Reshaping the GM category

Some grocers are ready to overhaul their general merchandise programs. By Carol Radice Blame it on the economy, fierce competition, an out­dated business mod­el, or all of the above, but grocers are finally showing signs that they are ready to revisit their general merchandise strategies in an effort to recapture what was once a flourishing category in grocery. While discussions are ongoing, observers say grocers are adopting a three-pronged ap­proach to revitalizing the general merchandise category—redefine, reshape and redistribute. “General merchandise space continues to get squeezed in grocery stores today,” says Dave Mc­Con­nell, president of the Global Market Development Center (GMDC), based in Colorado Springs, Colo. Given the tremendous amount of pressure placed on grocers to minimize general merchandise in favor of other categories, he says GMDC’s board of directors is moving forward with a study that takes a deeper look at the value proposition for GM. “This isn’t about making a case for more space,” McConnell says. “It’s about providing leadership, analysis and insight as to how we can work together and rebuild GM.”  He says the study will review 10 to 15 key categories, using data from GMDC’s retail members as well as Chicago-based SymphonyIRI Group and New York-based The Nielsen Co. “Our goal is to provide a snapshot of what’s happening in these categories, what consumers expect and where we need to go, but we also will provide executables, something other studies seem to stop short of doing,” McConnell says. According to observers, H-E-B and Kroger are among the grocers that are proving that supermarkets can succeed with GM. “Kroger, for instance, has reviewed its general merchandise program, beefed up its category management within certain GM segments, repositioned some of the categories and, where warranted, redistributed space,” McConnell explains. “This freed them to expand popular departments, such as seasonal.” For as long as Bill Bishop can remember, general merchandise has faced challenges in grocery. The economy has merely magnified the decades-old issue, says Bishop, chairman of Willard Bishop LLC, based in Barrington, Ill. Complicating matters further, he says today’s consumers are willing to do whatever it takes to save money, whether that means cutting back on spending or reshaping their priorities, which makes the challenge of resurrecting general merchandise even more formidable. The grocers that are succeeding in general merchandise are facing those challenges head on, according to Bishop. “Let’s be clear though, while the majority of retailers are feeling the bite from spending cutbacks, the Whole Foods and Wegmans of the world are thriving,” he says. “Why? Because they more than others have invested the time to find out how they can be more relevant to consumers.” Grabbing attention Observers note that since many consumers today tend toward mission-directed shopping strategies in search of specific items, retailers have to do more to get them to go down the GM aisles. Two low-cost remedies, according to Bishop, are solution-based selling and seasonal event selling, both of which can easily be promoted on websites and in weekly circulars. Bishop says that when it comes to developing effective GM displays, too often retailers are focused on protecting merchandise from theft at the expense of innovation. “It’s a business where control of shrink is the top focus, which doesn’t leave a lot of time to be innovative or creative,” he says.  “I’m not saying shrink isn’t a real concern, but when retailers are so focused on people stealing from them it impacts their openness to create consumer-centric displays.” Thad Hanna, vice president of sales for Fayetteville, Ark.-based Hanna’s Candle Co., is optimistic that the category can rebound if more focus is placed on merchandising. “While the statistics indicate many consumers have traded down from their favorite brand to save money in certain product categories during the recession, that hasn’t happened in candles. It was more a matter of holding off,” he says, noting that sales are already beginning to climb again. Consumers may be turning to places such as the Internet for some of their general merchandise products, but as Hanna notes, the tactile nature of candles means they are often an impulse purchase. “It’s hard to miss the appearance and smell of a quality candle and that’s something grocers can play to their advantage,” says Hanna. Since catching the eyes, and noses, of shoppers is key, he says grocers should focus on offering quality candles that feature a fresh look. To turn a consumer into a repeat customer, Hanna says the scent needs to maintain its appeal from the shelf to the home. He suggests that one way to infuse life to candle sales is to offer floor displays that attract the attention of the consumer as they shop. While it’s true that in general consumer spending has been declining, the consumer electronics category seems to be one of the exceptions. In fact, consumers are spending more, not less, on electronics and related accessories. Sam Mizrahi, executive vice president of Avenel, N.J.-based Mizco In­ter­national, notes that in each of the past four years consumer spending in the category has actually increased. High hopes for high tech “Consumer electronics are an important part of every day life in today’s culture,” says Mizrahi, noting for example that cell phones have a more than 90% household penetration in the U.S., with most homes having more than one. “There are more than 285 million cell phone users in the U.S. and because of savvy marketing and innovation, an additional 120 million phones were sold last year. That’s huge,” says Mizrahi. Add to that the use of music devices and the drop in price for tablet computers and Mizrahi says the opportunities for accessories are limitless. He says that since consumers shop supermarkets for everyday food items, it is not a stretch that they would want to pick up consumer electronic accessories there as well. Calling it “a highly impulsive category,” Mizrahi points out that the products offer shoppers unique, trendy items. Now that Verizon is offering the highly touted iPhone, Mizrahi says cell phone sales are expected to heat up even more. By his count, an estimated 12 million new users will become iPhone owners this year alone. Mizco has created a 48-piece iPhone accessories shipper that includes chargers, fitted cases, ear bud headphones, screen protectors, USB connectors and other items, each of which sells for about $10. “Consumers will be looking for phone accessories and this gives them the opportunity to buy it in the grocery store and not somewhere else,” he says. “By doing so, retailers send the message they carry relevant and interesting products.” Similarly, the batteries category continues to attract grocery consumers, primarily because suppliers have remained focused on creating new offerings to meet modern needs. While there is still a demand for traditional batteries, specialty devices and batteries are driving sales and profits. Among the most popular items in the power-source segment are those for mobile phones including a broad array of charging devices whose features emphasize convenience and portability. The fact that battery companies have also expanded their offerings to include items such as digital memory and USB sticks is also helping drive sales, experts note. In the greeting card category, the focus on keeping products fresh and innovative draws customers into the card aisle, notes Frank Cirillo, senior communications specialist for Cleveland-based American Greetings. That plus the fact that consumers are moving away from specialty shops to toward more convenient locations is creating an opportunity for grocery retailers to do more with the category. The key to attracting shoppers, satisfying their individual needs and keeping them coming back is to create a best-in-class card department built upon a strong location, optimal size and the right product mix, notes Cirillo. He points our that going forward, the challenge for the general merchandise category in grocery will be the same as the rest of the store—remaining relevant to shoppers. “This is something that all general merchandise companies must work with their retail partners to deliver to ensure return trips and profit.” Given the time and money constraints today’s consumers are facing, Brett Bradshaw, president of Rancho Cucamonga, Calif.-based Bradshaw International, Inc., says one of the most effective strategies grocers can employ within the housewares department is to cross-merchandise housewares with solution-based merchandising efforts. “Raising kids and working full time means mom is busier than ever. Money is tight, and she feels the pressure to put a healthy meal on the table,” says Bradshaw. Moms are shopping multiple retail formats for housewares and other items, he notes. In addition to traditional grocery, mass and department stores, Bradshaw says that moms now shop dollar stores, organic grocery, drug and club stores with regularity, each one for different types of products.  This shift, he adds, has resulted in the customization of product, mix and merchandising from the manufacturers. “The days of building one or two lines and selling them to everyone are long gone,” he says. “We are now building retailer specific programs, tailored to each retailer’s merchandising strategy.” Retail space may be shrinking, but Brad­shaw says the quality in product, packaging, and merchandising is light years ahead of where it was a decade ago. “The product design is better in terms of form and function, the colors are fresher, and the fixtures and signage at store level are much more engaging. We have also seen assortments shift to a multiple ribbon format in larger sets that offer a bit less in overall variety, but more in terms of a good/better/best offering segmented by package, design and brand,” he says. Sitting pretty David Tagliatela, director of sales, mass and grocery channels for Muscatine, Iowa-based Kent Nutrition Group, the maker of World’s Best Cat Litter, notes that while some portions of general merchandise may be struggling to return to pre-recession spending, the pet aisle, specifically the natural cat litter and natural pet food segment has continued to grow in both dollar volume and new offerings.  “Granted it is still a relatively small segment, but natural products geared toward pets are driving interest in the category. Features such as high-quality ingredients, sophisticated packaging, superior pet nutrition, and keeping people, pets and the planet safe are in high demand today,” says Tagliatela. In addition to stocking the right products, Tagliatela says the keys to succeeding in the category involve taking an ownership role, noting the retailers that are taking “pet by the horn” are the ones prospering in this segment. “Super­markets today still offer one thing all other channels cannot compete with—convenience,” he says. “The average consumer still is in the supermarket two-plus times per week.” The formula for success, Tagliatela adds, also includes offering new products, line extensions, attractive pricing and a good breadth of items. He advises retailers to keep the aisle fresh and updated. “Don’t get stagnant, because the national pet stores certainly are not, and keep the shelves stocked,” he says. Another area where it is crucial to keep items stocked is magazines, observers note. Audited magazine titles are a tad soft right now, says Dick Terlaak Poot, senior national marketing director for Ro­dale, based in Emmaus, Pa. He says that retailers he has spoken with are linking their shoppers’ willingness to spend to the cost of a gallon of gasoline. Discount retailers selling food are faring better than other retailers, he says, adding that in general most retailers are looking carefully at all the options available to them to build sales, including multi-buy offers and off-shelf merchandising in key store locations such as the front end and pharmacy. “Every­one is looking for ways to convert their food shopper to a GM buyer and capture that impulse/trial sale,” says Terlaak Poot. To build sales, retailers need to take more ownership of the category, and part of that, he notes, includes providing additional selling opportunities. He says although it appears counter-intuitive, magazines generate more sales and profits than any other category at checkout, noting the combination of direct-to-store delivery, guaranteed sales and creative fixturing breeds success. “Contrary to popular thought, reading ranks in the top three of leisure activities with 85% of Americans reading magazines,” Terlaak Poot says. “Plus, POS shows that the average shopping basket that includes a magazine has a $28 higher ring than those without.” Going forward, observers say retailers need to take a proactive ap­proach to the category if they want to get back in the GM game. “In my experience, most grocers work as defensive players rather than offensive ones,” Bishop says. “If grocers hope attract top shoppers, most of whom do not purchase general merchandise products in grocery, they can’t keep looking in the same places and expect to find different answers. It’s simply not very appealing to them because in many cases, retailers have maintained the same breadth of inventory, space and assortment that they did 10 to 15 years ago.” Describing the current environment as challenging for general merchandise,  McConnell says the fact that some companies are growing their share is a clear indication that, when done right, general merchandise can still be an essential part of the mix. Downsizing and minimizing key general merchandise categories is not the solution, he stresses, noting that  GMDC has to be responsible in how they evaluate which categories should be in the top 10. Picking the right spots “We don’t have the luxury or space anymore to stand on a soap box and say grocers need to compete with big box stores and carry all the GM categories,” he says. “Grocers have to be realistic and pick the right categories to focus on. Our goal with the study is to give senior level decision makers insight, information and support to reshape nonfoods. “Working together we can achieve the best results and develop the best assortments.” Among the categories the study will focus on are seasonal, housewares, pet, and celebrations, which includes cards, candles and  party supplies. Preliminary results of the research will be shared at GMDC’s conference on June 3-7 in Orlando. “If we find categories that have fallen out of favor we’ll be completely transparent about it,” says McConnell, who points out the time has come to focus on options other than throwing out an entire category. “Opponents have long made the case grocery needs to back off of categories like automotive and hardware and yet H-E-B’s private label automotive chemicals program is proving that when done right, grocers can successfully play in this arena.”