OLEAN, N.Y. -- Olean Wholesale Grocery Co-Op here has reported a 10% increase in its nonfood volume due to aggressive price promotions by its 130 food retailers.
The impact of mass merchandisers in the upstate New York region has resulted in Olean-supplied grocery retailers running more advertised specials and weekly features "at much more competitive prices" in health and beauty care and general merchandise," said Curt Rumsey, manager of HBC and general merchandise for the wholesaler.
Wal-Mart began its expansion along the East Coast nearly two years ago, said Rumsey. "The assault in our area from the mass merchandisers started early in 1993. Wal-Mart opened six Wal-Mart stores and four Sam's stores in our marketing areas of southern New York, Rochester, the Finger Lakes region and the northern tier of Pennsylvania."
With Wal-Mart and Sam's Wholesale units in this market, "the days of high grosses are no more. You must be much more competitive with the correct price points," said Rumsey.
This has been especially the case in shampoo and oral care categories. After seeing "a 3% to 4% decline in shampoo sales and a 2% to 3% erosion in dental care, we started getting hotter in our shampoo prices and features to recover our lost volume," noted Rumsey.
Most Olean retailers have shaved gross margins down from 24% in nonfood, and many are now working on margins in the 17% to 18% range. Rumsey added that retailers are "no longer afraid to run features by cutting away a little gross so that they don't lose a whole lot in the long run."
Olean retailers also started promoting nonfood in one- and two-page inserts in grocery ads. Some are featuring 11 to 14 HBC items and six to 12 general merchandise items every week, said the nonfood executive.
HBC ads are "constantly pounding away at Suave, White Rain and Pert shampoos, Colgate and Crest toothpastes, and all brands of sanitary napkins with sharper pricing."
The wholesaler also is increasing private-label Shurfine vitamin variety from its present 19-item mix to 30 stockkeeping units , said Rumsey.