Member Article

Retailers future-proofing their profit margins using secondary revenue

Retailers are combating cut-throat online competition by expanding their revenue streams beyond traditional product lines, new research by Webloyalty has revealed. Nearly half (47%) of retailers say that increased competition online is causing them to develop secondary revenue streams and 40 per cent cite tightening of margins as the trigger. A third have expanded their offerings to prepare for the impact of Brexit and 25 per cent because of high business rates.

Webloyalty’s Beyond the Core II report reveals that establishing additional sources of income is helping to future-proof retailers - three quarters of retailers with a secondary revenue strategy in place have reported greater profit margins over the last two years.

The industry report shows how retailers are seeking new strategies to improve their resilience, stay profitable and boost the bottom line. It is timely insight following the news that the number of retailers issuing profit warnings reached a seven-year high in the first three months of 2018 and that House of Fraser is having to restructure and close stores in response to the increasingly competitive retail environment.

When asked about the particular threats facing their businesses, the fastest growing concern is competition from overseas businesses – 26 per cent now cite this as a major threat compared to only 16 per cent a year ago. Inability to control costs is also a growing concern increasing from 23 to 30 per cent over the last year. Retailers also listed competition from other businesses, higher operating costs and the uncertain external environment.

Richard Piper, Director, Webloyalty Northern Europe, comments: “Our high streets are facing unprecedented challenges and it is easy to feel it is all “doom and gloom.” Our report however gives cause for hope - secondary revenue can help future-proof a business and increasing numbers of retailers are realising this.

“Advertising and internal loyalty and reward programmes are currently some of the most widespread forms of secondary revenue with three in ten retailers having them in place already. In addition, a quarter of retailers now have an affiliate programme compared to only one in 10 a year ago. They are not necessarily difficult to implement but a thought-through strategy is essential. For example, most of the integration required to get an affiliate programme up and running is undertaken by the provider of the affiliate programme rather than the retailer itself.”

The report also shows that 70 per cent of retailers are now generating revenue from non-core sources. In total, 46 per cent of retailers are now generating more than 10 per cent of revenue through secondary income streams, up from 36 per cent in 2017.

This was posted in Bdaily's Members' News section by Webloyalty .