Business man pointing to increasing revenue graph

Recurring Revenue is Your Retail Future

If the pandemic experience has taught us anything, it’s knowing how important it is for a business to shield itself from the impact of the disappearing customer.

In the home furnishings retail business, success is determined by having enough customers that purchase enough products and provide enough margin to produce a profit. But when a brick and mortar retailer is forced to shut down, revenue immediately dries up while much of the overhead costs keep going. Whether it’s the cost of rent, utilities, employees, or carrying charges, the fluidity of business comes under intense pressure.  

Retailers that have sufficient working capital, or are able to make payment deferral arrangements with their suppliers or obtain the support of temporary government subsidies, know that their survival depends on how quickly they can adapt to rapidly changing circumstances.

Fortunate are those who, prior to the lock-down, had existing e-commerce capabilities and those who were able to move quickly enough to implement such ability – it gives these retailers a fighting chance to stay alive.

Really fortunate are those retailers who have ways to generate one or more different streams of revenue when the temporary interruption of retail sales has a limited impact on the ability to maintain a continuous flow of revenue.

Long-standing rent-to-own (RTO) providers of home furnishings have established a niche that is ripe for disruption by the traditional home goods retailer. RTOs are often considered a source of low-cost furnishings for those with limited financial resources or where consumers may not have access to credit. The secret to the RTO business is to rent or lease their product while finding ways to turnover their products as frequently as possible (often well-worn).

Retailers can Deliver Value at Affordable Monthly Rates

While traditional home furnishing and appliance retailing may be one of the last categories to enter the recurring revenue world, new opportunities have emerged where quality retailers are delivering convenience and value at affordable monthly rates. Consider IKEA’s entry into the furniture leasing space with the overriding theme of recycling and sustainability. Or, Restoration Hardware that claims 95% of their core revenue is the result of their membership-based model.

For the retailer who understands their consumer’s desire for fashion-forward design, frictionless convenience and exceptional customer experiences, a membership subscription model could include unique Member benefits such as access to professional interior design services; first-look at new products; special member discounts; free priority delivery etc. 

There are many ways to create new value that helps to maintain a long-term connection with customers while generating a reliable, repeatable source of revenue.

The Smarter Living Plan, recently introduced by ZucoraHome, is a recurring revenue program designed to help retailers retain customers-for-life while increasing their ‘customer lifetime value’ (LTV) by creating an ongoing relationship with the customer.  

The Smarter Living Plan is an alternative to the traditional single-item product protection plan. It provides comprehensive service coverage, including wear and tear, for almost all of their home furnishings and appliances (regardless of the products’ age or where previously purchased). The plan can also be upgraded to include home systems such as heating and plumbing. 

When service is required, the plan holder contacts ZucoraHome and a qualified technician is dispatched to fix or repair the item. The member pays a one-time trade service fee to dispatch the technician. Should a covered product need replacement, the customer is provided with a gift card and returns to the retailer to purchase new merchandise. The retailer receives full value for the gift card and also benefits by sharing in the monthly plan fee paid by the Member. It’s a win-win for the customer and the retailer.

Retailers with a recurring revenue model are able to benefit from a source of income that doesn’t end abruptly when required to close their brick and mortar operations. 

Not only does a recurring revenue source create incredible value for the retailer during normal times, but it delivers a significant advantage when faced with an unexpected event like a pandemic.

Related information: See What is a Smarter Plan at  zucorahome.com

By Brad Geddes

Brad Geddes

Brad Geddes, President & CEO of ZucoraHome regularly shares insights about the Canadian home furnishings industry, changing consumer needs, and the transformation of ZucoraHome into a Smarter Living enterprise that leverages technology and professional home services to help families enjoy a better quality of life.

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