Going into 2022, Retailers were quite optimistic that with the end of the pandemic, some of their challenges were about to end, and business would go back to a new normal. During the 2 years of COVID, most of e-Retailers saw double digit growth, while brick-and-mortar retailers grew at a single digit pace. While the whole world is recovering from this pandemic, another challenge was about to knock the door, that would affect tremendously businesses and everyday life, with the outburst of the war in Ukraine, and the resulting rise of prices, in raw materials, energy levels and cost of goods. The inflationary crisis may still be the largest challenge business owners have to wrestle with so far, not only due to increasing operational costs, but also because of the diminished buying power of consumers.
The International Monetary Fund has said that it expects inflation pressures to be significant around the world in 2022. Every corner is facing rising prices, but Inflation is predicted to be worse in developing economies, where price increases are projected to reach 8.7% on average over the course of this year and in Europe that according to Eurostat, prices have increased up to 7.5% in March 2022. The steepest annual inflation rates in Europe are faced in Energy with +44.7%, food +5.0%, other goods +3.4%, services +2.7%. The United Nations food agency said prices hit a record in February and again in March, and the World Bank forecasts wheat prices have risen more than 40%.
Retailers’ answer to the crisis
Despite retailers trying hard to maintain their prices and products intact, absorbing as much as possible the price increase, and making consumers feel it as less as possible, the situation has gotten out of hand, as retailers are seeing both their revenue dropping and their margins being cut. It is indicative that Retail sales in the UK fell by an unexpected 1.4% in March 2022, and February’s sales figures were also revised down.
It goes without saying that there are limits to the costs that retailers can absorb, that is why big retailers have already raised the price of some goods to cover increased labor costs. Next, a British multinational clothing, footwear, and home products retailer, has said its prices could rise by up to 6% this year to keep up with higher costs. And finally, supermarket giant Tesco has also warned that the “worst is yet to come” for rising food prices.
From a survey conducted by “First Insight” in partnership with the “Baker Retailing Center at The Wharton School of the University of Pennsylvania” based on a sample of 51 retail senior-level business executives, 27% of respondents saw a reduction of margins by 10% -20%, while 5% anticipate a margin fall by 30%.
When asked how to tackle this price increase, the most prominent answers were that they were planning to pass these costs to consumers by having a cost-based pricing, to reduce promotions/discounts, to listen more carefully to consumer feedback and to leverage market data.
Leveraging market data
Retailers are accustomed to facing difficulties and know the importance of pivoting in order to survive & succeed. This time, paying the bills has become a real burden every month and that is why a new solution must be found, and there is one. Retailers are in possession of a very valuable asset and many of them, are not even aware. They have in their hands a plethora of data such as the Transactional data of shoppers, Basket data, Sales data, Customer data, Marketing & eCommerce data, allowing them to understand shopping patterns, behaviors, and preferences. For instance, Electronics Retailers did not need to know that the Pandemic Reignited Tablet growth in the previously stagnant market, they could see that right away from their sell out. (Global tablet shipments gradually dropped from 230 million in 2014 to 145 million in 2019, before climbing back to 164 million in 2020 according to Statista.)
Having all this data gives a lot of power to Retailers, since they have the power of knowledge. And this knowledge is what brands are thirsty for. They want to know not only what their sell-out was, but the one of competition, the keyword searches and marketing activations across products & categories, in-store and digitally, to make their products, services and marketing stand out. By giving out these data, Retailers can get a new source of revenue, the so called… Data Monetization.
Data Monetization value
How does data monetization work? Practically it is the systematic gathering & sharing of Retailers’ transactional data with their Brand Partners in a unified, processed way. And this is where Convert Group steps in, since we allow Retailers & Brands to speak a common “data” language through a smart, user-friendly platform, that turns data into actionable insights. Retailers & Brands need to collaborate with each other to find efficiencies and really work hard on keeping the prices at a normal level becoming more attractive to customers. Gartner predicts that by 2023, organizations that promote data sharing will outperform their peers on most business value metrics. “There should be more collaborative data sharing unless there is a vetted reason not to, as not sharing data frequently can hamper business outcomes and be detrimental,” says Clougherty Jones, Senior Director Analyst, at Gartner.
Therefore, a significant opportunity arises for Retailers that decide to give out data in a standardized, scalable, sustainable manner. Data Monetization can bring two sources of revenues for Retailers. The first one is directly from the monetization of data and the second one, and most likely, the most important one, is from the strengthening of the collaboration with suppliers. Brands that work closely with Retailers are willing to invest more money on their marketing campaigns both in e-commerce and in physical stores of the Retailer, getting more benefits either on product or discounts. Based on our own research with retailers and brands who have successfully implemented this strategy, direct data monetization can add up to 1% of the brands’ turnover within the retailer and collaboration strengthening is estimated to drive up to 2% like-for-like growth on a category level.
In a challenging era therefore that Retailers are seeing their costs skyrocketing, unlocking an extra source of revenue can be their lifejacket and the first step to becoming a truly data-driven organization, working collaboratively with their brands, and standing out vs. competition. This is where we come in and we help you do effortlessly and easily, with the technology, processes, and talent we provide.
For more info don’t hesitate to contact our VP of Retail Monetization, Jacob Levis here