Perhaps it shouldn’t have come as a surprise to me that my last post – topped and tailed with a pair of lyrics from The Specials – raised a few eyebrows in the FRP offices. I’d hoped to provoke some serious conversation about the shifting UK shopping centre revenue model, but it seems my colleagues were more interested in the contents of my vinyl collection (although I did enjoy earning the soubriquet ‘Two Tone Tone’). So where else to look in the collection as inspiration for this week’s post? Well, reading the latest figures from the BRC (British Retail Consortium), it feels as though a suitable backdrop might be The Smiths singing “Heaven Knows I’m Miserable Now”.
Year-on-year spending is down 1.1%, as sales both in-store and online fell for a second month in a row. In part, this reflects last year’s “bubble” as the harshest pandemic restrictions eased, but the rate of decrease has worsened from April’s 0.3% decline. There were some small bright spots – clothing, footwear and accessories rose ahead of the holiday (and Jubilee) season, but bigger ticket items in particular suffered as the cost of living squeeze continued to dent consumer appetite.
So what can retailers do to respond? Brooke Masters, the FT’s US investment and industries editor, had an interesting opinion piece in last week’s pink pages exploring the opportunities for cross-selling for retailers. As Masters astutely points out, the current recipe of tight supply chains and challenging inflationary environment makes the “easy wins” of a cross-sell opportunity all the more appealing. And as such, the practice has returned as a hot topic for a whole range of retailers – Sentieo data have recorded an uptick of mentions in quarterly earnings calls across the board.
Some sectors are already highly adept at partnering up and promoting the cross-sell. Airlines, in particular, take every opportunity to bombard you with car hire, travel insurance, and credit card ‘special offers’. But what surprised me reading the article was just how successful a strategy this has proven – Delta’s deal with American Express secured a record $1.2 bn for the airline in the first quarter alone. And with a high-quality, captive, clientele, airlines are looking wide and far for the next partner including on-board promotion of everything from Starbucks to Apple TV+.
And where the airlines have led, others are rapidly following. As retail margins have come under more and more pressure, they have looked to their valuable customer relationships as a source of potential growth. And whilst this was previously largely focused in-store (such as supermarkets hosting concessions for pharmacies, banks and cafes), I know from bitter experience that the inexorable rise of the digital marketing dollar means that checking out from the online weekly ‘shop’ now requires a veritable running of the gauntlet to get around the numerous cross-selling attempts.
And perhaps that signals just one danger of such an approach. Customer loyalty is fickle, and even more so in hardened times. Whilst one customer might welcome – or at least not mind – an opportunistic cross-sell, it might cross the line into irritation for another. And as Masters points out, in extremis, cross-selling can cross a line into much less desirable territory, such as the near decade-long fall-out for banks retrospectively atoning for their PPI mis-selling practices.
Ultimately, it all points to an ongoing theme – that challenging economic environments put exceptional demands on retailers to be reactive and to ‘box clever’. The best ones will know where that line between opportunity and risk lies.
And who knows, if they get it right, maybe the soundtrack will take on a different Manchester vibe –Oasis’s ‘Roll With It’ anyone?