While every retailer is constantly on the lookout for ways of increasing sales and cutting costs, there is a growing number that are generating a whole new stream of revenue from their prime asset: store space.

As trading conditions get ever tougher, this can be a significant source of profit that drops straight to the bottom line.

Store space, footfall, locations and brand demographics are all valuable, tradable assets with a market worth. There is a raft of potential partners out there who pay good rates for space in retail stores – it’s like having a few lodgers to help pay the bills.

Department stores have long understood the benefit of “renting” out store space to retailers/brands that complement their store offer. More often than not, these concession partners own the stock, and supply staff and tilling. So for the retailer, the rent or commission paid is pure incremental profit – no shrink, no stock, no staff.

The model is well proven – you only need look at various coffee shops, Post Offices and other concessions. Less obvious – but equally valuable – are the “mini concessions”, such as display stands for jewellery/watches/pens, or the partnerships such as DHL service points in Staples stores. Even the smallest store can accommodate some of these compact options.

However, it’s not just about long-term concessions and business-to-business partnerships; there is scope for seasonal concessions and promotions. Done well, they are brand enhancing and generate footfall.

Some are as short term as a single week of in-store activity: increasingly, retailers are welcoming into their stores third-party promoters who use a small area to sign up, or sell to, customers. You’ve probably come across the likes of Sky, Orange or Venture promoting in stores – a simple, instant revenue source.

Beyond this are more radical approaches, such as moving to vendor-managed or consignment stock. Wal-Mart recently announced its intention to focus on this approach, shifting the ownership of stock to suppliers and paying for goods only when they have sold.

While a store-wide approach to vendor-managed stock may not be achievable, most retailers have a few key suppliers with range authority in their sector that would welcome the chance to work as “virtual concessions”, owning stock and managing supply. When it works, the retailer gets the double benefit of handing over stock/shrink ownership and increasing sales – more often than not, the suppliers’ close management of their own products leads to higher sales.

So, while it is tough out there, there is new money to be made from letting some new brands/partners into stores and it’s more fun than cost-cutting.

Sue Wharton, managing director, New Income Streams

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