A COMMISSIONED STUDY CONDUCTED BY FORRESTER CONSULTING ON BEHALF OF MASTERCARD, JULY 2024 Drive Retail Growth With Revenue Diversification
Executive Summary Retailers today are challenged like never before to grow revenue while managing rising costs, evolving regulations, and labor availability. Given this environment, retailers must diversify their revenue streams as traditional growth strategies are no longer enough. Revenue diversification can include B2C revenue streams, such as offering new products outside the core business, as well as B2B revenue streams, such as data monetization. By strategically diversifying revenue streams, retailers can more successfully attract new customers, build stronger brand loyalty, and ultimately achieve sustainable growth. In a study commissioned by Mastercard, Forrester surveyed 326 decision-makers at retailers in the Americas, Europe, the Middle East, and Asia Pacific to assess their priorities, challenges, and opportunities driving growth by diversifying revenue. ABOUT FORRESTER CONSULTING Forrester provides independent and objective research-based consulting to help leaders deliver key outcomes. Fueled by our customer-obsessed research, Forrester’s seasoned consultants partner with leaders to execute their specific priorities using a unique engagement model that ensures lasting impact. For more information, visit forrester.com/consulting. © Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester®, Technographics®, Forrester Wave, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. [E-59635] Project Team: Lane Abernathy, Market Impact Consultant Contributing Research: Forrester’s Consumer & Digital research group © FORRESTER RESEARCH, INC. ALL RIGHTS RESERVED. 2 3
Retailers Prioritize Multiple Goals In The Coming Year AMERICAS (N=148) EMEA (N=107) Attracting new customers 86% Attracting new customers 87% Building stronger brand loyalty/retention 75% Personalizing the customer experience 79% Improving customer insights 74% Improving customer insights 79% Personalizing the customer experience 74% Understanding changing market dynamics 74% Understanding changing market dynamics 66% Integrating online and in-store experiences 70% Integrating online and in-store experiences 73% Building stronger brand loyalty/retention 73% Increasing brand awareness 65% Increasing brand awareness 67% Responding to changing consumer expectations 80% Responding to changing consumer expectations 80% APAC (N=71) Personalizing the customer experience 87% Understanding changing market dynamics 82% Improving customer insights 80% Building stronger brand loyalty/retention 79% Integrating online and in-store experiences 73% Responding to changing consumer expectations 79% Increasing brand awareness 65% Attracting new customers 83% Top Goals By Region While strategic goals vary by region, attracting new customers is a top priority for all retailers. 5 © FORRESTER RESEARCH, INC. ALL RIGHTS RESERVED. 4 Base: 326 B2C strategy decision-makers in the retail industry in the Americas, Europe, the Middle East, and APAC Note: Showing “Critical” and “Important” responses Source: A commissioned study conducted by Forrester Consulting on behalf of Mastercard, March 2024
AMERICAS (N=148) Expected Difficulty Achieving Goals EMEA (N=107) APAC (N=71) Responding to changing consumer expectations 72% Responding to changing consumer expectations 77% Responding to changing consumer expectations 73% Improving customer insights 64% Attracting new customers 66% Improving customer insights 70% Personalizing the customer experience 64% Improving customer insights 63% Integrating online and in-store experiences 66% Building stronger brand loyalty/retention 53% Personalizing the customer experience 57% Attracting new customers 57% Increasing brand awareness 46% Understanding changing market dynamics 44% Understanding changing market dynamics 42% Attracting new customers 50% Building stronger brand loyalty/retention 54% Building stronger brand loyalty/retention 48% Understanding changing market dynamics 44% Increasing brand awareness 40% Increasing brand awareness 36% Integrating online and in-store experiences 66% Integrating online and in-store experiences 67% Personalizing the customer experience 70% However, For Many Brands, Achieving These Goals Will Be Difficult Retail leaders report the biggest challenge they will face is responding to changing consumer expectations. 7 © FORRESTER RESEARCH, INC. ALL RIGHTS RESERVED. 6 Base: 326 B2C strategy decision-makers in the retail industry in the Americas, Europe, the Middle East, and APAC Note: Showing “Very challenging” and “Challenging” responses Source: A commissioned study conducted by Forrester Consulting on behalf of Mastercard, March 2024
Growing Challenges Make Achieving Goals More Difficult Than Ever Obstacles That Are More Challenging Than In Prior Years By Industry DRUG AND GROCERY (N=73) Managing supply chain 74% Rapidly changing consumer expectations 62% Rapidly evolving innovations in technology 62% Increasing competitive pressure 60% Decreasing labor availability 48% Analytics/understanding the impact of new strategies 58% Stricter regulatory requirements 41% Rising costs 64% APPAREL, SPECIALTY, AND SPORTING GOODS (N=76) Increasing competitive pressure 64% Rapidly changing consumer expectations 62% Analytics/understanding the impact of new strategies 59% Rapidly evolving innovations in technology 57% Rising costs 49% Decreasing labor availability 54% Stricter regulatory requirements 41% Managing supply chain 64% LUXURY AND BEAUTY (N=58) Rapidly changing consumer expectations 71% Managing supply chain 57% Rapidly evolving innovations in technology 55% Increasing competitive pressure 53% Rising costs 48% Decreasing labor availability 52% Stricter regulatory requirements 45% Analytics/understanding the impact of new strategies 64% 9 © FORRESTER RESEARCH, INC. ALL RIGHTS RESERVED. 8 Base: 326 B2C strategy decision-makers in the retail industry in the Americas, Europe, the Middle East, and APAC Note: Showing “Much more challenging” and “Moderately more challenging” responses Source: A commissioned studyconducted by Forrester Consulting on behalf of Mastercard, March 2024
EMEA APAC Americas My organization is behind and not keeping up with consumer expectations. 27% 21% 31% My organization is effectively managing its ability to transform at the rate of consumer expectations. 62% 63% 53% My organization proactively anticipates change and is ahead of customer expectations. 11% 15% 16% Leading Brands Compete By Proactively Anticipating Customer Needs Brands must transform to meet consumer needs. But to stand out, retailers must go one step further and proactively anticipate customer expectations. However, regardless of region, very few respondents’ organizations proactively anticipate change, while many fail to keep up with consumer needs. 11 © FORRESTER RESEARCH, INC. ALL RIGHTS RESERVED. 10 Base: 326 B2C strategy decision-makers in the retail industry in the Americas, Europe, the Middle East, and APAC Source: A commissioned study conducted by Forrester Consulting on behalf of Mastercard, March 2024
Revenue Diversification Can Help Retailers Achieve Their Most Important Goals Expected Or Achieved Benefits From Diversifying Revenue Streams By Industry DRUG AND GROCERY (N=73) LUXURY AND BEAUTY (N=58) APPAREL, SPECIALTY, AND SPORTING GOODS (N=76) Enhanced customer acquisition efforts 52% Improved penetration of new market 59% Increased brand awareness 54% Improved online and in-store experiences integration 44% Increased brand awareness 48% Improved customer insights 43% Improved ability to anticipate and proactively respond to changing consumer expectations 44% Improved ability to anticipate and proactively respond to changing consumer expectations 45% Increased hyperpersonalization of products or services 43% Improved penetration of new market 38% Enhanced customer acquisition efforts 40% Improved ability to anticipate and proactively respond to changing consumer expectations 41% Improved brand loyalty/retention 34% Improved online and in-store experiences integration 38% Improved understanding of changing market dynamics 38% Increased personalized customer experiencesretention 30% Increased hyperpersonalization of products or services 28% Improved online and in-store experiences integration 34% Improved understanding of changing market dynamics 37% Improved brand loyalty/retention 38% Enhanced customer acquisition efforts 39% Increased hyperpersonalization of products or services 32% Increased personalized customer experiences 29% Increased personalized customer experiences 36% Improved customer insights 29% Improved customer insights 17% Improved brand loyalty/retention 26% Increased brand awareness 51% Improved understanding of changing market dynamics 52% Improved penetration of new market 46% 13 © FORRESTER RESEARCH, INC. ALL RIGHTS RESERVED. 12 Base: 326 B2C strategy decision-makers in the retail industry in the Americas, Europe, the Middle East, and APAC Source: A commissioned study conducted by Forrester Consulting on behalf of Mastercard, March 2024
Testing this at a small scale Implemented Plans to implement in the next 12 months Embedded retail opportunities 28% 18% 83% 38% Retail media networks 32% 18% 83% 33% Extending into products and services unrelated to traditional business 25% 16% 83% 41% Data monetization 19% 24% 79% 36% B2B partnerships 26% 14% 71% 30% Many Companies Are Early In Their Revenue Diversification Journey Approaches To Revenue Diversification Some retailers have already implemented elements of revenue diversification either through a targeted approach or across their full network. The most common way is creating B2B partnerships. Tailored experiences or services 11% 30% 91% 50% 15 © FORRESTER RESEARCH, INC. ALL RIGHTS RESERVED. 14 Base: 326 B2C strategy decision-makers in the retail industry in the Americas, Europe, the Middle East, and APAC Note: Showing six responses; totals may not equal separate values due to rounding Source: A commissioned study conducted by Forrester Consulting on behalf of Mastercard, March 2024
Creating new B2C revenue streams beyond just selling products 79% 51% Creating new B2B revenue streams beyond just selling products Revenue Diversification Is An Important Part Of Retailers’ Plans For The Coming Year, But They Still Have A Long Way To Go 76% 58% The Importance And Expected Difficulty Of Creating New B2C And B2B Revenue Streams MODERATELY IMPORTANT TO CRITICAL CHALLENGING/VERY CHALLENGING* 17 © FORRESTER RESEARCH, INC. ALL RIGHTS RESERVED. 16 Base: 326 B2C strategy decision-makers in the retail industry in the Americas, Europe, the Middle East, and APAC *Base: Variable B2C strategy decision-makers in the retail industry in the Americas, Europe, the Middle East, and APAC, showing somewhat important, important, or critical priorities for the coming 12 months Note: Showing two responses Source: A commissioned study conducted by Forrester Consulting on behalf of Mastercard, March 2024
Across Regions, Difficulty Personalizing Customer Interactions Is The Top Barrier To Revenue Growth AMERICAS (N=148) EMEA (N=107) Difficulty personalizing customer interactions 51% Insufficient customer data 42% Inability to come up with new ideas or innovations 30% Inability to foster long-term brand loyalty 28% Lack of investment/high costs of analytics platform 18% Lack of internal skills or resources 26% Inability to assess the cause and effect of introducing a new strategy or initiative 44% Difficulty personalizing customer interactions 52% Inability to come up with new ideas or innovations 41% Inability to assess the cause and effect of introducing a new strategy or initiative 38% Lack of internal skills or resources 35% Inability to foster long-term brand loyalty 17% Lack of investment/high costs of analytics platform 25% Insufficient customer data 51% APAC (N=71) Difficulty personalizing customer interactions 55% Inability to assess the cause and effect of introducing a new strategy or initiative 39% Inability to come up with new ideas or innovations 30% Lack of internal skills or resources 28% Lack of investment/high costs of analytics platform 14% Inability to foster long-term brand loyalty 25% Insufficient customer data 47% Barriers To Revenue Growth By Region 19 © FORRESTER RESEARCH, INC. ALL RIGHTS RESERVED. 18 Base: 326 B2C strategy decision-makers in the retail industry in the Americas, Europe, the Middle East, and APA Source: A commissioned study conducted by Forrester Consulting on behalf of Mastercard, March 2024
Robust Data Solutions Offer The Ability To Solve The Most Common Barriers To Revenue Growth And Diversification AMERICAS (N=148) EMEA (N=107) Recommendations on how to deliver personalized customer experiences 62% In-market testing capabilities to assess and optimize new business initiatives 52% Support with developing new business ideas 32% Insights into consumer spending patterns 68% Accurate performance evaluations for new product lines 44% Recommendations on how to deliver personalized customer experiences 62% In-market testing capabilities to assess and optimize new business initiatives Support with developing new business ideas 28% Insights into consumer spending patterns 68% Accurate performance evaluations for new product lines 41% APAC (N=71) Recommendations on how to deliver personalized customer experiences 51% In-market testing capabilities to assess and optimize new business initiatives 52% Support with developing new business ideas 38% Insights into consumer spending patterns 64% Accurate performance evaluations for new product lines 45% Capabilities Or Qualities Expected From A Third-Party Design Solution To Help Create New Revenue Streams By Region 54% 21 © FORRESTER RESEARCH, INC. ALL RIGHTS RESERVED. 20 Base: 326 B2C strategy decision-makers in the retail industry in the Americas, Europe, the Middle East, and APAC Source: A commissioned study conducted by Forrester Consulting on behalf of Mastercard, March 2024
Conclusion Diversifying revenue is a top priority for retailers. But iterating ideas, using the right tech, and following best practices are critical to success. This study found that: Finding net-new revenue is key to growth. Most retailers (76%) agreed that digital transformation and changing consumer expectations make finding new ways to generate revenue beyond traditional methods essential to success. Testing small is imperative. With so many options, 84% say their organization needs to test initiatives on a small scale before implementing them broadly. Revenue diversification requires modern data solutions and partnerships. All retailers reported at least one challenge to growing revenue. Data solutions can help retail organizations overcome these challenges by providing consumer insights, personalization capabilities, and advanced analytics. Methodology This study was commissioned by Mastercard. To create this profile, Forrester Consulting supplemented this research with custom survey questions asked of B2C strategy decision-makers in the retail industry in the Americas, EMEA, and APAC. The custom survey began and was completed in March 2024. Note: Percentages may not total 100 due to rounding. LEVEL C-level 19% Vice president 37% Director 44% RETAIL TYPE Discretionary 50% Nondiscretionary 38% Other 12% ANNUAL REVENUE (USD) >$5B 15% $1B to $5B 24% $800M to $999M 18% $600M to $799M 22% $400M to $599M 12% $200M to $399M 9% REGION Americas 45% EMEA 33% APAC 22% Demographics INDUSTRY Retail 100% 23 © FORRESTER RESEARCH, INC. ALL RIGHTS RESERVED. © FORRESTER RESEARCH, INC. ALL RIGHTS RESERVED. 22
Explore More Download the full study: How Retailers Can Drive Growth With Revenue Diversification Read now How Retailers Can Drive Growth With Revenue Diversification To Ensure Future Success, Retailers Are Looking For New Ways To Generate Revenue Outside Traditional Methods Get started FORRESTER OPPORTUNITY SNAPSHOT: A CUSTOM STUDY COMMISSIONED BY MASTERCARD | MAY 2024 © FORRESTER RESEARCH, INC. ALL RIGHTS RESERVED.
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