CLASS STRUGGLE

LIZA CASABONA / Additional reporting: Dan Alaimo

ORLANDO, Fla. -- There is no longer best in class, there is only the best for retailers hoping to compete in general merchandise and health and beauty categories, according to new research.

The first stage of the "Merchandising for Success" study was released here at the annual General Merchandise Marketing Conference of the General Merchandise Distributors Council, Colorado Springs, Colo., last week. The project was conducted for the GMDC Educational Foundation, New York, by Wisner Marketing Group, Libertyville, Ill. The second part of the study, which will focus on health and beauty care while covering its final phases, will be presented this fall at GMDC's HBC Marketing Conference.

Consumers no longer care about channels when they are shopping for GM and HBC items, but those categories can drive store selection, the study found.

The answer to the question, "Why buy it here?" needs to go beyond the differences between competitors in various trade channels to a readjustment of retailers' approach to the GM and HBC categories.

"The competition is no longer within class, it is across class. Particularly for general merchandise and health and beauty care it is more important for supermarkets to be concerned with what mass, drug, home centers, club stores and dollar stores are doing than it is to be concerned about what other supermarkets are doing," said Jim Wisner, president, Wisner Marketing Group.

The "Merchandising for Success" study provides retailers with suggestions and strategies for taking full advantage of the GM and HBC market. Jim Wonderly, vice president marketing, American Sales, Lancaster, N.Y., a division of Ahold USA, Quincy, Mass., said his company uses GMDC studies to enhance its go-to-market strategies for key categories.

"The GMDC studies provide merchandising ideas that supplement our own category management efforts and they are presented in a manner that is user friendly," he said. Wonderly is on the executive board of directors of the GMDC.

"There's no question that there is a lot of value in those programs," said Larry Ishii, general manager, GM/HBC, Unified Western Grocers, Commerce, Calif., and vice chairman of the GMDC Educational Foundation board of directors.

In the report presented last week, GMDC set forth a number of "big ideas" to help retailers define new roles for GM and HBC categories in supermarkets. Among these key concepts:

Consumers don't care about channels.

Destination values create trips.

There are few "routine" GM categories.

The price must be right.

Being fun and interesting is important.

The environment must be right.

The most important of these is that in the consumer's mind, channel no longer matters as much as it used to when shopping for GM and HBC items, said Roy White, vice president, GMDC Educational Foundation, New York. The merchandising field, whether food or nonfood, is wide open for all retailers.

"The shackles are off the supermarket class of trade and the drug store class of trade. They can merchandise any way they feel fit, and if they execute well it will work within their stores. They are no longer bound to do what drug stores and supermarkets have always done in the area of general merchandise," he said.

"If we continue to merchandise just those items that we have always done, we become an easier target for someone who would want to take away our businesses, or even put us out of business," Ishii said. "We need to look at items outside the traditional types of products that we have handled."

Defining a new role for GM in supermarkets is gaining in importance for a number of reasons, Wisner said. In particular, GM increasingly plays a role in store selection as consumers associate certain stores with specific categories. What started as special trips to get batteries or light bulbs has shifted as the outlets that are destinations for those items started carrying more food, negating the need for a trip to the grocery store.

In terms of trip allocation, Wisner pointed out, a higher proportion of consumers shop stores that are best practices operators in the GM arena. Supercenters, for example, are really just supermarkets with very extensive GM departments, he said.

"Either you're a destination, or you're not," Wisner said. "There's not a lot of middle ground with that. If you are simply carrying what everyone else has and not differentiating yourself, you're probably not even going to get the convenience business anymore." Retailers need to make themselves the answer to a question, he said. Such questions might be:

Who has the best value on an item?

Who has something really different or unique?

Who does the best job of promoting?

Who is always first with new items?

To illustrate how merchandising practices can be updated and how the "big ideas" can be implemented, the presentation focused on two categories: housewares and batteries. The concepts could be applied to other product areas once a category profile for them is established, White said.

For the battery category, the study suggests a nontraditional merchandising approach referred to as "flipping the aisle inside out." With a high transaction category like batteries, White said, you need to move the product out of its traditional single location in-line to multiple higher profile locations like endcaps. Moving regular stock to an endcap gives the category multiple touch points to capitalize on its impulse and consumable nature, he said.

To achieve best practices in the housewares category, retailers need to communicate to consumers through fixtures, displays and solution selling that they are a viable kitchen accessories source, according to study findings. Creating unique selling opportunities and upgrading the assortment of products were also found to be important elements.

According to findings from the study's focus groups and data analysis, a supermarket competing with a mass merchandiser with an upscale housewares section with a wide variety of products and price points can compete on the same characteristics if the department is executed well, White pointed out.

In a presentation of early findings from this study at the International Home & Housewares Show in Chicago earlier this year, White pointed to the Market Street format of United Supermarkets, Lubbock, Texas; Hy-Vee, West Des Moines, Iowa; Stop & Shop Supermarket Co., Quincy, Mass; and Pathmark Stores, Carteret, N.J. as examples of retailers who are already utilizing best merchandising practices to turn their housewares departments into destinations.

The study used regression analysis (a statistical technique that uses data to predict future variables and relationships) and ACNielsen research to provide brief profiles of additional categories.

The study was designed, Wisner said, to move sequentially from a broad-based industry perspective down to the store levels to see what customers say and observe how concepts play out first hand.

The study thus far has compiled information from the regression analysis, done with the help of Dr. Sanjay Dhar of the University of Chicago; advisory committee meetings with manufacturers and retailers; GM and HBC focus groups; and category data from ACNielsen, Schaumberg, Ill., to establish the major issues. The store level phase will extend over the next three months, according to Wisner and White.

A number of retailers have signed on as major sponsors for the study by providing stores to test the "Merchandising for Success" concepts for the next stage of research, White said. He declined to name the retailers.

The final report will be presented in September at the GMDC's HBC Marketing Conference in Scottsdale, Ariz. That piece will look at women's well-being as a continuing unifying theme, the importance of in-aisle adjacencies, and adjusting category management processes to best serve the HBC categories impacted by Rx-to-OTC switches.

Among the study sponsors, in the order listed by GMDC: ACNielsen, Energizer Battery Co., Johnson & Johnson, Premier Greetings, Prism Retail Services, Revlon, World Kitchen, Unilever Home & Personal Care, Colgate-Palmolive, Cannon Equipment, Del Pharmaceuticals, Gillette Co., Panasonic, Pioneer National Latex, Ray-O-Vac, S.C. Johnson, Spontex, Wilton Industries, Converting and Perrigo.

Battery Best Practices

Successful merchandising in the battery category is not difficult. Batteries generate substantial volume from a relatively small space and can be successfully merchandised by any channel of trade.

Turn the Aisles Inside Out

Batteries belong at endcaps, at checkouts and everywhere any battery-using device is sold. More than any other category, batteries require multiple touch points throughout the store to maximize sales. Relegating the battery category exclusively to in-line displays and low-traffic aisles minimizes sales potential of the category.

Use Destination Values to Pre-Empt Trips

For device-heavy families, batteries are a major budget item not unlike diapers and households with infants. Heavy users are typically high-spending, larger households with many toys and electronic devices. Key values on large packs can pre-empt stock-up trips to alternate channels of trade for these shoppers. These values can be created both by special pricing and special packs, and through frequent and aggressive promotion. Promotion frequency is the No. 1 category sales driver.

Sell the Occasion

Battery volume is device-dependent. Vacation photo taking, holidays and other events increase usage. Merchandising and display must be intensified during these key times.

Merchandise Consumer Risk

Simple suggestive selling can create extra sales. Whether it be a lost photo from a cherished moment, or not being able to listen to the big game, running out of power presents a big risk to most people. At the focus groups, consumers expressed concern about running out of batteries and wanted to be reminded by finding them throughout the store.

Source: "Merchandising for Success, Maximizing GM and HBC Sales and Profits," a project of the General Merchandise Distributors Council Education Foundation conducted by Wisner Marketing Group.

Best Practices for Kitchen Accessories

Make a Statement

In-store execution must have the customer see you as a viable location for purchasing these items. Pay attention to fixturing, display and creating a kitchenwide solution.

Create Unique Selling Opportunities

Unique values and one-time opportunities can add significant volume to the category. Tie-in merchandising (e.g., omelet pans) can result in "I can always use one" types of purchases.

Upgrade the Assortment

Consumers are far more responsive to the quality of selection rather than finding the lowest price. These products are more semi-durable than consumable and both product quality and other considerations factor into the equation.

Source: "Merchandising for Success, Maximizing GM and HBC Sales and Profits," a project of the General Merchandise Distributors Council Education Foundation conducted by Wisner Marketing Group.

Maximizing GM Sales and Profits

Here are six ways retailers can improve their General Merchandise results:

1. Get the trip first. Identify those items and categories for which consumers are making stock-up trips to purchase in locations other than your store. Pre-empt these trips with unique items, key item values or cross-merchandising promotions.

2. Define the selling environment for each category. Evaluate adjacencies, solution-selling opportunities, fixturing and signs. They can all enhance selling environment and lead to additional sales.

3. Sell the "Stolen Moments." The GMDC "Women's Well-Being Merchandising Strategies" report uncovered a tremendous opportunity to market against lifestyle and "down time" activities. Interesting or fun items, such as candles, unique bath and body products, and hobby-related items, can all be very successfully merchandised to customers looking to take some of the edge off the functionality of the shopping trip. These are the opportunities that generate true incremental sales and earnings.

4. Focus on key category drivers. Focusing on the most important catalysts by category will enable retailers to maximize the return from in-store traffic with the least investment.

5. Provide destination values. Each category should offer one unique value or product not available at any other competitor. Certainly a sale price can suffice, but true equity can only be achieved when the consumer expects to find a point of difference every time she shops.

6. Emulate only the best. GM competitive reviews must include all classes of trade. Channel of trade distinctions are increasingly less important to consumers.

Source: "Merchandising for Success, Maximizing GM and HBC Sales and Profits," a project of the General Merchandise Distributors Council Education Foundation conducted by Wisner Marketing Group.