CROSS SELLING

CROSS-SELLING THE WALGREEN’S WAY

Dick and I were in New York City for almost a month so he can get a new knee. He did so successfully. While Dick was recuperating at a hotel, I continued to seek food from all possible sources. Those who know me know that I am always desperate for food and have a deep-seated fear of being without items such as strawberries and chocolate. There aren’t many grocery stores in Midtown Manhattan near our hotel, so I was worried.

Imagine my surprise when I visited Duane Reade, a drug store chain in the city, to fill Dick’s prescriptions. The first floor was completely redone and stocked with fresh fruit and other fresh food items such as sushi, salads and hummus, I was elated. I filled my basket with these goodies, got Dick a couple of caramel Milky Ways, and returned to the hotel. The fruit was fresh and tasty, the apples crisp and juicy. My food concerns were eliminated.

I continued restocking my supplies daily, and in the process picked up various sundries for Dick and the kids. I even stocked up some for our cross-country train trip to return home (Dick cant fly for six weeks post operation) .

On the train we had many conversations, being confined to a cell-like cabin and having gotten our fill of corn fields. One topic that came to mind was the unexpected product expansion at the drug store. Dick wondered why did the chain put food-stuffs on the ground floor and moved everything else to the second floor or basement. He also wondered what does food have to do with drugs. Both excellent questions which I have been pondering ever since that time.

It occurs to me that Duane Reade (as well as Walgreens and others) realized, like Wal-mart and Target, that selling food items increases the frequency of customer visits. Their ultimate goal is to pump up traffic. Putting fresh items in their stores not only leverages the space and workforce (already a fixed cost) but also gets more people in the store more often. This, in turn, means more impulse purchases (typically of higher margins) and more revenue per square foot.

The beauty of this process that I believe is applicable to our industry is the apparent unrelated nature of the new merchandise to the stores’ traditional wares. Target and Wal-Mart, as well as these drug stores, changed the definition of their business from selling clothing, electronics and other goods to retailing. Period. Like Amazon, which started as a book-seller and now uses the same “rails” it built for internet retailing to sell pretty much anything, these retailers redefined their business away from specific items (e.g. books, household goods etc. ) to retailing anything and everything that meets their customer needs.

Starbucks is another example of a coffee seller that sold an “atmosphere” and “experience” more than coffee itself, only to expand the product offering once the brand has been established well beyond coffee, yet true to the brand promise.

We have defined our business for a long time as selling financial services. This may or may not be appropriate. Consider the cross-selling that Umpqua has done (coffee, music) or ING (a coffee house where barristas can also sell financial services) and ask: why not?

We are in the initial stages of strategic planning for the year. Revenue growth is the battle cry, yet there is a dearth of innovative ideas out there. I thought the cross selling activities described above broke the mold of cross selling related products, something we (and other financial services providers,most notably,insurance companies) have done (not often successfully) for decades. Perhaps it is time to consider expanding the product suite to increase customer visit frequency and create a more unique value proposition toward meaningful differentiation? What about selling candy bars at the teller windows? If you do consider such new paths (so long as they meet regulatory requirements), please let me know at anat@anatbird.com. I am anxious to see the next generation of innovation in our business.