MAKING THE GRADE 2001

STEPHANIE LOUGHRAN

When it comes to the back-to-school season, supermarkets merchandising for the August-September onslaught are going to the head of the class -- literally.

Retailers are increasingly reliant on input from teachers to merchandise their back-to-school section with the right assortment of staples and trendy items, they said. Grocers are providing consumers with convenient school supply lists specific to the stores' surrounding school districts.

Bob Yehling, director of nonfood, Harps Food Stores, Springdale, Ark., told SN, "All of our stores have teacher lists, by school district or even by individual teachers." He said consumers in the lower-income area stores use the lists more definitively. "They will only buy what's on that list," he said.

One director of general merchandise and health and beauty care at a large chain in the South said that bundles of prepackaged school supplies, complete with pencils, glue, notebooks and other school essentials, have sold briskly in recent years.

"We're big on prepacks -- they run between $20 to $40, so they have a nice ring," the source said. The bundles, manufactured by Educational Products, Houston, are customized by town and by school.

"Price and ease of shopping are very important, and that is why the packs do so well," he told SN. "Parents buy the pack for little Suzy and they're ready to go."

A cooperative wholesaler source in the South who also wished to remain anonymous said, "Lists are convenient for the customer -- it's an added feature [for supermarkets]."

Some schools have even started selling school supplies through local Parent Teacher Associations, according to Ted Fullerton, vice president of retail operations for Coppell, Texas-based Minyard Food Stores. "More and more of the schools are getting into selling school supplies themselves, but it's hard to say if it's taken away sales," he said. Nonetheless, the stores also carry school-customized packages bundled with backpacks. Dean Owens, vice president of general merchandise for Minyard Food Stores, said school supply merchandise "has been moving pretty well early" since it hit shelves July 9. Sales of clear-colored and mesh bookbags are also soaring, due to mandates by many schools.

"In our area, clear backpacks are hot because schools require them," Yehling said.

Burt Flickinger, managing partner, Reach Marketing, Westport, Conn., said food and drug retailers are in good position to build back-to-school sales this year due to the dimmed storefronts of Bradlees Stores, Caldor and other discount chains.

"Supermarkets can do reverse category killings against discount store chains with destination, impulse and cross-merchandising opportunities," he said.

If sluggish statistics are any indication, supermarkets need to be aggressive. According to the 2001 American Express Retail Index on BTS shopping, spending was expected to decline 4% from last year, from $548 in 2000 to $527 this year.

Sarah Scheuer, manager, industry media relations for the National Retail Federation, Washington, said supermarkets overall have been more aggressive and creative in their back-to-school offerings. "Supermarkets are offering more nonfood items and giving more shelf space to seasonal, whether it's lunch bags, school supplies or bookbags, which may not be normally bought at a supermarket," she said. "People don't think they can buy a backpack there until they see it -- supermarkets are offering [nonfood] as a supplemental service and as a convenience."

Retailers are also creating one-stop shopping destinations by cross merchandising school supplies with lunch bag-type items like snack foods.

At Angeli Foods, Iron River, Mich., a display of cardboard school bus featuring snacks in the front of the store has tied in well with other more traditional back-to-school products, according to Mary Fournier, scanning coordinator. She said cross merchandising food with nonfood works well "because it's a temptation. [Consumers] pick up one item, see another, and they pick up that one, too."

The general merchandise and health and beauty care manager for the cooperative wholesaler said, 'We're tying in grocery snack items, advertising those items in conjunction with back-to-school supplies."

Fashion trends are also toward more value-added basics, with a mixed bag of trendy items like gel pens and black paper, and perennial licensed items from Pooh and Looney Tunes.

"The gel line continues to grow, and black paper will be a hot item -- we went all out and stocked up on black paper," said Yehling.

"Gel writers are still hot, but it remains to be seen if they will be huge," said the Southern-based retailer source.

Lew White, director of marketing, school, consumer and office products, Mead Corp., Dayton Ohio, said consumers are buying more upscale, value-added durable supplies that last longer.

"Consumers want products to last throughout the year -- kids don't want to rewrite their notes when their notebook falls apart," White said. "They'll pay more for not having to get another one in a year's time." Last month, Mead rolled out a line of Five Star subject notebooks with information that applies to specific subjects. They are priced at $5.99 to $8.99.

However, other retailers and analysts said consumers are purchasing more price-valued merchandise this year.

"We see people going towards price value -- shooting for the lowest price possible," said Owens.

Flickinger said that due to soaring credit card debts, an increasing number of personal bankruptcy filings and a large number of layoffs and unemployment claims in the last few months, "there is a tremendous lack of disposable income right now."

Retailers are taking notes.

Angeli Foods started displaying its back-to-school merchandise July 25 in a 20-foot section along the wall in the front of the store. Prices range from a 60-page notebook for 19 cents to a $12 backpack, according to Fournier.

Harps Food Stores have been merchandising supplies that run a large price spectrum, from eight to 10 portfolio binders for $1 to $39.99 "boom boxes" with CD-ROM drives, and they push other ancillary items together, like computer paper, computer ribbons and even socks. Yehling said the stores run five or six items below cost continually throughout the month of August on a rotating basis. The retailer averages 28 feet of display space for the section, Yehling said.

Although retailers lose money on filler paper, folders and other loss leaders, supermarkets have to draw the line on the price war somewhere, said the cooperative wholesaler source.

"It's like selling turkeys at Thanksgiving -- someone is always going to have a better price," he said.