MASS MERCHANTS: A GROWING THREAT

Michael Slezak

Pressure from mass merchants' lowball health and beauty care prices and their ability to grab market share is a constant for many supermarket retailers.

Not only do consumers say they're increasingly heading to discount stores for HBC, and often on the basis of price, but statistics showing dollar sales for HBC across food stores, drug stores and discount stores tell a similar story.

According to Nielsen North America, Northbrook, Ill., drug stores had the greatest HBC dollar sales for the 52 weeks ended March 12, 1994, raking in $12.97 billion, or 39.4% of HBC sales. Food stores followed with 33.5% of the HBC market, or $11.04 billion. Trailing were mass merchants with 27.1% of HBC dollar sales, or $8.91 billion.

In dollar sales growth, however, mass merchants are clearly leading the pack. Their HBC sales were up 14.8% compared with a year ago. Food stores gained 3.9% over the previous year, and drug stores held nearly flat, up 0.3% from a year ago.

Lisa Subramanian, an associate at Willard Bishop Consulting, Barrington, Ill., said a separate study her company completed in 1992 showed that between 1986 and 1992, supermarkets' HBC market share dipped from 44.2% to 41.0%.

"Maybe a 3% [decline] doesn't seem that significant, but one share point equals $345 million in retail sales," said Subramanian. "So you're talking almost $1 billion in sales supermarkets have lost."

But the menu for HBC sales is a large one, and supermarkets don't have to let mass merchants eat their lunch, Subramanian said.

"In a 1991 [Willard Bishop] study for FMI showed only 30% of consumers traveled through the HBC aisle when shopping the supermarket," she explained. "The primary reason they don't go down the aisle is the lack of association that supermarkets would carry HBC products. But also, of the consumers who do realize food stores have HBC, many tended to perceive supermarkets to be overpriced [for HBC.]"

Communicating an image of lower-priced, or competitively priced, HBC is the best way to draw customers down the HBC aisle, Subramanian said. "Supermarkets have a great opportunity. It's a matter of getting them down the aisle through ads in weekly fliers that say, 'We have a hot new price on an HBC item,' or in-store radio announcements."

Subramanian said the over-the-counter medicine market is a fast-growing market in which supermarkets can gain back their lost dollar share. And with the recent launch of Aleve, Procter-Syntex's new OTC analgesic, supermarkets seem to have done precisely that, she added. For the period Aug. 1 to Aug. 31, 1994, supermarket sales of Aleve reached $5.4 million. Drug stores followed with $4.8 million, according to Towne-Oller & Associates, New York, a division of Information Resources Inc., Chicago. For the month of July, drug stores outsold food stores in Aleve by a margin of $5.4 million to $4.6 million. Seemingly from these statistics, the strong buzz that swept the supermarket industry to heavily promote and prominently merchandise newly switched prescription-to-OTC products, starting with Aleve, has begun to pay off.