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BDO: The top risk factors for retailers are….

BY Marianne Wilson

Consumer confidence remains strong, but that's not stopping retailers from worrying about the economy.

General economic conditions ranked as a top risk factor for the 9th consecutive year in an annual ranking of the top 25 risk factors by retailers, cited by 100% of respondents. Cybersecurity and regulatory concerns shared the top spot with the economy.

That’s according to BDO USA’s 11th annual “Retail RiskFactor Report,” which examines the risk factors listed in the most recent SEC 10-K filings of the largest 100 public U.S. retailers. Other top risk factors include: industry competition and consolidation; natural disasters/terrorism/geo-political events; labor, litigation; implementation/maintenance of IT systems; and credit markets/availability of financing.

Retail space overcapacity is another pressing issue. As e-commerce continues to accelerate, retailers continue to reassess and optimize their real estate portfolios. Eighty-four percent of retailers cite impediments to U.S. expansion as a risk, and 69% reference risks associated with owning and leasing real estate, up from 54% last year.

In addition, failure to invest new capital in new stores or projects was cited by 63% this year. And 44% are concerned with risks associated with mall traffic and competition for prime real estate

“Retailers’ top risks show their eyes are wide open to the new wave of emerging and evolving risks, from widespread store closures and bankruptcies, to uncertain regulatory changes and mass digital disruption and its associated security threats,” said Jennifer Valdivia, partner in BDO’s Consumer Business practice. “While awareness is a key first step, retailers’ proactive responses to these vulnerabilities will ultimately determine their fate.”

In other key findings:

Regulatory: Forty-four percent of retailers cite concerns around potential border tax, and 76% reference U.S. accounting rule changes, internal controls and financial reporting risks. Thirty-six percent list FCPA as a risk factor.

Geopolitical: Whether by virtue of their physical store locations, supply chains or e-commerce sales, nearly all retail players are exposed to some degree of international risk. Eighty-nine percent cite international operations as a risk, up from 73% in 2016, and 41% reference impediments to international expansion, up from 30%. Twenty-two percent of retailers mention Brexit in their 10-Ks, 95% of which have U.K. operations

Labor: Among the 98% of retailers who cite labor concerns as potential risks, 49% point to minimum wage increases, and 26% list pension costs. Eighty-five percent are concerned about the loss of key management or new leadership, up from 73% last year, and 58% cite healthcare reform and benefits risks.

Cybersecurity: As companies grow more knowledgeable about their unique vulnerabilities and are increasingly held accountable for safeguarding sensitive data, they anticipate more cybersecurity guidance from regulators. Seventy-eight percent point to risks associated with data privacy and security regulations, and 30% name Payment Card Industry standards and EMV compliance as a concern.

To see a chart listing the top 20 risk factors in the report, click here.

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Study: EMV is shifting fraud online

BY Deena M. Amato-McCoy

A new fraud pattern is emerging.

For 84% of U.S.-based companies, EMV has lowered their fraud prevention costs. However, 52% of retailers said their card not present (CNP) losses are growing.

This is according to the “2017 Global Payments Insight Survey: Merchants and Retailers,” from ACI Worldwide and Ovum. The study tapped 1,475 payments executives globally in December, 2016 -January, 2017.

“As commerce becomes increasingly digital, payments technology is critical to improving customer engagement and reducing costs — with 79% of global merchants and retailers noting that an omnichannel approach is key to creating a seamless customer experience,” said Lynn Holland, VP, ACI Worldwide. “EMV continues to influence retail fraud patterns; while the U.S. adoption of EMV has lowered in-store fraud costs and shifted fraudulent activity online, merchants must remain vigilant about preventing card not present fraud.”

According to data, 59% of merchants and retailers plan to considerably increase investment in payments to improve customer experience (a 50% increase over 2015). However, more than 75% of these organizations view security, compliance and fraud management issues as the biggest barriers to their investment decisions.

“Although there isn’t one path to payments modernization for merchants and retailers, the benefits of investing in new and alternative payments methods are increasing — in terms of both merchants’ bottom lines and overall improvement of customer experience,” said Matthew Heaslip, analyst, Ovum. “To stay competitive in this changing retail market, merchants and retailers must foster strong payment partnerships with companies that not only understand their market verticals, but can also help them both improve their omnichannel capabilities and reach new customers.”

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Walmart installing automated vending machines for online order pickup

BY Marianne Wilson

Walmart continues to explore new ways to make it easier for customers to pick up goods purchased online.

The discounter is expanding its deployment of a giant self-service kiosk, which it calls a Pickup Tower, that spits out online orders to users of Walmart's buy-online-pickup-in-store service. Walmart debuted the technology last fall, in a store in Bentonville, Ark., close its headquarters.

"Much like a high-tech vending machine for your online orders, this feature…allows you to pick up items in less than a minute by scanning a barcode sent to your smartphone," stated Mark Ibbotson, executive VP of central operations, Walmart U.S., in a blog on the company's website. "The pilot phase has been so successful we’re expanding it to other locations across the country."

Walmart is also testing a self-service kiosk for pickup of groceries ordered online. The retailer installed a 20-ft.-by-80-ft. kiosk, or small building, in the parking lot of its supercenter in Warr Acres, Oklahoma.

According to a report by Mashable, the kiosk has refrigerators and freezers to keep the groceries fresh. Customers type in a code at the kiosk and their groceries appear within a minute. The service is only available to customers who spend at least $30 per order.

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