HIGHLAND, Ind. -- Health and beauty care sales increased 12% at a Strack & Van Til unit after 500 retail prices were reduced to match Wal-Mart and Target's pricing. The HBC volume was boosted at a 90,000-square-foot Lansing, Mich., Cub Foods warehouse store after margins were slashed to about 16% from 19%. Categories include oral care, analgesics, cough and cold, deodorant and hair care. In some cases, retail prices were cut 20%. "We may have given up 3% to 4% in nonfood gross, but we now have a lot more traffic in the HBC department," said Joe Kolavo, buyer supervisor, general merchandise and HBC. The lower margins also increased total nonfood sales to 11.1% from 10.2%, according to Kolavo.
"We've always tried to be in the ballpark of (Wal-Mart and Target) pricing. Now, we're taking a stand that we're not going to let them beat us," said Andy Raab, vice president of the company. Various 6.4-ounce sizes of toothpaste were among the items whose profit margins were reduced the most. The 8.2-ounce and 4.6-ounce sizes weren't impacted as greatly because Wal-Mart isn't as price-aggressive with them, according to Kolavo.
To draw attention to the higher-margin items in toothpaste and other categories, Strack & Van Til repositioned them at a shelf tier at eye level. The lower-margin 6.4-ounce containers, meanwhile, were moved lower on the gondola. "Truckload Buy" signs have been placed throughout the HBC section to highlight items that have reduced prices. Also, a large banner that features a picture of the "Truckload Buy" sign has been placed over the promotional area.
Implemented late last year, the program will be evaluated at the end of next month. If HBC sales have continued to grow and gross margins can be maintained at the store, HBC margins also may be cut at Strack & Van Til's four other warehouse stores by the fall, Kolavo said.