How hidden revenue streams can rescue retailers

Bricks & mortar retailers are facing tough challenges in today’s climate. Marks & Spencer recently announced a 10% fall in profits, and the retailer also revealed it is set to close another 85 stores. Other high street giants like Debenhams, Boots, New Look and Mothercare also face similar problems. Desperate times calls for desperate measures, and many retailers are now asking landlords to take back the keys to the worst performing stores while lowering rents on those that are staying afloat.

But what’s the cause of this problem? It’s hard to specifically put it down to one challenge in particular, as it’s rather a wave of new challenges for retailers to overcome. For example, many customers generally favour eCommerce shopping. Technology has enabled customers to browse, compare and shop from the convenience of their homes, meaning traditional bricks & mortar retailers must embrace this or risk collapsing.

There are also challenges such as legal regulations like GDPR imposing stricter rules on the use of data. While pressure from discounters like Aldi and Lidl – which have more than tripled their market share in the last decade – as well as from digital natives like Alibaba, with different operating models, cost bases and data as their DNA. Put all this together and the sector is not just being disrupted, but effectively being reborn

So, what can traditional retailers such as Marks & Spencer do to overcome some of these challenges?

Taking on the role of publisher

More and more retailers are taking on the role of publisher. And it’s a smart move, as the media opportunity is a big one. Creating a new revenue stream such as this will enable retailers to better deal with shrinking margins and rising costs of the highly competitive retail ecosystem.

A recent estimation from eMarketer predicts that 7% of US total ad spend in 2020 will go to Amazon, doubling its revenue earned from media and placing it alongside key media players such as Google and Facebook (whose core business is media, not retail). This essentially makes media the most profitable business line for Amazon, and other companies are now realising the opportunity of following suit.

What is the secret behind Amazon’s success? It’s the same advantage that plays into the hands of every retailer – it’s the absolute certainty of the customer’s shopping behaviour.

Browsing generates a variety of data and insights into a customer’s shopping behaviour when compared with the actual products bought. Retailers can also capture information such as recurring shops, implications of breaks in pattern, the context of historical behaviour and the meaning of new purchases. These are all things that retailers can analyse in order to know their customers and their specific habits and needs better than anyone else.

Applying data in the real world

Across websites, mobile applications, loyalty programmes and in-store, retailers have access to vast amounts of data and a rich media inventory which can help them connect with customers in the right way, at the right time. With all this data to their disposal, retailers can start to make a meaningful difference to the customer experience and their bottom line.

Based on our experience working with global retailers, we believe they can generate 1% of their retail sales revenues through media – for grocery retail alone, that would be equivalent to at least $14 billion in the EMEA region. The exact share of this will depend upon a number of factors, such as a retailer’s data and technology maturity, the proportion of brand (rather than own-label) sales and their multichannel presence, but the opportunity exists for all retailers.

Not only can advertisers plan campaigns and buy their media based on actual shopping behaviour but they can close the loop between their online ad campaigns and in-store sales. Linking online ads to store purchases is the dream of a lot of media owners. Remember when Google partnered with Mastercard? In reality, though, retailers have always had the ability to provide that feedback loop. Consumers will also benefit as access to better data means more tailored and personalised communication in-store.

Retailers are having to adapt more than ever with the move of online players into the offline realm. In this data-driven world, publishers are no longer the only media owners. Retailers can take a page from their books and approach, leverage and monetise their own data assets the same way publishers do. They are ultimately masters of a deep ecosystem that’s connected – from customers to advertisers to retailers.