5 key ways to boost retail profitability
Stage 3: Sell
Thomas Vosper
20th April 2017
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With reports from Deloitte that retail profits are set to drop by 5% this year and news of yet more well-known retailers entering administration, it is clear that profitability will be a continued focus for retailers for the remainder of 2017 and beyond. How can retailers continue to remain competitive, visible and omni-present whilst boosting profitability and keeping costs in check? 

  • Shift Your Focus – Out-of-town retail parks, outlet villages and shopping centers were imagined as a destination site for shoppers with a collection of retailers, brand outlets and services. Backed by huge reserves, grocers such as Tesco placed a bold bet on creating the Mega Store packed with general merchandise and outlying services ranging from car washing to hair dressing to benefit from the weekly migration of shoppers for the large family shop. Over time consumer habits have changed to small, convenient shops in unison with the rise of Pureplays. In part this is driven by the increase in last-mile delivery choices such as retailer Click&Collect, 3rd party parcel shops, scheduled delivery and parcel lockers; all of which stay part of the customers local, regular routine. Retailers and sites challenged by in store walk-up and shifting consumer behavior need to place a much heavier focus on that very first touchpoint, where pureplays excel, discovery at the initial online search. The retailers who will excel are those who can adopt technology solutions that connect online product discovery with store locations, stock availability and delivery options in just one click.
  • Boost Online Visibility and Transparency – The high adoption of smartphones has made it much easier for consumers to be smarter when it comes to conducting research online, often whilst present in the store. From seeking out reviews and buying guides, to checking prices and delivery options across multiple online and offline retailers, now is the time to seek maximum presence. The savvy retailers are the ones that are pushing their products across a multitude of channels such as marketplaces or search engines. Retailers like Amazon have gained consumer trust through complete transparency of pricing, special offers, reviews, stock availability and delivery options both directly and through their marketplace sellers. Farsighted retails will see the inevitable increase in transparency as an opportunity to show customers their brand value, sharp pricing and overall great customer experience; but will be wary of products surfacing alongside undesirable and unregulated content through traditional search. Just as Skyscanner presents a pure picture of flights, vertical search engines such as Pricesearcher create a safe environment for brands and retailers of all sizes to showcase their entire range to the world alongside some of the most trusted, household names at a pure product and price level; increasing transparency and delivering high numbers of engaged shoppers.
  • Seek Maximum Traffic for Minimum Cost – Multichannel adoption boosts visibility but comes with margin constraints such as commission rates, CPC, PPC, CPA, etc. Integration is hampered by stretched tech resource and data mapping that means retailers of all sizes are under constant pressure to ensure they are bringing enough customers to their e-commerce sites for as lower cost as possible. Reduced costs can be achieved through volume and the subsequent increased buying power, however sellers of sizes have increasingly relied on quick-fix sources of traffic through marketplaces, daily deal sites, price comparison channels or paid search customer acquisition. Retailers should not be curating their range or fixing their pricing based on cost of acquisition or the development resource required to open a new channel; this creates a confusing messages to customers engaging across multiple channels and on multiple devices.
  • Back the right (growing) channels – Price comparison sites were seen by many consumers as a way to find the best deals on their chosen items, but retailers know this isn’t really the case. The commission and referral-based structure of these sites mean that only a small proportion of product catalogue is visible and products only appear whilst the retailer still have budget. Marketplaces such as Amazon and eBay have delivered retailers spectacular growth, and large volumes of buying traffic, however this has come at a cost. Reliance on marketplaces has left retailers at the mercy of a self-created online landlord. As commission rates are increased retailers find their source of revenue constrained by tight margins and eroding volumes. By championing emerging and game-changing unbiased search platforms, retailers can help re-educate engaged shoppers to get a much wider choice of products to choose from and for the best price through a channel that will never look to monetise pure product search.
  • Collaborate and co-ordinate – The best online strategy for retailers predominantly sited on the high street is to build a great online offer to show selection, availability and pricing matched with an in store experience that involves expert advice and the reassurance of physically handling of the product. The expansion of Click&Collect services means that now is a great time for retailers to collaborate with the right carrier company and last mile solution providers that complement their current options and customer demographic. Special offers, daily deals and vouchers should not be viewed as separate activities and channels with a high ‘breakage’ rate. Retailers could look to combine efforts with partners who can provide customers with the complete picture of range, pricing, offers and location. Retail parks and outlet villages should be looking to collaborate with their landlord and co-tenants to co-ordinate activities and create a seamless online experience that drives consumers to their out-of-town location as the final destination.
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Author: Thomas Vosper
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