Retailers Should Invest in Security to Better Capitalize on E-Commerce Opportunity
Over the past decade or so, we’ve watched as consumers have increasingly turned to e-commerce to make their purchases, and more segments of the retail sector — from apparel to grocery — have set up shop online to meet demand.
According to BDO USA’s tenth annual Retail Compass Survey of CFOs, retail CFOs expect this trend to continue, predicting a 10 percent increase in online sales in the coming year. Data from the U.S. Department of Commerce supports this prediction. In 2015, e-commerce sales accounted for over half of all retail sales, totaling $341.7 billion for the year, up 14.6% from 2014.
Though e-commerce is surging, retailers aren’t abandoning their brick-and-mortar foundation. Just 9% of retail CFOs are planning on making e-commerce and mobile their primary area of investment in 2016, while 31% are focusing on remodeling and redesigning their physical locations. For many in the industry, a physical rejuvenation could be just what they need to translate their online sales boost to their stores as well.
Cybersecurity
Though the continued growth of e-commerce is good news for the retail sector, it also raises the concern of cybersecurity for both retailers and their customers. Every day, millions of electronic transactions are made both on the Internet and in person via credit card, generating vast amounts of data and creating numerous points of entry for hackers.
One way retailers are protecting sensitive data is by ensuring they are Europay, Mastercard and Visa (EMV) compliant. The deadline for compliance was October 1, 2015 and 76% of the retail CFOs we surveyed say they have completed the transition, significantly outpacing the industry average.
There is no perfect or guaranteed way to thwart cyber-attacks, but it appears that retailers are looking to address the problem from all angles, with 52% of CFOs saying they increased spending on cybersecurity in the past 12 months.
An overwhelming 85% of surveyed CFOs say they are leveraging new security software, and 72% are creating a response plan for breaches. Many are focusing dollars on hiring dedicated security professionals, as well.
Some retailers are even taking their cyber prevention efforts to a new level to avoid costly hacks. According to a recent Wall Street Journal article, General Motors has invited white-hat hackers to find cybersecurity gaps in GM vehicles, websites and software. Launched earlier this year, GM is calling it a “coordinated disclosure” program.
Sixty-nine percent of CFOs say that cybersecurity regulation will increase in the year ahead, which may also be driving increased spending in this area. President Obama recently announced a new Commission on Enhancing National Cybersecurity and appointed his former national security advisor and the former CEO of IBM to lead it. The commission will be focused on reducing vulnerabilities and setting a course for how to improve America’s cybersecurity.
This is an exciting time for retailers. E-commerce opens vast new markets available to both shoppers and shop owners that were previously impossible to reach unless customers were ready to take a plane, train or automobile — or unless retailers were willing to invest resources in physical expansion. The Internet has truly made commerce global; the caveat is that retailers and consumers must take the bad with the good. With the rise of e-commerce also comes the rise of cybersecurity related risks. However, with a sound cybersecurity strategy, preparations and controls, retailers can help mitigate the risks and reap more reward.
For more insights into the findings from BDO’s tenth annual Retail Compass Survey of CFOs, read the full report or visit our blog.