If COVID didn’t get you, inflation will… It’s sure been a tough few years for retail. Locked down by a global pandemic, any hopes of a rapid recovery have been stunted by rocketing global commodity prices putting the squeeze on already thin margins.
In the first quarter of 2023, US retail revenues were forecast to dip by 6.8%.
The problem is not just inflation. Or any kind of lingering COVID hangover. The world has changed, the retail landscape has changed. More is being sold online than ever before, with ecommerce now a trillion-dollar industry in the US alone. Bricks and mortar retailers have no option but to adapt and survive. If they just sit and acccept flat sales and rising costs, their days will be numbered.
A lot of attention is therefore turning to what retailers can do to boost revenues in innovative ways. Not easy to do when you have a business that has been set up to make money in a certain way in markets you know and understand.
But businesses do have one invaluable resource on their side – data. Modern retail is digital retail, and we don’t just mean online. Today’s stores, whether they are fitted with conventional POS checkouts, self-service checkouts, order and return kiosks, clerks carrying mobile POS tablets or anything else, they’re all full of digital touchpoints. All of them capturing data about what customers buy, where, when, how often and so on.
Data gets talked up as a valuable resource for businesses. But what makes it so valuable is the intelligence you can get from it. And for that, you need sophisticated analytics tools to turn data from across your business into actionable insights.
Turning data into money
So what can data do in terms of opening up potential new revenue streams in retail? There are two different strands. One is opening up insights about hidden opportunities you might never have even realised were there. The other is monetizing the data itself.
In the first camp, there’s the idea of adjacent markets. Retailers have long been prepared to jump across categories to sell different types of products. Gas stations doubling up as convenience stores, for example. Or bookstores opening coffee bars.
Another option is to explore what are sometimes called ‘retail-adjacent services’ – selling not just physical products, but complementary services that give consumers more reasons to shop in store. According to analysts McKinsey, with the squeeze they are facing from ecommerce where customer convenience reigns supreme, looking “beyond the traditional bounds of retailing” is key to physical retailers remaining relevant, and to attracting and retaining loyal customers.
The big question is – what services? And that’s where data comes in. Data empowers you to understand your customers in great depth. Their preferences, their habits, their needs. And this unlocks insights into which services would be the best fit for your business, and of course which would open up the most lucrative revenue opportunities.
So what about monetizing the data itself? The classic example is retail media. Retail media is an adjacent service, too – it essentially boils down to retailers branching out into advertising and marketing. A service offered to other businesses rather than consumers, but still an adjacent market. And one that depends fundamentally on the value of the data your business generates.
This can be monetized in various ways. The standard is selling advertising or promotional space in store, using data to set rates based on footfall or average conversions for products and services in related categories. Retailers routinely run promotions in partnership with suppliers, of course. Advanced data analytics can be used to provide real-time feedback on how promotions are performing, providing an opportunity to adjust and optimize to boost conversions.
Another option is to simply sell customer insights based on your data, with the proviso that you have to be careful about complying with privacy laws if taking this approach. Other examples include opening up customer loyalty schemes to other companies, so points collected can be redeemed across a number of different outlets.
So the key takeaway is that retailers are sitting on a rich resource in all the data they collect through their digitized modern POS systems. The goal is unlocking that value. Using data to inform how you branch out to different revenue streams, or monetizing the data itself, are two great options.