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UK retailers look to new revenue streams as margins are squeezed

Two thirds of UK retailers are being forced to look for new sources of revenue as pressure on margins continues to grow.

New research, carried out by online marketing company Webloyalty and the British Retail Consortium (BRC), found that 67% of businesses reported that at least 1% of revenue now comes from secondary sources, with 18% driving at least a fifth of their revenue from non-core lines.

The Beyond the Core report, published yesterday (March 23), said secondary revenue sources include affiliate marketing, selling advertising space, cross-selling addition products and services, as well as offering credit and loyalty or rewards programmes.

“The retail landscape is facing one of its biggest challenges to date; remaining profitable during times of change,” says Guy Chiswick, managing director of Webloyalty, Northern Europe. “Threats to profitability are multiplying, from escalating delivery and fulfilment costs, the strain of handling huge returns, the cost of ecommerce investment and delivery functionality across devices. Not to mention the uncertain and unpredictable effects of Brexit.

Larger retailers are the ones capitalising the most on secondary revenue strategies with 22% of businesses earning over £1m in turnover generating 20% or more from a secondary stream.

Chiswick adds: ““Our research shows that secondary revenue strategies have the potential to combat low margins. However, whilst they can be easily incorporated into retailers’ overall marketing agenda, to maximise revenue through these sources it is important they are relevant to the brand and introduced at the right stage of the customer journey.”

Rachel Lund, head of insight and analytics at the BRC said the research offered an “important contribution” to the evidence base on innovation in retail.

She added: “The survey gives insight into the application of secondary revenue generation amongst UK retailers, a practice widely implemented in the airline industry when faced with a similar situation to that faced by UK retailers today – low and falling margins on core products. This report should provide food for thought for retailers of all sizes and types.”

 

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