Best Practices: How retailers can prepare for outages caused by natural disasters
Last month, as Hurricane Dorian threatened to sweep over the southeastern U.S., retailers were expecting $1.5 billion in losses according to Planalytics, instead of the increase in sales they typically see around Labor Day weekend and the back-to-school season.
During hurricane season, consumers’ priorities shift toward stocking up on necessities from grocery and home improvement stores. However, all merchants run the risk of an outage, physical damage to property or the inability to process payments in-store that would lead to a loss of sales and an inability to serve consumers during their time of need.
There are some steps merchants can take to prepare for natural disasters, which we’ll further explore below.
Physical damage and mobile stores
Following a natural disaster, many brick-and-mortar stores will have suffered some physical damage to the property. In extreme situations, this could lead to the retailer having to shut down the store temporarily until the damage has been surveyed and fixed. In such situations, the retailer could be closed for weeks or even months depending on the damage, potentially leading to a major loss in sales.
In areas where the risk of natural disasters is high, retailers should always have a disaster recovery plan in place, and a plan B (even a plan C!) in case the original plan doesn’t work out. The main goal should be to remain open for the consumer and provide as much service as possible. In a situation where the damage is bad enough that the retailer cannot remain open for a certain period, they may plan to open a temporary mobile shop – this could be a truck or a van that the retailer can move around and sell goods out of.
Additionally, since most consumers will likely turn to eCommerce in such situations, merchants must ensure they have a robust eCommerce site and the related logistics strategy to service consumers untethered to their brick-and-mortar locations. This must also include a plan to enhance the delivery speed from the nearest unaffected store so that customers receive their goods and remain satisfied.
For most retailers, almost everything in the retail shop is dependent on the IT infrastructure, from merchandise management to payments acceptance. Therefore, a sound disaster recovery plan is key at the store level. In addition, retailers must ensure that the disaster recovery plan and strategy is exercised regularly in preparation for an actual disaster. Ensuring that there’s redundancy around telecommunication, power, etc. within the store is especially important as in-store technologies become more dependent on the cloud. Having more than one means of connectivity routed to the cloud is essential. That is, when a disaster impacts the ability to connect to the primary cloud location, they need to have the ability to connect to a secondary location.
Satellite point of sale technology is another way for retailers to function without connectivity. If the retailer has no power and no coverage even in a mobile store, satellite connectivity can enable them to obtain Internet beyond the local tower and local hard lines.
Fewer people pay with cash in-store – only 21 percent prefer cash compared to 79 percent who prefer non-cash methods of payment according to a recent ACI survey. With non-cash payments, the retailer can validate funds and ensure no fraudulent behavior has taken place – but only while connected. Retailers must ensure that their systems continue to function as such even in the event of a disaster.
If a payment system has been well constructed, there are many error-handlers, work-arounds and redundancies built into keeping these payment infrastructures up and running. Despite the superficial simplicity of payment handling, good payment systems are necessarily complicated, specifically because they can deal with errors and issues, including those arising from climactic trauma. Here are a few ways retailers can ensure their payment systems are up and running in the event of a disaster:
- Accept payment without connecting to a processor or entity: when there’s a loss of connectivity in the store, retailers must be able to authorize transactions offline utilizing a Store and Forward (SAF) queue mechanism. Then, once connectivity is restored, they will be able to debit the consumer’s account and ensure the merchant obtains the funds. It’s important to note that even with an SAF mechanism, as in-store payments infrastructure is always dependent on a communication line, retailers must build a redundant communications plan to avoid adverse and prolonged outages caused by physical damage.
- Process payments based on risk-level and configuration: Merchants can process and accept payments within a certain level of risk and configuration during a situation when their regular payments infrastructure isn’t available. For example, if a customer buys a $2 drink vs. a $500 couch, each of those purchases carry different risks for retailers. Merchants must configure what type of risk they would like to take by setting up floor limits, what type of cards they would accept etc. to adjust what type of processing they will do during a disaster.
- Setting up payments through a mobile store: if the retailer’s store is out of service and a temporary mobile store is set up, whether in a truck or elsewhere, the retailer must be able to spin up mobile IT infrastructure to process payments from the truck. This could be similar to the technology that is used in the stores for “queue busting” purposes – and the payment system would be untethered to a physical location.
There are numerous cases where retailers’ systems have failed them at a critical time. At any other time, this would be bad news for the retailer and the customer, but during a major shopping season, this could be hugely damaging to their bottom line. Unsatisfied customers won’t be back later to get their bargain, and some may become disloyal in the long-term. Retailers need to ensure their IT infrastructure and payment services are well tested and with immediate back-up plans and sufficient capacity to handle normal operations, especially during peak season.
Benny Tadele, a leader within ACI Worldwide's on demand business unit, drives the overall strategy for the company's Merchant portfolio, including ACI’s eCommerce and merchant payment platforms