A turbulent time for retail trading
Who would want to be on the board of a retailer today? The worst June sales on record was followed by an unexpected bounce back in July with a 0.2% increase. What will the next few months hold, and will peak really peak this year? The only thing that is certain for retailers is uncertainty in such a volatile trading period. Consumer confidence is at the heart of this trend, with the ongoing Brexit saga leaving consumers über-cautious of how much they spend.
When share of wallet and margins are shrinking, our experience tells us that retailers typically respond by looking intensely at answering the below questions:
- Do we need to change our promotional or pricing strategy?
- How do we improve the efficiency of our marketing budget?
- Which stores should we/can we reduce costs in or close?
- Is there an opportunity to diversify our product range?
Quite rightly, a retailer’s focus is on protecting and improving the margin and revenue of their core business and they should be answering these questions. After all, this is the reason why they exist as a brand in the first place, and should be the heartbeat of all C-Suite conversations.
However, brands who have observed the rise of Amazon as a media business should have realised that there is a new dawn, opening a new, more highly profitable revenue stream for pureplay and multichannel retailers.
A new dawn… monetising your retail assets
From experience, we already know that monetisation alone can bring a 10x higher profit than retailing your own products. And the word on the street is that over the next three years, there is an expected £3.2b of revenue on the table.
Over the last 18 months the digital landscape has experienced a perfect storm, providing retailers with more reasons than ever to become a publisher.
So, what has this storm looked like?
- There has been a rapid decline of 3rd party data as a result of changing customer behaviour and the pressure from GDPR legislation, coupled with Amazon and Google making moves to ringfence their assets
- Retailers are starting to focus on developing their CRM strategy, creating customer segments and procuring data management platforms for digital marketing and on-site personalisation
- Budgets continue to move across from traditional media – in 2019 digital has significantly overtaken traditional, with digital spend in the UK now at 66% of the overall media investment
- Brands (or partners investing on behalf of brands) would rather invest in media opportunities where customers are showing an intent to purchase their product and through channels which are highly trackable and measurable
Now, let’s look at it from the retailer’s perspective. The top 50 retailers in the UK all generate in excess of two million unique page views outside of peak each month, with many brands consistently in double digits each month. All of these ‘eyeballs’ are valuable to brands who are jockeying to win their own market share vs. their rivals. As brands are looking for more targeted and measurable ways of investing their media budgets, surely this is a win-win opportunity for retailers to receive investment from brands to promote their product range brands, as well as driving incremental sales margin benefit through increasing the overall sales for the brand.
It’s also important to remember that this doesn’t have to be limited to your web site. Anything you own which has a customer touchpoint is an opportunity to sell to brand owners and complementary brands, whether this be email marketing, social channels, in-store displays or receipts.
Retailers are also sat on rich customer data, understanding context on customer purchasing behaviour which 3rd party data could never provide. They understand what brands and categories people will buy and at what frequency, which could be made available to the market at a premium. Unknowingly, many retailers are making their customer data available for advertisers to buy, without being in control of what is offered, who this is provided to, and most importantly are not getting paid. In fact, they have already paid for the privilege by running campaigns with providers. Retailers should be looking to take control of this, ensuring high targeted segments are created and are only made accessible to the brands who you want to leverage such data.