Americans’ spending hits a fever pitch during the holidays and two days in particular – “Black Friday” and “Cyber Monday” – leave retailers and consumers vulnerable to different exposures.
The day after Thanksgiving — also known as Black Friday — is considered the start of the holiday shopping. This is the day Americans line up at their favorite stores at all hours to take advantage of deals on the hottest merchandise of the season. According to the National Retail Federation, 134 million people shopped on Black Friday in 2009.
Unfortunately, in recent years Black Friday has also become a liability for retail stores, as consumers rushing to save money cause injuries and other serious incidents. Two years ago, a worker at a Wal-Mart in Long Island, N.Y. was trampled to death when the doors were opened and the crowd outside rushed in.
Since that tragic incident, the U.S. Occupational Safety and Health Administration (OSHA) and the National Retail Federation have taken several steps to prevent accidents like it from happening again. OSHA sent a letter this year to 14 major retailers nationwide reminding them to consider the safety of employees and customers. OSHSA has also posted a safety checklist on its site to help retailers prepare for the Black Friday madness.
Kelly Brown, Zurich’s Retail Industry practice leader, says retailers must begin planning for Black Friday early on so their employees can deal with any situations appropriately. Insurance agents, he adds, can help them with this process.
“I hate to say it, but it’s a little too late to be talking about preparing for it right now,” he says. “The first week of October retailers have meetings and agents and brokers should probably go. I get invited to these meetings and agents and brokers could capitalize on fourth quarter [company] meetings and make sure each of their insureds has a plan in place.”
This year, Brown visited numerous stores to help them prepare for Black Friday and put in place plans so things run as smoothly as possible.
“It’s a big day and everyone needs to know what’s going on,” he says. “[Retailers] need to have everything lined up and the proper manpower. If you don’t, you will have major problems.”
Brown says the number of claims from Black Friday can be significant because of the considerable increase in foot traffic. The weather – ice and snow—can also have an effect.
Agents and insureds should review the insurance policies and verify that all the coverages the insured needs are there. Some of the necessary coverage could include workers’ compensation for employee’s who could get hurt on the job; product liability in case a product is recalled or defective; theft in case money or items are stolen; directors and officers liability in the event a suit is brought towards the retailer; and property coverage for any damage that could occur to the retail space.
Brown says retailers will benefit more from this year’s shopping season if they have taken the necessary precautions.
“It’s a retailer’s chance to take advantage of what has been a bad sales year,” he says. “It could be a day most retailers start making money.”
Brown says some of the steps insureds should take ahead of time to reduce their exposures include:
- Assess crime vulnerabilities such as theft or assault in a given area or market and budget for extra security if it is needed.
- Communicate with customers by putting up signs or making them aware of what the doorbuster stipulations are. Also, provide rainchecks for items that may run out of stock so that customers do not get angry.
- Take an organized approach when the doors open. Have employees available to assist customers on where they can find what they want, where to pay, and where to exit, to cut down on any confusion.
- Have a system in place for restocking items and clean-up inside the store. Make sure aisles stay clear so there is less of a chance for customers to trip and fall.
- Ensure the money in the cash registers is secure and have it collected frequently and locked in a safe to cut down on the chance of theft.
Risky Cyber Monday
The risk for retail-related holiday incidents doesn’t end after Black Friday is over. Cyber Monday, the Monday immediately following Black Friday, is one of the biggest shopping days of the year for online retailers.
Larry Collins, head of E-Solutions for Zurich Services Corp., says both consumers and businesses are at risk on Cyber Monday, but for different reasons. Businesses are at risk because increased sales volume brings increased opportunity for credit card fraud. Consumers are at risk because Internet crimes are growing and criminals are working overtime to get the credit card and bank account numbers that consumers use to purchase things online.
According to the National Retail Federation, some 15 to 20 percent of annual shopping is done during the holiday season. Collins says there is at least that much cyber crime during this period and this year there could be more.
“What remains to be seen is if the bad economy drives this up even more,” says Collins. “They say that hard times breed hard crimes. The Christmas shopping season can be especially hard. Does this lead to a higher incidence of cyber crime? Stay tuned on that one.”
Collins says it is important that agents be aware of the cyber risks their retail clients face and to educate them on the coverage options out there, such as data breach coverage and privacy liability.
“This is a new area of exposure and hence coverage for customers,” he says. “Agents and brokers need to make sure they understand what’s available and its value to their customers. In addition to standard perils, reputation risks, privacy risks and the resulting loss of customers are very significant exposures. Our agents need to help their business customers with these exposures.”
To help online retailers, in-store retailers, and supply chain and logistics professionals prepare for the holiday shopping season risks, Zurich launched Zurich HelpPoint, a free online risk guide for these businesses. It also has an online tool that businesses can use to assess the state of their computer security.
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