Make secondary revenue a primary focus
With rapid changes happening in e-commerce, leaders tend to intensify the focus on their core revenue drivers. It’s a natural reflex that, unfortunately, can leave a lot of money on the table. By putting energy into developing secondary revenue streams, your business can unlock nearly limitless flows of additional money.
A recent report shows 46% of retailers generating at least 10% of their turnover from secondary revenue — that means some retailers are getting even more. If you’re starting to see why secondary revenue should be a primary focus for brands, you’re not alone. The same report also revealed that secondary revenue is now considered very or extremely important for 29% of retailers, up from just 13% a year earlier. Secondary revenue is becoming imperative because it builds customer loyalty, generates serious money, and it’s easier than ever to implement.
Improve the Customer Experience
We’re in an era where customer loyalties can shift pretty quickly. Savvy e-commerce leaders know this and they’ve zeroed in on customer experience as a way to increase loyalty and revenue at the same time. Take Amazon, for example. When a customer purchases an Echo or a Nest Home Security system, Amazon Services makes the overall experience better by providing setup and installation assistance. The Container Store and Ikea both have similar offerings. And once installers are in a customer’s home, they can suggest additional products and services that enhance the customer experience and generate further ancillary revenue.
Stay ahead of the competition
An increasing number of e-commerce leaders are realizing there’s serious money to be made from secondary revenue. Remember that study mentioned earlier? It also showed that 34% of retailers already have a secondary revenue strategy — and that number is up from only 26% in 2017. Companies like Amazon have turned cross-selling into an art. Amazon markets ad space and Amazon Web Services (AWS) to the retailers selling on its site. Even though the company’s main business is e-commerce, secondary revenue from cross selling accounted for 85 percent of Amazon’s profit in 2018.
For most brands, starting an ancillary business like AWS isn’t really an option but there may be potential add-ons hiding in plain sight if you really start to look. Let’s say you don’t book vacations but you do sell luggage or beach bags. When your customers make those purchases, layering a targeted travel insurance policy onto that purchase at checkout could potentially net your brand more money, especially at scale.
Partner With Third Parties for Easy Implementation
As a retailer, you’re undoubtedly aware that selling extended warranty protection at the point of sale generates serious money for brands. You may not realize that the secondary revenue opportunities today are much bigger than just warranties on washing machines. Emerging insurtech companies are driving huge changes in the e-commerce landscape. These insurers offer a superior API and an underwriting model that unbundles the traditional policy approach to ensure customers are offered insurance that meets their specific needs. Claims are easy to make, and payouts are available in most major currencies — perfect for retailers that sell globally.
Offering insurance at the point of sale is also a great way to improve the customer experience. Hotel and airline sites commonly offer travel insurance not only because it brings in additional revenue, but because customers increasingly expect it. Customers prefer brands that anticipate their needs and provide personalized experiences. No one wants to go through the whole process of entering dates, personal information, and payment details to book a vacation and then go to another website and do it all over again just to buy travel insurance. Convenience for the customer can become revenue for your brand.
Secondary revenue from insurance is a huge opportunity for brands operating hotels, car rentals, tours, attractions, or even duty-free shops at airports, to name just a few. The great thing about an add-on like insurance is the fact that somebody else takes care of all the details for you. These days, all your brand really needs to do is identify the selling opportunities and leave the rest to a third-party with a good API. Insurtech companies also allow retailers to price core products very competitively because the ancillary revenue still adds margin to the bottom line.
Change The Agenda
Secondary revenue streams are easier than ever to develop, the real challenge is getting established businesses to change. When secondary revenue is too low on the agenda, the opportunities for building customer loyalty and earning additional revenue will continue to be missed. Leaders who make secondary revenue a primary focus are the ones who will beat out the competition and help their companies succeed in the marketplace.