Retailers are optimistic about their prospects for the future – including the future of physical stores. This is amongst the findings of research carried out by WTW into the risks faced by the sector as it battles challenging trading conditions. Despite this, retailers expect their strategies to reap rewards in the near term, with 58% anticipating higher profits within two years.

WTW’s Global Retail Risk Outlook 2024 reflects a market facing growing risks in highly challenging and complex areas, driven by disruptive forces such as social commerce, artificial intelligence and the metaverse.

Canvassing the views of 700 senior decision makers in food and supermarkets, luxury and fashion, department store, health and beauty, electronics, home and DIY and online-only retailer marketplaces, the research suggests that physical stores are here to stay. With consumers continuing to value the in-store experience, 84% of retailers say they will have a mix of physical stores in 3-5 years’ time. This includes 7% of online pure-play businesses that have no physical footprint today.

Artificial intelligence is considered a pivotal opportunity, with 48% expecting it to revolutionise retail operations. However, it comes hand in hand with increased risks. More than 4 in 10 (43%) of respondents identified cyber threats as significant business risks and 45% named rapid changes in technology among their greatest obstacles to achieving strategy.

Meanwhile, reputation risks are increasing. The danger to a retailer’s brand and reputation was identified by 50% of those surveyed as the greatest risk facing the sector in the next three to five years. The rise of the influencer and the popularity of celebrity endorsements opens brands up to social media controversies.

Garret Gaughan, head of direct and facultative, at WTW, commented: “It is reassuring to see that the Retail Industry is very upbeat about the future and embracing new technology such as AI whilst maintaining a healthy awareness of the risks that go with this. It will be crucial though that businesses navigate this new digital world safely. Public confidence and reputation are hard won and swiftly lost and by embracing tech and the digital landscape, businesses need to be aware they need to protect themselves in new ways.

“However, it is fascinating that despite so much commentary regarding the demise of physical retail, even purely online companies, see their future as including some element of physical retail space.”

WTW’s research also found that consumers have become more elusive and harder to please, increasingly expecting a seamless experience. Retailers are looking to technology to provide a more personalised, seamless service, with 52% citing an improved customer experience among their top strategic priorities for the next two years.

As risks increase, firms face a raft of challenges in getting the cover they need at an acceptable price – 44% cited high deductibles, 36% historic loss experience and 32% lack of risk or claims data as barriers. This may be leaving businesses dangerously exposed.

---