From discussing opportunities to reward customers with loyalty programs that drive additional revenue, to improving discount and voucher strategies in sales, retail leaders are exploring new avenues to maximize profitability for the year ahead, in reflection of recent economic challenges that have been presented in the 2025 UK budget.
To summarize, 81 retail leaders added their signatures to a British Retail Consortium (BRC) letter this past October, expressing their concerns over the scheduled rise in National Insurance contributions and reduced threshold for tax payment, which could negatively affect business growth and job stability.
This set the stage for an insightful 90 minute long roundtable discussion at the Haymarket Hotel in London, where Webloyalty and Retail Gazette invited retail leaders from Brand Alley, Catalina, Dune London, Ocado, Selfridges, and Tala on November 21st to discuss how this has impacted their business, what it means for consumer behavior, and how exploring new revenue streams is becoming increasingly more vital for businesses to stay financially resilient against new economic challenges.
The talking points below, summarize and highlight some of the key points of discussion revolved around what retail leaders believe some of the most important tactics to consider. Quotes are anonymized reflecting the Chatham House Rules applied to the event discussion.
1. Autumn Budget a ‘punch in the stomach’
Supporting much of the content from the BRC letter, one roundtable delegate called the Budget a “punch in the stomach” for their business. Just as the plans for 2025 had been put in place, they said, “we’ve had to rip our own budget up” – with the guest citing a clear negative impact on consumer sentiment already.
Another guest suggested the measures stated in Reeves’ Budget “impact every part of the business”. Others around the table said the 30 October announcement on top of a prolonged period of economic challenges in the UK will have a far-reaching effect, changing what people buy, slowing the frequency they make purchases, and even influencing the colour and fabric of the items they seek out.
One attendee said: “Customers are definitely choosier right now – they are keeping items for longer, and replacing them less often than they typically would.”
2. Voucher vultures and discount drug
Coming as it did a week before Black Friday, the event naturally entertained much talk about discount strategy and the challenges around margin erosion.
Underlining its importance and reason for retailers’ focus on improvements in this area, one retailer said: “It’s difficult to wean consumers off discount codes.” Others agreed, and suggested many Gen Z shoppers solely use discounts and won’t make a purchase online unless they have received money off in some form. “They’re astute, and know how to play the game,” one guest explained, adding that there is a significant section of consumer society who place items in an online shopping basket without checking out, knowing they’ll receive a later financial incentive to convert.
Another roundtable guest revealed their business has a cohort of customers they describe internally as “voucher vultures” i.e. people who only make a purchase with a discount and never buy at full price.
3. Black Friday ‘opportunity’
Despite knowing it can be margin erosive, one retailer at the table said “you simply have to maximise the spending opportunity” during Black Friday period. It was suggested that Black Friday period represented a “make or break” time of year for many retailers.
One of the guests suggested they always step away from offering deals during Black Friday, but are still able to do well “because people are generally in the mood to shop”.
Another retailer indicated that loyal shoppers to the brand feel they are “owed” deals during Black Friday as a “thank you” for spending money throughout the year.
It seems clear the industry has trained modern consumers that they’ll always be a deal they can find, making it difficult for retailers to avoid getting embroiled in sales events that chip away at margins.
4. ‘Hug the customer’
One retailer explained an expansion of its loyalty scheme is on the cards for 2025, with the aim of extending the time customers are spending with the business. It was agreed locking in customers with more perks and experiences – as opposed to solely running a points for purchases scheme – was the best way forward for loyalty programmes.
It is all part of the ongoing focus on consumer experience retailers need to be investing in if they are to succeed in such a challenging economic environment.
One retailer said their key focus for the year ahead was to work hard at converting the “significant percentage” of shoppers who place an item in their online basket but who don’t actually make a purchase.
“Our target is to hug the customers we have a bit more,” they explained.
“We could certainly communicate with our existing customers better. It’s always tricky in retail and very competitive, but there is margin out there to go for.”
5. Marginal gains
When asked about how they were going to look to squeeze the most out of the year ahead, retailers around the table agreed the coming 12 months will continue to be a challenge but they all had ideas about where they could make marginal gains.
From pushing higher value products in marketing to edging up delivery costs in international markets and taking a more cost conscious approach across all operations, there is definitely a trend for maximising profitability. A concerted effort to keep items at full price is the target for one of the retailers at the roundtable.
“If you sell at full price, there’s your margin,” they explained.
Another suggested that looking ahead to a year of inflation and rising business costs, more targeted offers and “smarter” discounting could be crucial to ensuring growth is still achieved. Retail media will continue to be a focus for retailers, it was argued, but several attendees said organisations needed to be careful they weren’t just replacing revenue they would have received elsewhere.
Dom West, Northern Europe MD for Webloyalty, said: “In the discussions we’re having with retailers we’re noticing a strong demand to add ancillary revenues to core operations.”
He added: “Whether it’s building retail media divisions, developing tiered loyalty schemes that bring a raft of benefits for members, marketplace expansion, or introducing additional services, most retailers are getting creative with improving the P&L.”
West continued: “We’re finding CFOs are on the hunt for new revenue streams, and the Budget on 30 October will only sharpen that search as businesses look to limit the profitability hit of the new fiscal measures in 2025. As the BRC/CEO letter to the chancellor states, retailers’ business rate bills alone will increase by circa £140 million in April 2025, so it is incumbent on the industry to think differently and engage with consumers in new, imaginative ways that drive incremental revenue streams.”
Discover more about how businesses are choosing to diversify their revenue streams here.