AWG ADDS FOOD ITEMS TO DOLLAR MERCHANDISE OFFERINGS

Mark Hamstra

KALAMAZOO, Mich. -- Associated Wholesale Grocers, Kansas City, Kan., has added more than 400 food items to its inventory of "dollar" merchandise since launching a dollar store program for its retail customers last year.

Speaking at the Western Michigan University Food Marketing Conference here this month, Steve Dillard, vice president, AWG, said the company now offers more than 1,000 items that can be included in a retailer's dollar store section. The program generated more than $20 million in sales through its warehouse last year.

"In most of our stores, we are seeing about 2% to 3% of sales in dollar merchandise," he said.

The keys to having a successful dollar program, he said, include offering a wide variety of products and maintaining a separate section for dollar merchandise.

In-line programs are not as successful, he said, because they send a message to customers that other items not included in the dollar section may be overpriced. Putting dollar sections in-line also reduces the impact on consumers, AWG has found.

He said customers have no illusions about the quality of dollar products.

"The quality is inferior, and the customers know it, but they buy it again and again," he said.

Although he said it is more difficult to find dollar-price-point food items that emulate national brands than it is to find dollar-priced cleaning products, offering food is still an important part of the section.

In one case study AWG conducted with a four-store operator in Memphis, Tenn., the company said sales of nonfood items in the dollar sections more than doubled when food items were added.

He said AWG's retailers have seen no loss in sales of national-brand merchandise to dollar products, although he noted that dollar stores do cannibalize private-label products by less than 10%.

At another presentation later in the day, however, Alan Hartline, vice president, center store merchandising, Spartan Stores, Grand Rapids, Mich., said his company was not as enthusiastic about the addition of dollar sections because Spartan's customers have experienced some cannibalization.