file for bankruptcy.
Another good example of physical retail not being able to compete with digital companies is the casino industry, where online operators offer free money with no strings attached to casino fans. Retail brick-and-mortar businesses will never be able to provide such perks to their customers due to the high cost of rent and other utilities. As a result, more and more gamblers are expected to take their casino entertainment online in the coming decade, especially with the growing popularity of mobile devices and the improved technology applied to mobile casinos.
Retail is regularly among the top industries targeted by hackers, and it’s expected that this fact will only grow in the future. Retailers don’t have the security stops that tech companies have in place, which makes them more vulnerable.
In 2013, Target by hit was one of the most infamous security breaches in retail history, and was made to pay settlement fees worth over $18 million as a result. But that amount was just a drop in the ocean compared to the $202 million that the group had to spend on legal fees and other costs. Other big brands in the US are continuously targeted by cyber-attacks, including Walmart and Home Depot.
In the coming years, the retail industry will become even more dependent on technology. Unfortunately, this will only increase its exposure and make it more vulnerable to cyberattacks. Industry analysts predict that this will create a huge challenge and the need for better security software.
In the Target case, the retail giant was required to tighten its security, including maintaining software and encryption programs to keep its customers’ personal information safe. Cardholder data had to be separated from the rest of the computer network and it had to pay for an independent assessment. It stands to reason that all retailers will need to take these types of steps in the next 10 years, if they haven’t done so yet.
The face of the retail industry is changing at a remarkable pace, and with it comes all sorts of challenges. Companies will need to consult with experts to help them ride the wave of these challenges, and help them predict the next one, if they want to stay in the race.