5 Ways Retailers Like IKEA are Using Non-Core Business Ideas to Boost Revenue
By Tricia McKinnon
While the pundits claim that retail is on a steep decline with no end in sight retailers are not sitting still. They are racing to reinvent themselves and many are looking outside of their core businesses to bring in new streams of revenue. For shoe retailer DSW its foray outside of its core business includes nail salons which are bringing in a new and younger customer. For Walmart it is trying to beat Amazon at its own game by leveraging its website to bring in advertising revenue. Not to be left out of the sharing economy, retailers like American Eagle have launched their own rental clothing tservices. One thing is for sure, these retailers are not going down without a fight. Instead they are innovating in ways that make this one of the most exciting times in retail for consumers. Take a look at how these retailers are focusing on non core businesses to bring in extra revenue.
1. Have you ever gone to IKEA without stopping in the food court to have a quick and tasty meal? If not then you are among many people that have helped IKEA to become the world’s sixth largest food chain. With the popularity of its food offering IKEA is testing food delivery in Paris. Currently food is being delivered out of a two-story, 58,000 sq. ft. smaller sized urban store in Paris. Some of the options for home delivery are beets, cabbage, salads, and salmon. Its famous Swedish meatballs are not offered under the delivery service at this time but perhaps they will be in the future. The food delivery market is expected to grow to $161 billion by 2023. Companies like DoorDash, Postmates and Uber are already trying to get in on the growth. If IKEA’s food delivery service proves to be a success the retailer may expand the service to Spain before offering it in the rest of Europe.
2. It is estimated that Walmart.com with 140 million monthly visitors has the second highest number of monthly unique visitors for a retail website behind Amazon at 200 million. Despite having such a high volume of online visitors Walmart is only now starting to take advantage of this traffic to drive advertising revenue. Speaking to analysts last October, Walmart CEO Doug McMillon said: “we have a tiny ad business. It could be bigger.”
In order to give its advertising business a boost, Walmart recently purchased advertising technology start-up Polymorph Labs with the goal of helping Walmart to compete better in the digital advertising space. The start-up’s custom developed technology platform including its high-speed ad sever will allow companies wishing to advertise on Walmart.com to better target visitors based on their actual shopping patterns.
In another move that signals Walmart’s focus on this area, the retailer consolidated its advertising sales for its website and stores into a single group so that advertisers have a single point of contact when dealing with Walmart. Walmart also moved its advertising operations in house.
3. DSW began testing locating nail salons in two of its stores located in Ohio back in 2017. One of the goals of offering this service in-store was to attract a millennial shopper. Approximately 25% of DSW’s client base are millennials while 50% of the customers that use the retailer’s nail salons are millennials. Based on successful results of the test DSW is planning to roll out nail salons in five of its shoe stores located in Austin, Washington, D.C. and Dublin, Ohio, this year. The nail salons are run by W Nail Bar and the hope is to eventually have nail salons in more than 250 DSW shoe stores. Customers using the nail salons located in DSW stores can get a manicure or a pedicure and certain locations will also provide waxing services and a place where customers can have a glass of wine as well as other beverages.
Speaking about the initiative, DSW Chief Executive Officer Roger Rawlins said opening nail salons is “part of a much larger strategy of differentiating the experiences and the product for the DSW brand that separates us from the rest of the pack.” “Everyone else is out there competing on price; we want to compete on experiences.”
4. In May of last year Walmart launched its Jetblack service in New York City. Jetblack is a personal shopping service that customers access via text message. The service’s tagline is: “Need It. Text It. Get It. Jetblack is the easiest way for busy parents to shop”. Jetblack is a standalone company within Walmart’s Store No. 8 tech incubator which is focused on helping Walmart stay ahead of retail trends. In addition to Jetblack the incubator is working on Project Kepler an initiative focused on creating cashier-less stores similar to Amazon Go, as well as a virtual reality project.
The service costs $50 per month and all a customer needs to do is send a text with a shopping request. The service can fulfill almost any shopping request as long as it doesn’t involve food, alcohol or prescription drugs. Jetblack’s CEO Jenny Fleiss says that there are typically three use cases for service. One is to reorder frequently purchased items such as toilet paper, another is to get a recommendation for something such as a birthday gift for a friend and the third involves sending a text message with a picture of a specific product (i.e. a screen shot of something a customer has seen online) but the customer does not want the hassle of finding the product online or they do not feel like taking the time to enter their payment information.
Although the service is not profitable yet and currently only available in New York the “big vision” for the service is to create a personal shopping service that is available to everyone (instead of just the small segment of customers the service is available to today).
According to a Wall Street Journal report, a Walmart executive said: “it's the first thing the company's tried that can separate the customer from Prime.” "The early indication is that [Jetblack] has legs."
5. American Eagle is one of several retailers that is getting in on the sharing economy trend. It launched “Style Drop,” in January of 2019, a subscription service where customers can rent clothing in four easy steps – Browse, Rent, Return, Repeat for a monthly fee of $49.95. For that fee customers get three items per month, unlimited exchanges, free shipping, and free dry cleaning. If the customer decides to keep an item, they can purchase the item at a discount of 25% or more. Rent the Runway offers a similar service.
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