Fuel Prices Trump Unemployment as Risk to Retailers: Study
In the study, BDO looked at the most recent 10-k filings from the 100 largest public retailers in the U.S. The study found that 99 of the retailers cited general economic conditions as a potential risk to their business. However, this year, fuel prices also loomed larger on the radar screen. About 71 percent of retailers cited fuel prices as one of their chief concerns, up from 58 percent last year.
Gasoline prices have fallen sharply in the past month, but earlier in the spring prices surged, sparking fears that the higher prices would crimp consumer spending.
Unemployment remains a concern for about 68 percent of retailers, the study found. But worries about the labor market reached their peak in 2010, when about 70 percent of retailers said it was one of their top concerns.
“Despite a dip in April, consumer spending has been improving, and retail executives feel that their strategy adjustments are on point,” said Doug Hart, partner in the Retail and Consumer Products Practice at BDO USA.
“This year, there is an increasing concern over unknown external factors, such as IT security, supply chain disruptions and geo-political events that could derail the execution of their strategies," Hart said. "While retailers are also concerned about gas prices this summer, they are otherwise encouraged by consumer spending.”
The number of citations regarding the ability of retailers to protect their consumer data rose 31 percent from the 19th most-cited risk to the 12th. Worries about maintaining information technology systems also were on the rise.
This could reflect the continued shift of more retail business online as well as increased awareness about threats to this posed by data breeches. For example, earlier this year, online retailer Zappos.com had to move quickly after hackers attempted to swipe data from the Amazon.com unit.
Another sign of the times: Fewer retailers are worried about the potential fallout from U.S. and global expansion plans. Concerns about these threats are at their lowest level since the study began in 2006. This is probably because retailers have slowed down the pace of their expansion in recent years.
A chart of the top 20 risk factors cited by the 100 largest U.S. retail companies is available on BDO’s website.