RAY'S SENTRY MARKETS RESTRUCTURES HBC

MICHAEL SLEZAK

BROOKINGS, Ore -- In a major restructuring of its health and beauty care departments, Ray's Sentry Markets here is demonstrating that variety is not only the spice of life in nonfood merchandising, but it also can be an effective way to do battle with the mass merchandisers.

Acting upon the results of a survey on how Ray's could improve its customer service, the chain will increase the size of its HBC departments between 30% and 55%, said Dan Van Zant, HBC buyer and supervisor for the 29-store chain.

"We found that a good 85% to 90% of our customers were not as concerned about price as they were with variety," he said.

The chain developed three goals in response to the survey:

Offer greater variety.

Make products easier to find.

Make departments easier to service.

The reset began last September at the rate of two stores a month, and is more than a third of the way completed.

"With the increase in competition from mass merchandisers, we have decided to take a deliberate strategy in order to stop the bleeding as much as possible and, if we can, increase our market share," said Dan Van Zant.

The increase in HBC section size, however, is the most vital component of Ray's new HBC philosophy.

"We want to satisfy the largest number of customers by having the greatest variety possible within a given set," said Van Zant. "So we are virtually looking at every department in the store to find additional space for HBC. And in some cases, we're adding wall gondolas and tightening up the

store. We're finding out it's hard to find that space, but it's there."

He said cuts were made in grocery and general merchandise, including dog food and hardware, to find additional room for HBC, especially analgesics and cough and cold. Thus far, said Van Zant, the space shuffle appears to be paying off.

"We've seen immediate results that have been very positive. We tracked the sales results in the second store we reset," he said. In that store, sales were up 18% from November to January. Van Zant said this was significant because Ray's HBC sales are traditionally much higher for November than for January.

Van Zant said he expects the chain's HBC sales will increase 25% to 30%, and added he has even allocated excess space for HBC so the chain will be prepared to accommodate several planned over-the-counter switches in the near future.

"We're expanding our space beyond our current needs and anticipating the space we'll need in the next three or four years," said Van Zant. "So we're adding a lot of flexibility to our set."

Ray's largest store will boast 3,300 HBC stockkeeping units. But Van Zant said the store's increased sales will not result solely from increased space.

"The HBC department has been literally turned upside-down. The way we merchandise. The way we're promoting. The way we advertise," said Van Zant.

The store is reducing prices on approximately 200 items, "so we can be a little closer to being competitive with the mass merchandisers," Van Zant said.

Ray's is shunning last year's popular method of battling alternate classes of trade, everyday low pricing (EDLP), and is instead sticking with a high-low pricing philosophy.

"Our strategy is to heat up our ads, negotiate for bill-back money and supply allowances and any street monies that are available, so we can apply that to the cost of goods," said Van Zant. "Then we'll run ads that are as competitive as anybody in the market."

These price reductions will be aggressively supported by off-shelf promotions, slant backs, floor stacks, ads and temporary price reductions, he said.

"We won't have an off-shelf promotion that isn't supported by an ad or a TPR," Van Zant said. These promotions and advertisements are designed to reach the growing number of people who specifically plan to purchase HBC in a food store, as well as impulse shoppers.

"HBC is still 67% impulse (in food stores), but there's a growing number of people that are expecting to find their HBC in the supermarket. Because with both people in the house working, or some people working two jobs, the typical consumer has no time to be driving all over town," Van Zant said. "People want to be able to purchase all their needs in one stop. We felt it was important to fill the needs and expectations of our customers."

And, as with any proper remodeling job, the HBC department will also receive some aesthetic improvements.

"We're trying to add a little pizzazz to the entire section with a red plastic molding strip, which really makes it look nice and brightens up the aisle. It goes on the molding channel," said Van Zant.

The chain is also adding lighted canopies which identify various HBC categories with signage. These lighted canopies hook into the tops of the gondolas and make the store easier to shop, which was another major goal of Ray's HBC restructuring, said Van Zant.

"Our studies have found that a great deal of the time, customers will leave your store in frustration because they were not able to find merchandise and, in fact, it was there. It's just that they were unable to locate it," he said. To combat this problem, Van Zant said his staff "spent a lot of time developing schematics that will not only increase impulse sales, but will make it easier for the customer to find what they're looking for."

Ray's is also "vertical merchandising" and blocking their subdepartments to aid shoppers.

Van Zant said the final aspect of Ray's new HBC attitude is to cut costs by making the departments easier to service.

"We're using a lot of slanted shelves, especially with items like toothpaste. All the toothpastes are on slanted shelves with dividers, which make them much easier to stock," he said. "We're using a lot of sloped shelves in the first aid department as well."

Once the changes are in place in a store, Van Zant said Ray's works hard to spread the word to local consumers.

"We're [advertising increased variety] on local radio. Our store manager did a local spot on local radio stations about the entire store. And they just plug in the expansion about the increase in health and beauty aids and the price reduction," he said.