Competition for back-to-school spending is expected to be fierce, and grocery retailers are advised to make a statement to win sales
With the end of Fourth of July comes Back to School.
This week, retailers around the country will begin clearing out summer merchandise in the seasonal aisle to make room for BTS displays.
It's unclear though if pent-up consumer demand will surface. Or, if more items added to this year's school lists can result in retail sale surges to override last year's steep fall-off in spending. The average family's spend on BTS supplies fell 7.7% last year, according to the National Retail Federation's 2009 BTS survey.
Retailers and suppliers acknowledge a tough climate with a slow-to-recover economy in which too many consumers are still struggling and unemployment remains high.
“It's still fragile,” summed up Mike Gatti, executive director retail for NRF's marketing division.
But he sees “a little bit” of pent-up demand that could lift BTS sales. There is no denying that “kids still want the latest clothing,” he said.
Tim Koletsos, director of marketing stationery for BIC Consumer Products USA, Shelton, Conn., wonders if consumers will turn out in force during the critical BTS time period. “The recovery continues to be a concern of consumers and they are still very cautious with how they are spending their money,” he said.
Koletsos declined to report BIC orders for BTS because it is proprietary information. However, BIC is rolling out in time for BTS its Easy Glide Ink system (an exclusive ink technology that is more vivid and provides smoother writing compared to current BIC ballpoints). It also has expanded its Ecolutions line and will feature a mechanical pencil made with 76% recycled plastic and features three No. 2 leads per pencil, which has the equivalent write-out of 2.5 wooden pencils, according to the company.
BTS, considered the second-largest selling season of the year, represents a large chunk of OfficeMax's business. The retailer, based in Naperville, Ill., has been selling office supplies and stationery for over 50 years. It decided several years ago to broaden its scope beyond its store base and reach out to other retail channels with its expertise in the office supply category.
Early this year, it partnered with Food Lion, a Delhaize America retailer based in Salisbury, N.C. It is now finishing up placing in-line sets in Food Lion stores and is ready to roll out BTS promotional displays. In 2008, it partnered with Safeway, Pleasanton, Calif., to manage the office supply category in its stores. In addition, it is managing the category at the University of Arkansas book store and is running a test in another channel, according to William Zeuch, OfficeMax's senior vice president of new business.
“In the last six months, we really have gotten behind this and started building the infrastructure and systems, and hired the people to build the department internally. I am happy with the way things are going,” he told SN.
Zeuch explained that it takes 12 months to start a conversation with another retailer about a partnership, and reset scheduling is not an immediate process.
For a grocery chain, the office-stationery category is not a core business. “Charcoal and laundry are more major categories,” Zeuch noted.
A partnership with a specialty retailer like OfficeMax provides a grocer with the category expertise and merchandise-promotional support necessary to make a statement, he said.
“They have one vendor that they can rely on to manage it all and help them increase sales and profitability,” Zeuch stated.
When it comes to the BTS selling season, the process is complex to get the merchandising right, Zeuch explained.
“We bring insight and education into the selling season. By focusing on the right fashion, the right commodity SKUs and the right pricing strategy for our partners, these guys can go out there and win some share,” he said.
OfficeMax spends a lot of time analyzing the start dates of schools, which vary across the country. The retailer then tailors its pricing and manages its supply-chain flows to coordinate with school start dates.
Zeuch said getting the merchandise sets right is critical. “It's having the right price points on the right SKUs, having the right SKUs grouped together, and it is really important to make sure you are offering different-quality product for trade up.”
It not just about commodity staples either, he said. While everyone will be drawn to the 1-cent, 5-cent or 25-cent notebook or poly portfolio, it is the higher-margin fashion items or licensed products that satisfy kids' individualism. “You don't want them to think that you are just in the business of selling commodity products,” said Zeuch.
In working in partnership with others, OfficeMax does comprehensive store and promotional clustering analysis.
In store clustering, the retailer looks for common store attributes — demographics, population, competition and location — to devise the right mix of products at the right price points for a chain.
In promotional clustering, the emphasis is on store velocity and tailoring displays to deliver maximum sales and profit without resulting in any leftover inventory at the end of the selling season.
One thing Zeuch can say for sure about the 2010 BTS season is that it will be very competitive.
“Retailers will be competitive with price points and promotional offers,” especially on core commodity items, he said.
Schools budgets have been cut and therefore schools aren't buying as many needed supplies. Instead, they are asking families to be responsible for some supplies like sanitizers and chalk erasers that have been added to the school list.
“When consumers come into the stores with their BTS lists, they need to know the retailer has a wide breadth of products available because they have to satisfy their teachers' needs and their children's needs and manage it all against the school list.”
For its retail partners, OfficeMax has put together a trade promotional program of innovative displays placed in the seasonal aisle of full, quarter or half pallets of product. The biggest challenge in serving the grocery trade, said Zeuch, is getting corporate support and focus on the category.
“Everybody wants to increase point of sale and that is great. But the strategy long term is how do you get your consumers to know you are in the BTS business and how do you stick with that year after year?” Zeuch asked.
He said the grocery stores they are presently partnering with will have signage, circulars and preprints, and will do as much as they can to make a BTS statement and convey to shoppers that they are dedicated to BTS.
To help distinguish themselves and make shopping for office supplies and BTS easier, Topco retailers will feature a relaunched Academix line sporting orange and purple colors in-line and through PDQ display pieces in the seasonal aisles. Sarah Van Dyke, director of general merchandise for Topco Associates, Chicago, said the aim is to create “a cohesive look throughout the aisle.”
The line's packaging was designed to inform shoppers about product features and benefits. Van Dyke noted that unlike an office supply retailer, there is no assistance available in the grocery aisle to answer consumers' questions about products, so Topco attempted to do that on the front and back of the Academix packaging to better sell the product for the retailer.
She said members will be offering a value proposition for BTS this year. “Shoppers that buy a typical product will get a bonus — extra marker or some item — that adds value and excitement.
“Our members are trying to offer the customer good value as opposed to selling all the extras. In private label, it is the base business — portfolios, pencils, pens and not the locker kits. Retailers will go after the core business,” she added.
Look for retailers to also tap into the power of evolving digital platforms to reach kids, noted NRF's Gatti. For example, Sears has Arrive Lounge that offers special promotions and builds a community of children. “A lot of kids have cell phones. They can go in and join these communities and opt into special promotions with their cell phones. They'll get text messages and special mobile coupons on BTS products,” he said.