Would you like fries with that?
The importance of active selling in tough times
No, this isn’t the old joke about the first thing a Philosophy graduate says when they start work. Instead it is about something that is becoming an essential KPI for many retail and hospitality businesses in these challenging times.
We’ll get to that, but first of all let’s root this post in a view of how peak trading has gone this year. I’m not going to get into the results of individual businesses - as regular readers will know, they are not massively enlightening anyway. But if you step back a bit and squint at the numbers, then a pattern emerges of what the baseline “no score draw” level of performance was for different sectors. Broadly speaking, the ‘neither won nor lost’ level of performance seems to me to be about 7-8% LFL growth for the food retailers, about 4-5% for clothing and about 0% for the home & electricals sectors.
Underpinning those numbers however, which broadly reflect the result you’d expect in a time of high inflation and a real cost-of-living crunch, is a stark change in the make-up of the constituent parts.
Many retailers I talk to describe, for example, that the number of people coming into their stores (footfall) or to their website (traffic) is down year over year. And they were saying the same thing a year ago, so when you compound up 2 years worth of data some sectors are seeing footfall down by double-digit percentages.
In other words, some people have disappeared from the market, and there are just fewer customers out there buying. Again, given everything we know about the wider economy that makes sense.
In business, though, we have to focus on the KPIs we can control. If there are fewer people out there to sell to, our only source of growth is to increase the amount we sell to them. And it is here that I see some seismic changes in the retail winners and losers coming.
We can consider four ways of increasing the value of the sale we make to each person visiting our store or website:
We can increase our prices. And this, I think, has been the narrative of much of 2023 and underpins the peak trading results we’ve just reviewed. As the UK has been through a period of high inflation retailers, with increasing costs, have had no choice but to pass much of that inflation through somehow or another. As overall inflation comes down, however, it is increasingly challenging to see this as a viable strategy for 2024 - our markets are competitive, customers are searching for deals and so it is hard to see anyone offsetting declining footfall by just arbitrarily putting up prices.
We can increase our conversion rates - in other words, make a sale to a higher percentage of the customers who visit us.
We can upsell to more expensive versions of the products people are buying from us
We can add to the basket by adding additional items - accessories, add-on services and related products.
And it is these last three options which I think will start to separate the winners from the losers in retailing in 2024. What links them together is that they are part of an active sales discussion with a customer. Ask any assisted selling organisation what an ‘active sales discussion’ looks like and they will all give you a similar answer - you need to engage with the customer in a personable way, listen to their needs, present some options, handle objections and be willing to close the deal.
The challenge for retailers is that each stage of that is harder than it looks, particularly when you need to deliver it dozens of times a day in thousands of locations through tens of thousands of colleagues. It needs training, incentivisation, performance management, regular communication and feedback.
When you walk into a store and are roundly ignored, that store is unlikely to be successful in persuading you to buy from them at all, and certainly won’t be encouraging you to stretch your spend further. And if that store is one which is seeing year over year declines in footfall, that slack approach is going to become very obvious in their results once the artificial flattery of inflation drops out of the numbers.
Don’t, by the way, mistake a call for active selling as shorthand for some terrible scenario where you are pounced on and harassed by over-commissioned sales people and never given a moment to browse. That stereotype is widespread but it is also nonsense, not least because it doesn’t work.
Getting active selling right in your retail business will be a subtle process that depends on the customer and colleagues you have and on the sector you are in. It might be as simple as a cheery hello when customers walk in, as artful merchandising showcasing accessories alongside other products or as some clever link-pricing.
There is also an interesting structural impact of the increasing importance of active selling conversations with customers. They might be tough to get right in physical stores, but they are even harder to get right in a pureplay online world where you are limited to the copy and imagery that you have on the page. We might wonder, then, whether there will be an increasing trend as inflation comes down of stores outperforming pureplay businesses? I certainly see a surprising number of pureplay businesses quietly putting themselves up for sale right now, which might be a clue that they don’t see 2024 as likely to be a vintage year.
Whether you are a physical or digital retailer, stretching your business to sell just a little bit more is a challenge which will involve your whole team - every function, and every level. Whatever the solution that works in your business, however, if we are going to be in a world of selling to fewer people this year, it is a formula worth getting right.
P.S.
I’m really looking forward to chatting with Vernon Dennis, the Head of Business Advisory for Howard Kennedy about what can go wrong running a retail business and how we can get ourselves out of trouble when it comes. We’ll be exploring many of the themes you’ll have seen in these posts, so if you fancy a bit of ‘Moving Tribes Live’ then do come along - Feb 7th, early evening in London.