NEEDFUL THINGS

LISA SAXTON

Today's baby needs a new pair of shoes -- and a lot more, too. He's got to accessorize. And for many supermarket chains, it's becoming quite fashionable to expand the baby needs sections in order to mitigate the profit losses they suffer in food, formula and diapers. And expansion is also becoming a more popular option for some due to a continuing deluge of new products, according to retailers contacted by SN.

Indeed, Junior looks just smashing as he sashays out of the store with the latest bottle, bib or teething ring, while retailers appreciate the sound of that high-margin register ring.

Baby needs -- baby bottles, nipples, accessories, powders, ointments, oil, bath products and lotions -- make up a $204 million chunk of annual supermarket baby section sales.

Generally, grocery retail and wholesale representatives said baby needs, ranging from the latest feeding spoon to safety latches, can bring in margins from 25% to 50% on up to hundreds of SKUs.

"Diapers are a competitive item that no one's really making money on," said Mitch Terry, general merchandise division sales manager at Malone & Hyde's Miami division. "So retailers are trying to cross-merchandise the baby aisle, and they've gotten into the accessories where there is a little more gross profit."

"You lose money on everything else in that aisle, but we probably make 40% to 50% on the accessories," said Kim Botkin, supervisor and buyer of health and beauty care and nonfood at Houston-based Gerland's Food Fair.

Laura King, HBC manager at Clyde Evans Markets, Lima, Ohio, reported that for her chain, accessories like bottles average a 35% margin, while lotions and other HBC products pull in between 25% and 26%.

Like other supermarkets, Thrifty Food Stores, Burlington, Wash., is focusing on accessories because they do help defray some of the aisle's losses, said Lou Mullins, Thrifty's HBC supervisor. Mullins added that, for him, the baby wipes category is an even more essential builder for profits, and Thrifty has expanded its wipes section in response. Such emphasis in the section "will offset the cost of the formula and all -- especially the private-label wipes, which will show you more profit than the others. Sales are quite brisk."

Thrifty Food Stores has not been able to expand baby needs in its older stores due to space constraints. However, said Mullins, "in our newer stores we've put in nice, expanded departments."

Mullins of Thrifty said it's important to provide as much space as possible, because even though they're not in the same league as food, accessories are definitely a need for parents, and they drop them in their carts on a fairly regular basis. "People also buy accessories for baby showers," he added.

With such attractive margins, is it any wonder retailers are making more room for what baby needs?

"Really," said Malone & Hyde's Terry, "anything under 4 feet is getting lost. The section should be at least 8 feet or more."

"We've upgraded that section in our stores" said Dennis Owen, general merchandise buyer for Morgan's Holiday Markets, Cottonwood, Calif. "We've remodeled and increased the department by almost 50%, and increased the SKU count by 20%."

And he's not the only one.

"We've expanded that section to 16 feet," said King of Clyde Evans. "They're coming out with a bunch of new products and we offer everything in that expanded space -- the bottles, nipples, lotions and toys."

To illustrate how the category is growing, King noted that a couple of years ago his stores wouldn't have had enough products to fill a 16-foot space without having multiple facings of the same product. Now, however, "we're down to one facing per item with all the new products."

Gerland's Botkin was among several merchandisers who told SN they find themselves currently stifled with too little room for merchandising accessories in many of their stores -- at least in part because of the space required for other, less profitable, baby section categories.

"Unfortunately, our stores are fairly small. Diapers take up so much space, we just don't have the space to expand," he said.

"Expansion really depends on the size of departments retailers have, and how much space they can contribute

to the baby aisle," said Malone & Hyde's Terry. However, Terry said all of his retail customers have turned to a merchandising tool called power panels to relieve some of the pressure for shelf space.

"Using power panels allows retailers to cross-merchandise baby needs next to, or with, a case stack of baby formula or a case stack of diapers," he said.

Jim Key, nonfood buyer for Community Cash Stores, Spartanburg, S.C., said he's increased the baby needs section by 20% to 25% in his stores over the last year.

"We're seeing a lot of different kinds of baby nursers coming out, like the curved bottles. We're also adding to our line of safety products -- unique items that are new to the category. There are definitely several different opportunities to add SKUs," Key explained.

Ingles Markets, Black Mountain, N.C., orchestrated a new planogram for the department that enabled the chain to expand the space for baby needs. "We went from 8 feet to 12 feet," said Tony Federico, vice president of nonfoods and HBC at Ingles.

When revising the planogram, Federico said he had to do more than just add more products to get the most out of the section; he had to edit the mix a bit. "We took out the dogs that I made mistakes with the last time, and then replaced them with some new shots."

Apparently, clothes don't make the baby among Ingles shoppers, because Federico reported soft goods were primarily the disappointing bowwows. On the other hand, it seems mommies want more of other kinds of accessories, judging from sales performance.

And manufacturers are only too happy to oblige -- at a rapid-fire clip. "Too fast for me," noted Federico, who found himself expanding Playtex's Cherubs, moving out 20 existing Evenflo products and bringing in 20 new Evenflo items, and adding 10 new Johnson & Johnson items.

"That category has a tendency to shrink at times," said a merchandiser for one of the country's largest retailers, who had requested anonymity. "But now, with the implementation of a lot of new products, it's expanding.

"As a matter of fact," said the retailer, "in our newest store, we just finished adding an additional 4 feet to the baby needs section."

He said it was not only to ease the fiscal sting of marketing baby food and formula, but also to satisfy the desire parents have for new and innovative products that are the best for baby.

Johnson & Johnson apparently has delivered the goods with its new Baby Healthflow bottle, which had several of the interviewed retailers cooing. The bottle features an angled top to keep air from getting into the baby's stomach.

"I've gotten in a couple of the new J&J bottles, and I know they've done really well," said King at Clyde Evans, "as have some of the licensed products, such as Pepsi, 7-Up and Slice bottles."

"We're real impressed with the new J&J bottles," concurred Federico of Ingles. "We've had them on the floor for about a week and they're just blowing out -- as baby bottles go, of course. We're averaging about three pieces per store per day, which is hot for us in baby bottles."