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Retail |REPORT

Growing number of retailers use secondary revenue to increase profits

By Vivian Hendriksz

26 Apr 2018

London - An increasing number of retailers are diversifying their income streams beyond the non-core product sales to increase the profit margins. Retailers have expanded their offerings outside of their conventional product lines, following the successful adoption of similar practices in the airline industry, according to new research from Webloyalty.

70 percent of retailers which participated in a study carried out by Webloyalty with the British Retail Consortium (BRC), currently generate revenue from non-core sources. 46 percent of retailers were found to generate more than 10 percent of their revenue through secondary income streams, which is 10 percent more than a year ago. The shift comes as more retailers seek out new strategies to ensure they remain profitable and boost bottom lines in an increasingly competitive environment.

Increasing number of UK retailers rely on secondary revenue sources to boost profits

Secondary revenue sources take various forms among UK retailers, including advertising, affiliate marketing, cross-selling additional products and services, and loyalty and rewards programmes which provide additional revenue. A growing number of fashion retailers have been employing these tactics of the years, including Asos, Ted Baker, and Topshop. The study found that the most used methods of secondary revenue among UK retailers are advertising (30 percent) and internal loyalty and reward programmes (29 percent).

"Companies just need to get started... it needs to be at the forefront of thinking. The CEOs who take secondary revenue seriously are the ones that will ultimately be successful"

Edwina Dunn, CEO of Starcount and co-founder of Dunnhumby

The benchmarking study explores how secondary revenue has become a common practice among UK retailers, with more companies becoming increasingly savvy on how they can monetize their websites as well as their customer base. As the number of retailers issuing profits warnings reached a seven-year high in the first three months of 2018, the study based on 100 retailers discovered that income diversification has become even more important. 29 percent of retailers consider it very or extremely important, up from 13 percent last year.

In addition, the study 'Beyond the Core II' found that 75 percent of businesses experienced a growth in profit margins when using secondary revenue sources, underlining the tactics commercial success. "In today’s competitive marketplace, retailers of all sizes are experiencing significant industry landscape changes, it’s important for all retailers to be smart about maintaining and importantly, increasing their profitability," commented Richard Piper, Director, Webloyalty Northern Europe in a statement.

"With secondary revenue streams proven to have a positive effect on profit margins, retailers should introduce a dedicated secondary revenue strategy that can fit within and support the overall marketing strategy to ensure business success and resilience."

Photos: Pexels