FLEMING HIRES THIRD-PARTY MERCHANDISERS

JAMES TENSER

OKLAHOMA CITY -- The general merchandise division of Fleming Cos. here has retained two merchandising service firms to handle an ambitious series of category management resets over the next year and beyond.

Fleming, the nation's largest grocery wholesaler, awarded the business in late December to Pimms, Minneapolis, and National MegaForce, Atlanta. In October, Fleming had announced an ambitious plan to institute new shelf schematics for 60 nonfood categories at many of its 3,000 to 4,000 retail stores.

The decision, which sets Pimms and MegaForce as preferred suppliers for this reset activity, is believed to be the first of its kind by any wholesaler. Executives at the two merchandising firms said they were already receiving inquiries from other wholesale companies interested in exploring similar arrangements.

The general merchandise reset program is part of a major commitment to category management that Fleming has undertaken as part of its Vision 2000 re-engineering program, announced in September. Testing of new nonfood schematics began in October at select Fleming supermarkets.

Pimms and MegaForce have already begun expanded implementation of some new schematics in selected stores, said Bob Dickson, vice president of marketing and procurement for Fleming's general merchandise division. The activity should be in full swing by February.

"We have identified about 200 stores in each of our six nonfood divisions that most clearly fit our definition of New Generation Retailer," Dickson said. "New Generation" refers to stores that the wholesaler has identified as being most likely to take advantage of new technology.

Pimms has been assigned the reset business in four of the divisions -- covering the center of the country -- based in Topeka, Kan.; Dallas; Memphis, Tenn., and LaCrosse, Wis. National MegaForce will handle the two market areas on the East and West Coasts, the Sacramento, Calif., and King of Prussia, Pa., divisions.

"So far we have eight category reviews complete, and several others in progress," said Dickson.

He estimated that Fleming would remerchandise an average of four to six categories per month, although that number could vary widely. "We think it will probably take two years to get through the entire cycle. At the end of that time there may be additional resets to do, based on category reviews.

"This is not a regular, scheduled type of work," Dickson added, explaining why Fleming looked to outsource the reset activities to third parties. "We might have taken a different tack if we knew the work was going to be regular and predictable. We also want to keep the expense as low as possible. Third party makes sense from both perspectives."

Pimms and MegaForce will bill each vendor directly. Dickson said Fleming chose this billing arrangement to make it clear to brand marketers that the wholesaler is not using this activity as a hidden profit center. Still, the decision might prove controversial among brand marketers, who are being told they must work with the two designated merchandising firms during this period of change. Similar relationships, sometimes called "preferred provider" or "exclusive agency," are gaining in popularity at a few retail chains.

"To our knowledge, this is the first relationship of this kind with a wholesaler," said Mike Freeman, the Pimms account executive working with Fleming.

Said Scott Sloan, president of National MegaForce, "Some manufacturers today already pay brokers to do this kind of work. A few may take issue with this."

He said he felt it was incumbent upon his people to prove the advantages of Fleming's arrangement to the brand marketers whose products they will be handling.

"We expect this activity will grow. We want to show the manufacturing community why we were chosen by Fleming," said Sloan.