The need for businesses to find alternative means of maximising profitability comes amidst changing patterns in consumer expectations. For example, many customers have shifted to online shopping, with some studies showing that up to 46% will purchase online services they previously bought in stores.
Alternative revenue refers to income streams beyond a company’s primary or traditional sources. It involves diversifying income through unconventional methods that complement existing revenue streams. This can include strategies like sponsorships, licensing, subscription services or product expansions. Alternative revenue aims to create supplementary income channels, reducing dependency on a single source.
How Companies Are Finding Alternate Income Streams
Unsurprisingly, businesses in sectors like online gaming implement alternative income streams by offering product expansions. Many iGaming companies are expanding their services and offerings to grow their revenues. For example, at an online casino’s digital portal, customers will not only find simple slot games but also an assortment of bingo and live games to immerse themselves in. That way, these businesses engage more customers, resulting in more profits.
With many customers transitioning to online shopping, supermarkets have more pressure to make profits as online retailing is more expensive. Online shopping comes with added costs of making deliveries, which can increase total logistics costs by 41%, as some studies show. However, online retailers are taking advantage of new opportunities like faster delivery to diversify their income streams despite the costs. Through the last-mile model, businesses deliver satisfactory services to their consumers without compromising profitability.
Online businesses can improve loyalty by offering faster delivery services, as many customers are willing to spend more for such services. For instance, a report revealed that buyers would pay up to 4.9% of the total order value as a value-added service if they received their products within 2 hours. Multiplying the additional spend by the number of customers can result in high alternative revenues.
Amazon Leading The Way
Amazon has been in the lead in utilising alternate revenue streams. It developed its cloud computing company, Amazon Web Services, in 2002 and launched Amazon Advertising in 2012. These two developments have brought Amazon enormous profits, particularly from its Prime members.
Furthermore, Amazon has campaign programs like Amazon Inspire that allow buyers to spend more time on their website, increasing the chances of conversions. Other deals include the launch of third-party travel partnerships.
For commerce giants like this, more opportunities exist to create alternative revenue.
With retail media, for example, retailers can now sell advertising spaces and insights to other companies to maximise alternative incomes. This trend is projected to be the next big thing in advertising, as some suggest it has up to 90% profit margins.
Evolving customer behaviours present businesses with new opportunities for alternate revenue streams. For instance, retailers can profit more from online shopping by providing value-added services like faster delivery, while Amazon has been leading the trend with its cloud computing web services. Predictably, as alternative revenues can be transformative, we can expect that more retailers will join this trail to maximise their profits.
