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The growth of new revenue opportunities, like retail media for c-stores, represents an exciting shift in how businesses can monetize their operations. High-margin initiatives, such as selling ad placements on screens, websites, or other digital properties, can be a powerful catalyst for funding growth in areas with significant long-term potential, like delivery services. However, success hinges on managing these revenue streams independently and with discipline. It can be tempting to combine these activities with other operations to shore up margin challenges.
The challenge lies in differentiating between strategic reinvestment and masking inefficiencies. Using retail media profits to scale delivery efforts or other new initiatives can be a smart, short-term strategy—but only if there’s a clear plan for ensuring that all operations eventually stand on their own. Simply blending results to make the overall business look healthy while ignoring persistent inefficiencies in one area undermines long-term success.
The Right Way to Leverage High-Margin Initiatives
Retail media is a perfect example of how a high-margin revenue stream can provide the fuel for growth. Its profitability creates opportunities to invest in initiatives like AI and digital ordering, which can unlock access to new customers and increase order frequency. But this strategy works only when executed with a focus on operational excellence, accountability, and sustainability.
‍What Works:
• Funding short-term deficits strategically: It’s perfectly acceptable to use high-margin revenue to fund growth as you build out operations and scale. For example, you might reinvest retail media profits in technology, logistics, or marketing to establish a strong digital presence.
• Maintaining independent accountability: High-margin profits should never permanently subsidize inefficient or underperforming operations. Track each revenue stream independently and ensure that every initiative contributes to profitability over time.
What Fails:
• Blending margins to mask inefficiencies: Combining the results of retail media and digital commerce without addressing inefficiencies in delivery operations creates the illusion of success. This approach avoids hard questions about the sustainability of the underperforming business and risks long-term erosion of profitability.
The Challenges of Managing Digital and Delivery Operations
Delivery initiatives are particularly vulnerable to inefficiencies. The complexity of managing inventory, coordinating with third-party platforms, and maintaining high service standards can stretch resources and introduce risks to profitability.
Key challenges include:
• Operational oversight: Proper delivery operations require timely order fulfillment, accurate inventory updates, responsive customer support, and reliable technology like tablets staying powered up and online. These demands are ongoing and resource-intensive.Â
• Staffing gaps: Hiring a full-time employee to handle delivery oversight when you only need part of their time can erode margins, while assigning delivery tasks to an already stretched team risks burnout and errors that ripple through other parts of the business.
The Role of a Strong Delivery Partner
Choosing the right delivery partner is crucial to overcoming these challenges. A partner that offers more than just technology—one that provides staff augmentation and operational support—can make all the difference.
A strong delivery partner should:
• Augment your team: By taking on the administrative burden of delivery oversight, such as inventory syncing, customer communications, and maintaining platform uptime, the partner ensures a high standard of performance without overloading your staff.
• Optimize processes: The right partner will streamline logistics, reduce errors, and help you manage costs effectively, ensuring that delivery operations become a sustainable, profitable part of your business.
• Provide expertise: Beyond tools and technology, a partner should bring deep knowledge of delivery best practices, helping you avoid costly missteps and maintain a high bar for customer experience.
Best Practices for Managing Revenue Streams
Each revenue stream—whether retail media, delivery, or traditional in-store sales—should be treated as its own line of business with separate performance metrics. Independent tracking ensures accountability and prevents one initiative from hiding inefficiencies in another.
It’s smart to use high-margin profits to fund growth and cover short-term deficits as you scale, but this should always be part of a plan to make every initiative profitable on its own. High margins are a tool for building strength, not a crutch for perpetuating weaknesses.
Delivery success depends on operational oversight, and insufficient staffing or overburdened teams can quickly erode margins. The right delivery partner can help by reducing the need for additional headcount and ensuring that your team stays focused and productive.
High-margin revenue streams can tempt businesses to overlook inefficiencies in other areas. Resist this temptation by focusing on cost control, streamlining processes, and addressing operational weaknesses directly.
New revenue streams like retail media and delivery have tremendous potential, but only if each one is set up for independent success. A disciplined, strategic approach ensures that your business thrives in the long run without compromising on profitability.
Final Thoughts
High-margin initiatives like retail media are powerful tools for growth, but they must be used wisely. The right approach is to invest strategically, using profits to strengthen other areas of the business while maintaining a clear focus on sustainability and independent profitability. For digital and delivery, this means choosing partners who augment your team and help you execute at a high level without burdening your staff or compromising operational standards.
Blending revenue streams to mask inefficiencies might make the overall picture look “okay” today, but it sets the stage for challenges tomorrow. By treating each initiative as its own business and managing them with discipline and care, you can unlock the full potential of both retail media and delivery while building a stronger, more sustainable future.
About Lula
While tech is our foundation, service is our mission. Lula provides the necessary technology and integrations to simplify your digital operations, while providing the critical services that reduce your costs and grow your digital revenue. Lula is your partner for digital growth, acting as an extension of your team in key areas like uptime and performance monitoring, 24/7 support, and key analysis to drive ongoing improvements. Let’s connect and talk about your digital initiatives and how we can help.
