Guest comment: Monetisation: a simple concept for unlocking new revenue from existing customers

by Martin Child

When Sir Tim Berners-Lee was sitting in his computer science lab in the early 90s, inventing the World Wide Web, I doubt even he could have foreseen the dramatic change the internet was going to have on the retail landscape over the last fifteen years – and he is undoubtedly one of the greatest living geniuses. Not even a genius would have placed a bet on Woolworths having to leave our high streets. And who could have predicted that so many people would respond to the question, “Where did you buy that outfit?” with, “I bought it online”.

In the early days of internet shopping, retailers’ websites were often simply a shop window for the high-street store, shoppers still wanted the ability to ‘touch and feel’ their products. However, times change and today’s convenience culture means that ‘try before you buy’ has become ‘buy it and send it back if you don’t like it’. Not surprising then, that the online channel is growing faster than offline sales.

According to Verdict Research, ten years ago, online retail was worth around £1bn and accounted for just 0.5% of all retail spending. Since then, it has grown by an average 37% per year and is now worth over £20bn, with 7.3% of all purchasing going through the channel – and rising.

A key driver of the rapid growth in online retail has been the hordes of new shoppers dipping their toes into online shopping each year. Just six years ago only one in four shoppers used the internet, but now it is one in two. The sheer number of new shoppers entering the market at such breakneck speed was enough to drive sales improvements.

But now online retailers are facing a severe slowdown in new customers. Retailers must therefore turn their attention to driving repeat business – shifting spend away from attracting new customers and instead focussing it on adding value and extra benefits for their existing customer base and driving repeat business. Those retailers that try to win on price and product alone will be left behind.

Despite growing by 13.3% in 2009, findings from Verdict suggest that internet retail has been significantly impacted by the recession – costing internet retailers an estimated £1.6bn in lost revenues that would otherwise have been gained had the economy not fallen.

This calls for more sophisticated income strategies for the online retailer post-recession. As we move forward, many consumers will grow in confidence and begin to treat themselves once more. They will be more willing to buy higher priced goods. That said, they will still be cautious and the likely trend will be to buy fewer, higher priced items. E-retailers cannot rely on heavy traffic and new custom, they need to recognise the increasing importance of providing their existing customers benefits that attract repeat business and maximise the revenue streams on their web pages.

2010 is the year that retailers should look to generate additional revenue from monetisation of their websites. Retailers invest significant amounts of money in order to attract visitors to their websites so that customers will spend money with them. So, once they are there, why shouldn’t these customers also generate revenue in the form of monetisation? Verdict estimates that at the end of last year the potential value of the monetisation of retail websites, excluding any revenue from advertising banners, was worth up to £220 million. And, as online retail continues to grow as a channel, this figure will only increase: potentially up to £949 million by 2013.

It doesn’t take a genius to understand the principle of monetisation. Quite simply, it involves allowing third parties to pitch their offers to a retailer’s web traffic. These offers can take the form of a discount and reward programme, a similar membership scheme or a one-off tactical offer. Third parties will pay retailers for the privilege of being exposed to their web traffic. The fact that these revenues can be generated with very few costs means that monetisation can be extremely lucrative. Often the right partner in this field will manage the whole process, leaving retailers to focus on selling products.

All that e-tailers are required to do is to promote the third party offer on their site. This can be achieved through a small advert or a click-through link. These can be placed on ‘non-transactional’ pages such as payment confirmation pages, thereby turning these previously static pages into ancillary revenue-generating areas of the site.

Tougher times like these are the ideal time for retailers to reduce their dependency on sales alone for generating revenue. Something else that Sir Tim Berners-Lee could never have predicted is that the internet has moved so far since its origin, that the role it plays in driving sales today is now not actually enough for retailers. Now the internet must work harder to gain additional revenue streams on top of sales.

So, in 2010, as I sit in my office in central London, I realise it doesn’t take a genius to work out that B2B partnerships with like minded companies that offer added value services to customers, can hold the key to unlocking this additional revenue from existing web pages and existing customers.

Martin Child is managing director of Webloyalty