Retail: Is there opportunity in uncertainty?

people walking down the street with purses and shopping bags with umbrellas

As a retailer, your view of the sector likely depends on several variables. How you’re embracing the continued growth of online shopping and automation across the value chain, how you’re adapting to rising operating costs while sharing in your consumers’ ethical concerns, and let’s not forget how you’ve been affected by the broader threats from terror attacks, political protest and increased financial scrutiny. It seems there are no shortage of external risk factors.

All of this means there is little doubt that retail is having to adapt and change fast as it faces new challenges. But there are also some new opportunities within the uncertainty, which merit a closer look.

What is behind the talk of a new kind of customer experience?

Today’s busy customers expect retailers to provide a fully integrated online service. But that doesn’t mean customers are simply looking to be able to shop online, where they can add to their basket, pay securely and return unwanted purchases easily.

If retailers want to recognize these needs and yet also attract foot traffic, they’ll need to encourage customers into their stores by making the retail experience worth the trip. That’s likely to mean fewer stores, with those that remain offering a fuller, richer experience, simultaneously providing more convenience throughout the customer journey. For many retailers the physical store will need to become the physical experience in a connected omnichannel customer experience.

How will social media continue to change retail?

Social media offers the potential for every shopper to become an important advocate. Customers will want to share great experiences, giving retailers potential access to a wide audience almost instantly. So retailers must work hard to provide an experience worth sharing.

Of course, the flip side is that news of a poor experience can travel just as fast – if not faster. It’s essential that retailers are proactive in putting processes in place to manage the potential reputational risk of a negative event.

Where will increased financial scrutiny lead?

When the activities of former execs can see £1.5bn ($2.0bn) wiped off your share value in a day, and result in a £129m fine from the Serious Fraud Office – as happened to one retailer in 2018 – it’s clear the stakes are high.

Effective compliance, internal auditing and high accounting standards become even more critical. Even when fines are not administered and the organisation is innocent, an investigation can be expensive, time consuming and lead to reputational damage. A flurry of claims are resulting in the market for directors’ liability insurance hardening to accompany the increased levels of scrutiny, adding to retailers’ insurance costs.

What do retailers truly believe in?

Thankfully, we’re all more informed about the damage that single-use plastic is causing our planet. Issues such as this, and the rise of the ethically conscious consumer, means people are scrutinising how brands respond. Some retailers have received praise for taking steps to reduce their plastic waste ahead of legislation, but those lagging behind are facing growing scrutiny.

In 2018, an animal welfare protest took place outside a flagship store in London against the use of down in high-end winter coats. To avoid reputational damage among an increasingly informed customer base, brands using animal products must be transparent with customers and take ownership of their decisions.

Consumers choose the brands they support more mindfully than ever. They consider the ethical and environmental impact of those brands and support companies that align with their own beliefs. Brands can cultivate this relationship by creating a dialogue with their customers. Transparency is key to building trust and forming deeper, longer-lasting relationships with customers.

How will events in the wider world continue to affect retailers?

Retailers are part of the communities they sit in – and are affected by events that are often outside their control. For example, the luxury fashion market in Paris has felt the impact of the yellow vest protests that started in 2018. Sales figures have fallen as customers – especially luxury fashion tourists – have stayed away from the city.
In retail, foresight and adaptability has always been key

People will still buy essentials and luxuries as they have always done, but where and how they buy is going to carry on bringing fundamental changes to retail. These forces of change are joined by others, brought by tech, new ways of living and working, and increased scrutiny.


It is clear that there is a pattern of risk, but also opportunity, to each of these challenges. For those prepared to innovate and to think about where their customers are and how they behave, rather than where they would like them to be and how they should behave, there will be significant rewards. Amazon was only incorporated in 1994, but is now the most valuable retailer in the US by market capitalization, which should show that fortune lies with those prepared to embrace risk and engage with it in a pragmatic – and agile – way.

About Kelvyn Sampson

Kelvyn Sampson is the Retail, Leisure and Hospitality Industry Practice Leader for Willis Towers Watson, Great Brit…
Categories: Claim & Risk Control, Insurance and Risk Management, Retail, Risk Culture | Tags: , , , , ,

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