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Retail & Wholesale

Retailers and wholesalers with retail operations face an evolving risk landscape, which is accelerating due to technology implementations and customer demands. With new needs for innovative risk consulting and transfer solutions, companies can rely on Marsh’s experienced global specialists.

The retail industry was already facing widespread change prior to the COVID-19 pandemic, with shifts underway towards online shopping and fast delivery. The pace of change accelerated during the pandemic, with government restrictions in a number of countries on in-person retail experiences and a customer preference for safe, contactless delivery and return options.

Although digitised shopping is by no means a new phenomenon, the surge in demand during the pandemic has created unforeseen challenges for retailers and wholesalers with retail operations. Business operations are being stretched to their breaking point, as retailers and wholesalers try to adapt to and manage an increasingly complex set of risks, from cybersecurity to supply chain disruptions.

Marsh’s experienced Retail & Wholesale Practice specialists can help your company anticipate emerging risk management needs and implement strategies to ensure stability and profitability in an era of uncertainty. 

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Retailers are facing a more complex set of risks than ever before, as societies reopen to in-person shopping while the demand for online retail still remains strong.

As COVID-19 is still present on a global scale, businesses must contend with risks related to the return to in-person shopping experiences, including customer and staff safety, as well as profitability in light of increased utilisation of online shopping.

Some of the risks related to online shopping, such as cybersecurity, were present prior to the pandemic. However, others, like supply chain disruptions, have become much more of an issue as a result of complications related to shipping and logistics, including delays getting merchandise across international borders.

At a bare minimum, retailers should have general and products liability coverage to protect against claims of customer harm. Beyond this, retailers should consider a business owner’s policy, which covers your storefront, commercial buildings, distribution and data centres), any personal property that might be in these locations and any resultant loss of profit or additional expenses incurred to maintain sales. Any retailer with employees other than the owner is generally also required to have some form of , although this does vary by country. If your business is also involved in transporting merchandise or making deliveries, it is important to have commercial auto insurance to protect against accident and, typically mandatory, auto liability claims. Finally, retailers and wholesalers sometimes have to implement the recall of products that have been contaminated either accidentally or maliciously. This risk and its impact are insurable, including costs of recall and destruction of contaminated merchandise..

In addition, transportation-related coverage is generally required, such as coverage for loss and liability of merchandise in transit, including protection against damage occasioned through road, rail, ocean and air transit of merchandise. The greater reliance upon and volumes of home delivery also requires particular consideration in the current environment.  .

Any time business is conducted at scale, there is an opportunity for great profit, but also for tremendous loss. Retailers and wholesalers face a unique set of risks as part of their daily operations. First and foremost is a loss of merchandise, whether due to theft or disaster. Next, there is the inability to obtain supply, which can effectively disrupt business. Retailers and wholesalers may also become involved in product liability claims, as they were part of either manufacturing or distribution. Finally, other legal action may be pursued against wholesalers for a number of reasons, from non-delivery of merchandise to regulatory compliance penalties.

There are other insurances that are likely to apply include:

  • Cyber Insurance
  • Crime Insurance (historically referred to as Fidelity Guarantee)
  • Specific Terrorism Insurance
  • Professional Indemnity Insurance
  • Directors’ & Officers’ Liability Insurance
  • Stock Throughput Insurance (as an option to cover joint marine transit and stock storage risks under the one insurance policy)
  • Surety Insurance (to replace or support any bank guarantee needs)
  • Credit Insurance (to cover a wholesaler’s credit risk as a supplier or key supplier credit risk)
  • Political Risk Insurance (associated with importation from/trading with international markets) 

First, it is important for wholesalers to consider general liability insurance, similar to retail operations. This protects companies against claims of injury or other harm to customers as well as the general public. Other insurance policies to consider include workers’ compensation, if required in a specific region, as well as transportation-related coverage, such as commercial auto insurance, if applicable. Should a wholesaler be responsible for shipping internationally, it is usually valuable to have expanded coverage for loss and liability of merchandise in transit, including protection against damage made to a shipping vessel or other form of transportation by the merchandise itself.

The most pronounced trend impacting US retailers at the moment has been the surge in demand for online shopping and fast, reliable delivery services. Even before the COVID-19 pandemic, customers were expressing a strong preference for online retail. Then, due to pandemic-related store closures and fear of disease transmission, in-person shopping all but disappeared, replaced by offers for free shipping and either convenient home delivery or contactless pickup. As societies re-open, the public has remained fiercely devoted to online retail, bringing up the question of what in-person shopping will look like going forward. 

Following widespread disruption to supply chains during the COVID-19 pandemic, retailers and wholesalers have adopted a dedicated focus on reducing exposure to continued losses through increased automation of their daily workflow. Through use of technology-heavy modalities like the Internet of Things (IoT), retailers and wholesalers are slowly moving away from a business model that relies on vulnerabilities like in-person staffing. In order to assess new approaches, retailers and wholesalers are also utilising big data and analytics to guide necessary adjustments, often with the assistance of a risk management advisory service.

Other significant emerging trends impacting retailers and wholesalers include social justice movements, which accelerated in 2020, along with severe weather events. These pose risks to workplace culture and safety as well as property. 

Emerging risks are on the mind of most retailers. These include cybersecurity, particularly in light of a recent uptick in ransomware attacks, and disruptions to the supply chain and delivery services.

Having the support of trusted risk management advisors that focus on retail and wholesale companies can be particularly valuable if your company needs assistance identifying and quantifying new risks. A good advisor will work with you to assess your company’s risk profile, create a prioritised list of risks, and help develop a management strategy to minimise exposure going forward.

Risk management advisors, such as Marsh, have access to sophisticated data analytics and can help you better understand your risks as an organisation. They are also able to help with the selection of insurance coverage best suited to your company’s needs as risk management specialists have a sense of wider industry best practices and standards.