Top 10 Factors Fueling Retailer Paranoia

According to BDO USA's 2011 RiskFactor Report for Retail Businesses, which examines the risk factors listed by the largest 100 public US retailers in their most recent SEC 10-K filings, retailers are more concerned with shifting customer loyalty than getting them out to shop in the first place. BDO noted consumer balance sheets are stronger, and retailers see a critical opportunity to sharpen inventory and offer a breadth of merchandise. Still, concerns persist over potential increases in taxes and regulation, and, whether consumers will continue to withstand price increases this summer and the upcoming back-to-school season.

The top concern remained, as it had in the report the last two years, general economic conditions, but vaulting to the number two spot was 'US and Foreign Supplier/Vendor Concerns.' This category covered a variety of issues, the most important being pricing pressures due to rising commodity costs, followed by loss of exclusive and proprietary brands -- a considerable differentiator between stores.

Tied for second place was 'Competition and Consolidation in Retail Sector,' which should be considered more on the 'competition' side than the 'consolidation' side. The competition grabbing customers remained more a threat that being bought out by them. Actual 'Mergers & Acquisitions, Joint Ventures' was far down in 18th place despite a revitalized mergermania hitting the industry thanks to the recovery of both consumer spending and corporate bond markets that fueled a recent spate of retail acquisitions by private equity firms.

In the fourth spot -- climbing significantly from 2010 -- was 'Federal, State and/or Local Regulations.' For retailers, rising healthcare costs and deficit gap contributed to this category, in addition to mounting worries about the new lease accounting standards, among other regulations.

As for generating customer loyalty, an Inc. magazine article offered seven suggestions: Create Enlightening In-Store Experiences, When You Do Something Wrong Make it Right, Reward Customers With Games, Quantify Customers' Love: Solicit Their Opinions, Make a Loyalty Card App for Customers, Offer Tangible Rewards and not Just Discounts, and Build a Relationship with Access to Personalized Customer Support.

Whether the idea of turning the shopping experience into an outtake of Sesame Street is appealing or not, the idea of building strong customer ties by listening and offering up some benefit remains the gold standard of retailing customer support. As happy customers are not only repeat customers, that should help with your competitive concerns.

Here's BDO's Top 10 list:
1. General Economic Conditions 97%
2. US and Foreign Supplier/Vendor Concerns 95%
2. Competition and Consolidation in Retail Sector 95%
4. Federal, State and/or Local Regulations 92%
5. Dependency on Consumer Trends 87%
6. Credit Markets/Availability of Financing and Company Indebtedness 86%
7. Labor (health coverage, union concerns, staffing) 84%
7. Legal Proceedings 84%
9. Terrorism, Natural Disasters and Geo-political events 83%
10. Failure to Properly Execute Business Strategy 80%