What lies ahead for retail is uncertain. Brands are strapped with excess inventory while inflation and interest rates are causing consumers to think twice before spending.
What can businesses do to weather the storms that potentially lie ahead?
It all comes down to two schools of thought: either diversify or simplify.
Brands that embrace diversity—as it pertains to selling channels, audience demographics, and more—tend to bounce back faster from challenges. That’s because businesses that have all their eggs in one basket are more susceptible to risk when that basket goes up in flames.
On the flip side, companies that over diversify and have their hand in too many pots open themselves up to inefficiencies and poorly performing business segments that drag the company down.
Diversify to Increase Revenue
First up, brands can opt to diversify in ways that will increase revenue. Here are four ways.
1. Adopt More Selling Channels
Savvy retailers take an omnichannel approach to selling. That means they have at least e-commerce and physical presences.
Brands can sell online in many ways: via their own website; marketplaces, like Amazon, eBay, and Etsy; and on social media, like Instagram and Facebook.
They can also sell in brick-and-mortar stores, either their own leased retail space or via retailers big and small, like Target, Urban Outfitters, and more.
Adding more selling channels gives brands access to more customers and, in turn, more revenue.
2. Expand to New Audiences
By opening up to new audiences, brands can increase their total addressable market (TAM). For example, if a company sells exclusively in the U.S., now might be a great opportunity to consider international markets.
But, the expansion opportunities don’t stop there. Businesses should also consider new demographics, whether that’s gender, age, etc., to tap new customer bases.
3. Grow the SKU List
Another way brands can diversify their business is to add more SKUs to their product roster. It’s important to be thoughtful about how to approach adding new products.
For example, businesses may want to add SKUs in order to increase the average order value (AOV) of their website. That means they’ll want to think about what items complement their existing product suite. It’s a natural assumption that consumers may want to purchase shaving cream when they buy a razor from Harry’s. It’s a much bigger stretch to say these consumers are also interested in tennis rackets or bowling balls. Retailers should test their assumptions with customer feedback and data before making product-related investments.
4. Test New Marketing Initiatives
As brands look for ways to increase revenue, they’ll want to reconsider their marketing tactics. Look for low-cost ways to test new strategies, like influencer marketing, organic social posts, etc. Consider conducting small paid tests to see what works and what does not.
Simplify to Decrease Costs
It’s not always economical to diversify. In other instances, it’s critical to simplify or streamline business tactics in order to improve the balance sheet.
Take a look at the same list above and ask yourself: have we overextended ourselves in some way? Are there areas where the costs outweigh the associated revenue with no path to profitability?
It may feel like the bold move to open up a new channel or reach a new audience amid times of uncertainty, but it can be just as bold to throttle down or turn off those same programs if they aren’t working.