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A Look At What's Keeping Retailers From Walmart To Apple Up At Night

This article is more than 8 years old.

These days, cybersecurity concerns, competition from online shopping and a potential slowdown in consumer spending are keeping the C-suite at the nation’s biggest retailers up at night.

 That’s what the findings of the 2015 BDO Retail RiskFactor Report revealed.

 The report from the advisory firm analyzes and ranks the risk factors cited in the most recent 10-Ks of the 100 largest U.S. retailers, including chains such as Walmart, Home Depot , Target , Walgreens, Apple , Best Buy and the Gap.

Among retailers’ top 10 concerns:

 Interest Rates Top List of Economic Risks

The BDO study looked at specific challenges merchants cite under general economic conditions.

For the second year in a row, interest rates ranked as the most frequently cited economic concern — by 88% of retailers — followed by fuel prices (83%).

“With unemployment now well below 6%, both retailers and consumers alike are looking to the Federal Reserve to see if it will soon curtail its easy-money policy and increase what have been historically low interest rates over the past several years,” according to a BDO press release.

“If it does normalize rates, companies are well aware of the potential negative impact on consumer spending, as well as their debt financing.”

 With A Tightening Workforce, Labor Market Concerns Rise

Labor-associated risks are a big concern for 96% of retailers.

A tightening workforce means retailers are having trouble hiring and retaining qualified store associates and distribution center workers, according to the report findings.

To that end, big players like Walmart are increasingly offering benefits and higher wages in a bid to attract — and hold on to — their best workers. This can be expensive due to rising healthcare costs, which was cited as a risk by 63% of retailers, yet considered a crucial investment in today’s ultra-competitive labor market, BDO says.

What’s more, “Competition for top industry leaders also remains entrenched, with four-in-five retailers citing risks related to attracting and retaining key management personnel,” the BDO release said.

Cybersecurity Risks Now Ubiquitous Due To Digital Growth, Ongoing Threats

 Just as retail CFOs predict nearly double-digit online sales growth this year, according to BDO’s separate, 2015 Retail Compass Survey of CFOs, nearly all (99%) of retailers now cite both IT system operations and cyber security threats as top risks.

That comes as little surprise following the high profile security breaches at Target and Home Depot, which compromised the credit and debit card information of millions of shoppers.

Although IBM calculated that the number of cyber breaches against retailers actually declined in 2014, “the high legal, operational and reputational costs associated with point-of-sale intrusions and web application attacks still very much have retailers up at night, especially as they expand their digital offerings and become increasingly cloud-based in the year ahead,” the release said.

To that end, a majority of retailers (56%) are ramping up investments in cybersecurity measures this year.

 Supplier and Vendor Concerns Climb In Light Of West Coast Port Disruptions

 Amid months of merchandise shipment delays due to the labor-related slowdown at the West Coast Ports, the BDO study found that virtually all (98%) of retailers are concerned about supplier/vendor related risks, including shipping and imports.

Although the major labor issues were resolved in February, many retailers have faced lingering delays and steeper transportation costs, and are wary of future supply chain disruptions and their potential damage, says BDO.

Indeed, this month, retailers from Walmart to Macy’s cited first-quarter sales declines, partly related to the port delays.

Widespread Competition, Consolidation Spark Worry

 Amid heightened retail merger and acquisition activity, and as retailers increasingly compete with both traditional merchants and e-commerce, “Concerns over competition and consolidation exist across the board: both were cited by 100% of retailers,” according to BDO.

What’s more, BDO’s 2015 Retail Compass Survey of CFOs found that 59% of retail CFOs expect M&A activity to increase this year.

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