CHICAGO -- Aggressive general merchandise strategies effectively combat competition from other classes of trade and significantly increase top-line sales, said retailers participating in the fifth American Greetings Research Council.
Several of the retailers discovered that they could successfully and profitably sell much higher-priced goods than they expected. For example, Hy-Vee, West Des Moines, Iowa, sold a $1,498 large-screen television. Not only do such efforts increase sales and customers' shopping pleasure, they put the "super" back in supermarket, according to the title of a program held during the recent Food Marketing Institute show here.
"Some people say we have to get back to basics, but I say if you go back to basics, you are going to go out of business," said Ray Stewart, executive vice president of Hy-Vee's Cherokee division, and a member of the council. Stewart spoke to SN prior to the presentation. "You need to be doing the basics right now, but you also need to have theater in your store."
The council was sponsored by American Greetings, Cleveland, with the support of FMI. WSL Strategic Retail, New York, conducted the research, monitored the in-store tests working with the council and developed strategic recommendations for the industry.
"In the end, there are a lot of paradigms that you can break, including the type of merchandise and the type of pricing that we sell," said Wendy Liebmann, president and founder of WSL.
Liebmann moderated the panel discussion at the show that included Stewart of Hy-Vee, along with executives from the six other companies that participated on the council: Bashas', Chandler, Ariz.; Gerland's Food Fair, Houston; Marsh Supermarkets, Indianapolis; Ralphs Grocery Co., Compton, Calif.; Shaw's Supermarkets, West Bridgewater, Mass.; Weis Markets, Sunbury, Pa.; and Williams Piggly Wiggly, Memphis, Tenn.
Shaw's, which tested three distinctive, new departments, saw the highest results of any retailer in the program, with a 168% sales gain for the categories involved in test stores, vs. a 12% increase in control stores without the departments. Shaw's put in special sections for international foods, natural and organic products -- including food and health and beauty care -- and a Kitchen Shop featuring a "good-better-best" selection of housewares.
"Kitchen Shop is really one of the food enablers," said Chris Darmody, vice president, meat/seafood, Shaw's. "It unlocks the potential of what you can do with food by looking at the gadgets and what they are capable of. It's a department that brings true incremental sales."
Other numbers from the Shaw's test also were impressive: Total store sales for the stores with the test departments went up 31%, vs. a 4% increase in the control stores; store traffic rose 20%, vs. 2% in the control stores; and there was a 9% rise in the average transaction value as opposed to 2% in the control stores. As a result, the retailer plans to extend these programs to other stores with appropriate demographics as they are remodeled.
Hy-Vee focused on testing products not normally found in conventional supermarkets, Stewart said. This included some high-priced goods like the $1,498 television, $79.99 garden decor items, $19.99 watches and $99 leather coats. In larger stores, the merchandise was placed throughout the store while smaller units held tent and sidewalk sales.
Dollar sales for some Hy-Vee events ranged from $5,000 for the sidewalk sales to $625,000 garnered in a weekend parking-lot tent sale, Stewart said. Results at Hy-Vee included a 14% sales increase for the test categories compared to 5% in the control stores, and a 6% rise in total store sales for test stores, vs. 1% for the control units.
"Our industry has survived every format that has been thrown at us since 1930," Stewart said. "Now, I see people locking up and walking away from their stores when they see a new format coming to town instead of hunkering down and being good at what they do. We are good at service. We are good at perishables. We are getting very good at general merchandise along with some other services." Hy-Vee's goal is to expand general merchandise selections in all stores, he said.
Ralphs tested an expanded presentation of seasonal goods. "We were looking for something new and exciting to put in our stores to create the element of surprise, the unexpected find, where a customer could walk in a supermarket store and see something different," said Kory Burwell, group vice president, nonperishables.
Other goals were to find a way to further differentiate Ralphs from Southern California competition while stopping "the continued erosion of general merchandise sales to the club, mass and drug classes of trade," he said.
Some of the results in the Ralphs test included a 6% sales increase for the test categories, vs. 3% in control stores, and a 4% rise in total store sales while control stores declined 2%.
Facing new competition from drug stores, mass merchandisers and other supermarkets, Gerland's displayed general merchandise ranging from home decor items to golf shirts in space-efficient ways throughout the test stores.
"We discovered that we could sell a variety of general merchandise that we hadn't sold in the past within our store," said Alex von Sehrwald, director, marketing. Among the display areas were tabletops and endcaps, and there was even a section of dollar merchandise, he said.
"The mass merchants, supercenters, drug stores and dollar stores were taking our business, and we found a way that we could grab some of that business back," he said. "We have rolled [the new program] into all our stores, especially the dollar merchandise and some of the higher-ticket merchandise, and we have been very successful with that," von Sehrwald said.
Among the other members of the research group, Weis worked on improving the shopper experience by creating a team environment for employees; Williams IGA created a customer advisory board to enhance its relationship with shoppers; and Marsh tested special seasonally themed events.