The retail sector is a fiercely competitive landscape. Margin pressures, evolving business models, threat of new entrants, high overheads, and changing consumer behaviour keep retailers on their toes. This article lists a few major risks associated with retail trade and suggests ways to safeguard against them.

Major Risks Faced By Retailers

1. Pilferage Risk
   A retail store deals directly with customers. Hence, it is vulnerable to risks like pilferage, damage, and shoplifting. Cafes, bars, kiraana shops, and other B2C (Business-to-Consumer) units that come across many walk-ins or deal with stocks on a daily basis are prone to financial losses due to such risks.
   
   
   
2. Inventory Management Risk
   Along with the products on display, retailers need to maintain an inventory of stock to quickly replenish the goods sold. A minimum level (stock reorder) should be decided and regular stock reviews should be taken to avoid the risk of running out of stock. Retailers who share a strong tie-up with suppliers may use the JIT (Just in Time) method of maintaining stock to ensure supply of goods at short notice. Under this method, low levels of stock in hand are maintained to minimize overtrading, thus reducing the risks associated with storage, damage, and loss of goods.
   
   
   
3. Exterior Damage
   Retail premises comprising of the facade, machinery, signage, shelves and fixtures, the goods in it, the staff handling it, goods in stock, and the cash in store are invaluable assets for an outlet. Burglary, natural disasters, fire, and other elements can cause serious financial damage to a business. The facade and interior elements contribute to the aesthetics of the store and play a huge role in generating sales. Damage to such store assets can be a major hindrance and can eat into the profits of the business.
   
   
   
4. Economic Risk
   Once a business suffers interior or exterior damages, considerable amount of resources have to be allocated towards repairing the loss and setting things in order. In the meanwhile, competitors may grab this opportunity and race ahead causing a loss of market share. While loyal consumers might stay with you through thick and thin, pragmatic consumers might not. Such economic risks entail a lot of effort to reinstate the business and result in monetary losses.
   
   
   

Safeguard Against Risks Associated with Retail Trade

Retail Insurance provides protection to business assets like showroom/ shop, stock, equipment, vehicles, etc. that the retailer owns and uses in the normal course of business. Additionally, one may avail of the following insurance policies:

• Fire Insurance
  Insurable assets under fire insurance range from electrical installations, machinery, accessories, goods in open, goods in store, furniture to fixtures, fittings and pipelines. Add on covers can largely enhance the extent of coverage provided.
  
  

• Erection All Risks (EAR) 
  This policy covers major risks around storage and erection. Damage due to riots, floods, storm, short circuit, theft, burglary and much more are covered under this policy.
  
  

• Group Health Insurance (GHI) & Group Personal Accident (GPA) 
  These insurance policies are meant to safeguard your frontline and operations personnel who contribute immensely to the company’s bottom line. Hence, it is imperative as a business to take care of your assets.
  
  
  

Click here to know more about retail insurance policies, and enjoy a safe and profitable year.