It’s fair to say that we have never seen a retail environment like the one we’re experiencing today. With Covid-19 having such a widescale impact to every part of the retail landscape trends that we were seeing prior to the outbreak have only accelerated. We now see even greater competition from global players like Amazon, an obvious acceleration of the importance of eCommerce and an even greater drag on margin from higher fixed costs for stores and ongoing currency fluctuations.
For U.K. retail to thrive over the next few years, leaders need to focus on new revenue streams to improve our profitability.
Having reviewed the top 70 retailers in the U.K. (excluding Amazon), we, at Threefold have identified that these retailers have an opportunity to develop an incremental £1bn in advertising revenue from their owned media estates each year.
But only half of this is being realised today. And meanwhile, players like Amazon are increasing their revenue from their media estates, even in a global pandemic.
So, why is there millions of pounds of opportunity being left on the table? What is it, that’s holding U.K retailers in becoming media owners?
Well, creating the right environment for brand managers to be confident in their investments in retail media means competing with the very well oiled and experienced media owners of old. It takes structural and cultural shifts, changing attitudes from buyers to service providers. It takes transparency and commitment. But it is possible.
We believe that all retailers selling branded goods have the ability to become media owners, turning their retail estates into advertising platforms that can reach shoppers directly. The reason for this is threefold: it helps retailers attract new shoppers and drive incremental sales; it gives brands the opportunity to influence shoppers at the point of purchase; and it gives shoppers a better shopping experience.
Within our analysis, we have identified that retailers’ revenues can be significantly impacted by seven consistent factors that impact a retailer’s opportunity to generate higher sums of supplier funded revenue:
1. The retail sector they’re in and its current growth
2. The quality of their media estate
3. Team resource available for delivery
4. Brand affinity for the retailer in question
5. Delivering ROI measurement on campaigns for media investors
6. Commercial alignment internally of supplier income
7. Media accessibility to third parties and external agencies
Some of these factors, such as the quality of a retailer’s media estate, team resource, ROI measurement and the commercial alignment of supplier income can be improved relatively easily and quickly – working with the support of a third party agency or through internal structural change. Others are slightly trickier for retailers or agencies to have vast influence upon due to the wider influences of the economy, for example.
Retailers have a real opportunity to improve their profitability if they’re prepared to invest time and focus on becoming media owners. Not only can the incremental revenue generated be transformational to the bottom-line for retailers experiencing market pressures on performance; if done well, it can also help turn around top-line sales revenues. For retailers willing to adapt in line with the change in market, the new opportunities available are both encouraging and exciting.
For more information, we’d love to chat over a virtual coffee: hello@threefold-agency.com