Critical Considerations: Insurance risks for Large Format Retailers

In 2025, Large Format Retailers must navigate a rapidly shifting landscape marked by economic uncertainty, technological disruptions, and evolving consumer behaviour. To sustain growth and profitability, businesses must proactively address key risks that could impact operations and financial stability, and considerations include insurance solutions that provide stability in an unpredictable market.

Economic volatility and inflationary pressures

Global economic shifts, including inflation, interest rates, and supply chain challenges, are reshaping retail. Rising costs, from energy to wages, make smart pricing strategies essential to maintaining market share. To navigate these challenges, Large Format Retailers must assess their exposure and implement strategies to mitigate risk.

• • Business Interruption Insurance covers income loss from supply chain disruptions due to specific triggers like natural disasters or supplier insolvency.
  • Credit Insurance protects against non-payment by commercial customers or partners during volatility. Direct inflationary pressures, such as rising operational costs, are not typically insurable.

Evolving consumer expectations

Consumers increasingly demand personalised, seamless, and digital-first shopping experiences. Retailers must integrate advanced technologies such as AI-driven personalisation, augmented reality (AR), and real-time inventory tracking. Those who don’t keep pace risk losing relevance, particularly among younger, tech-savvy shoppers.

Sustainability is another critical factor, as eco-conscious consumers push for greener practices, including supply chain transparency and waste reduction. Businesses that lag in these areas may see their brand reputation impacted, and customers drawn to more sustainable competitors.

• • Technology E&O Insurance covers financial or reputational losses from malfunctions in tech-driven personalisation tools.
  • Product Liability Insurance protects against risks from sustainability practices, such as defective products or processes causing harm.

Competition from e-commerce giants

The dominance of e-commerce giants continues to challenge Large Format Retailers. Innovations in same-day delivery, virtual shopping, and subscription services enhance their online appeal. Direct-to-consumer (DTC) brands further threaten market share by offering niche products with a personalised touch.

Many retailers are investing in omnichannel strategies, blending physical and digital shopping experiences to help ensure customer loyalty.

• • Cyber Liability Insurance protects against data breaches, ransomware, and liability for compromised customer data.
  • Warehouse & Logistics Insurance covers risks like theft, fire, or accidents for distribution centres and inventory in transit.

Technological disruptions

Adopting cutting-edge technology is both an opportunity and a risk. While AI, IoT, and automation can improve efficiency, they also require significant resources and ongoing maintenance.

As retailers become more reliant on digital systems, cybersecurity concerns such as data breaches and system failures pose financial, regulatory, and reputational risks. Legacy systems further impede innovation, limiting retailers’ agility in responding to market changes. Key insurance solutions include:

• • Cybersecurity Insurance which covers losses from data breaches, hacking, and related disruptions.
  • Equipment Breakdown Insurance for physical technologies like automated systems or IoT devices, covers repair and replacement costs in case of mechanical or electrical failure.
  • Errors and Omissions Insurance addresses liability for technological errors, such as software glitches that disrupt operations or harm customers.

Real estate challenges

Large Format Retailers depend on expansive physical locations, which pose risks amid shifting consumer preferences. Reduced in-store visits in favour of online alternatives can lead to underutilised spaces and increased operating costs. To maximise efficiency, retailers can explore hybrid models such as micro-distribution centres or experiential hubs.

• • Property Insurance covers damages to physical stores from events like fire, natural disasters, or vandalism.
  • Business Interruption Insurance helps offset income losses if store closures result from covered property damage.
  • Flood and Earthquake Insurance necessary for locations prone to these specific risks.

Regulatory and workforce challenges

Labour laws are reshaping workforce dynamics. Additionally, regulatory shifts, particularly around data privacy, sustainability, and trade policies, require retailers to remain agile and compliant. Missteps in these areas could result in legal challenges and financial penalties.

• • Employment Practices Liability Insurance (EPLI) covers claims related to employment issues, such as discrimination, wrongful termination, or wage disputes.
  • Workers’ Compensation Insurance protects against employee injuries or illnesses sustained on the job.
  • Directors and Officers (D&O) Insurance provides protection for executives against lawsuits stemming from regulatory non-compliance or fiduciary mismanagement.

Successfully navigating risks through innovation, sustainability, and strategic adaptation will be crucial for maintaining a competitive edge; otherwise, retailers may be outpaced by more agile competitors.

Stella Pruscino is Account Director with Edgewise Insurance Brokers.