Boom in online shopping brings new risks to retail industry

Despite the current turbulent economy and low consumer confidence, online retail spending is forecast to increase by 220% within the next four years.

As a result, insurer RSA warns retailers hoping to capitalise on the boom to protect themselves against the many risks associated with online transactions. Following a detailed programme of interviews with retailers and brokers, to gather insight into their needs, RSA found the biggest issues facing the industry today are the increasing threat of online fraud and unreliable delivery of products.

Online retailing, now worth close to £40 billion a year, is predicted to keep growing as more consumers are abandoning the high street to find a better bargain on the internet and avoid the rising running costs of cars and public transport. Additionally, improvements in technology have led to faster internet speed and cheaper computers, allowing a larger share of the population to 'surf' more easily.

While retailers can manage the risks of theft and damage in their stores with the use of increased security such as CCTV surveillance, electronic tagging and additional staff, protecting one's business online requires a thorough understanding of the online environment. Fraudulent activities such as 'phishing', where a party attempts to acquire sensitive information such as passwords and credit card details by masquerading as a trustworthy entity, are rife. Retailers saw card fraud attempts rise by nearly 150% in the last six months alone.

The other major issue for online retailers is product delivery. While the seller can ensure that their products, customer service, website design and purchasing process are of high quality, the standard and timeliness of the delivery rests with a third party. According to RSA research, a significant majority of delivery companies can not always meet the service standards needed by retailers and customers and this is becoming more apparent as internet sales grow.

The two issues of poor product delivery and online fraud regularly cause significant disruption to businesses and can potentially ruin a company's reputation unless precautions, such as buying insurance and seeking risk management advice, are taken.

Desmond Cross, Director of Retail, RSA, said, "It is vital that online retailers make themselves aware of the threats the industry can pose and ensure they are appropriately covered.

"RSA provides a bespoke offering to retailers giving them the peace of mind that any event, should it be business interruption, fraud or damage to stock, is covered. Having recognised that online shopping is key to a retailer's success, we are constantly working to improve our offering so that online retailers have the protection they need."

For information on how RSA can help with your business, visit rsagroup.com