LOSS-LEADER PRICING LEADS SUPERMARKETS' BTS CHARGE

JOEL ELSON

Supermarkets' back-to-school displays went up last month featuring lower loss-leader pricing and more fashion selections at better margins.

Stores featured half-price specials on the basics like writing instruments, construction paper, small notebooks and filler papers as well as items priced under $1. This year's approach to the season appeared to be more aggressive as food chains attempted to combat intense pressure from the mass merchandisers and drug chains for the seasonal business, said nonfood executives interviewed by SN.

"Drug chains in the last few years have latched more onto seasonal trends [such] as back-to-school. And as they build larger stores they're filling that space with more variety," commented Charles Yahn, vice president of general merchandise at Associated Wholesalers' nonfood warehouse in York, Pa.

"We're competing against the mass merchandisers and large drug chains that continue to open larger stores, filling them with nonfood like school supplies," said a source at Super Fresh Markets, a division of A&P, Montvale, N.J.

Retailers reinforced their low pricing with shelf-talkers and signs placed on off-shelf displays, promotional floor shippers and at regular in-line stationery and school-supply sets. Here's how back-to-school kicked off for some leading chains and wholesalers around the country:

In the Philadelphia, southern New Jersey and Delaware areas, Super Fresh played up several back-to-school specials at 89 to 99 cents, priced lower than last year. They included 200-count Mead filler paper, 100-count marble composition books, 80-count wireless one-subject notebooks, five-count loose-leaf tab dividers and 96-count construction paper at these price points.

Other selections were priced up to $12.99, including a nylon cover 5-Star Student Planner with zipper pockets.

At Giant Food Stores, Landover, Md., back-to-school displays broke in July featuring assorted half-price specials, which were played up prominently in the weekly ad circular. The mix included a 16-count box of private-label crayons at 49 cents and a package of 12 Crayola colored pencils at $1.24. Other back-to-school items offered were four styles of backpacks marked at $7.49 to $14.99.

Associated Wholesalers invested in more licensed backpacks and lunch kits, said Yahn. Variety on these items was boosted by half of last year's offering. The items are attractive for the 40% to 50% margins they offer retailers, said Yahn.

"These specialty and licensed products, like Hercules and other Disney-themed characters, carry better margins than the 20% profit in basics. They also are more related to food," Yahn added.

Farm Fresh, Norfolk, Va., is accenting hotter ad prices on the basics and downplaying higher priced fashion goods because "of too much competition from Wal-Mart and the other discounters," said Annette Zumba Glass, back-to-school buyer.

The chain merchandises its school-supply mix on several secondary floor shippers and pallets away from the main department at rear or front aisles. Prices start at two for $1 or three for $1 for about 10 basic supplies, and top out at $12.99 for a backpack.

J.H. Harvey, Nashville, concentrated 90% of its back-to-school program on the basics in paper, portfolios, composition books, pens and pencils, said Wyman Butler, nonfood merchandiser, who mentioned they changed a few stockkeeping units to be more competitive with Wal-Mart.

For example, Harvey went to a 150-count pack of filler paper to promote the smaller count packs at two for $1. Last year they promoted just the single 200-count pack. The retailer also added a few fashion writing items in Pentel ceramic pens and denim covered pencils. One-subject composition books and portfolios also were sold as loss leaders.

Southwest Supermarkets, Phoenix, accented its back-to-school displays with basic products in 200-count filler paper, 10-pack pens and basic portfolios, reported Erich Sielaff, head buyer for nonfood.

As the season progresses, the chain is prepared make adjustments to its pricing if necessary to move items, said Sielaff.

Sielaff views back-to-school is a "pretty staid category." The chain positioned two 12-foot, off-shelf displays in July in preparation for the Aug. 4 start back at some schools.