Speeding up HBC

Slow response in adding new items into the mix is just one of many issues costing grocers valuable HBC business. Mistakes happen. It is simply a part of life. However, as the adage goes, the true lesson to be learned about mistakes is not that they happen, but more about how one handles it. Unfortunately, industry observers say some grocers are failing to heed this advice when it comes to their HBC programs. Suppliers have long called out grocers shortcomings with HBC including issues with pricing, assortment, merchandising and slowness in introducing new products. After years of lost market share observers say improvement is not coming as fast as it should. “It’s frustrating at times,” says Gary Pigott, senior vice president of sales and marketing for Mason Vitamins, based in Miami. Pigott says that while several regional retailers have taken steps to include trending products quicker, most still wait for scheduled planogram reviews or national TV advertising campaigns to kick off before exploring these opportunities. “It’s one thing to be cautious about new items, but waiting six to eight months as some are doing is costing retailers precious HBC business,” says Pigott. “In our experience it is often better to feature an item early and make adjustments down the road if warranted.” This sloth-like reaction is especially problematic in segments such as vitamins and dietary supplements where consumer curiosity has been high the last several years. Additionally, other channels, such as web-based retailers, are aggressively pursuing this business and taking share from grocers. “Having the store traffic and not doing everything you can to earn a shopper’s business means money is being left on the table,” says Pigott. Among the suggestions he has on how this can be remedied include having an exit strategy in place with the vendor, featuring at least two to three TPR offers during the launch period to give the product some shelf visibility and measuring the impact in six months. Slow to shelf with new items can also pose concern in the homeopathy segment, says David Gerhardt, vice president of sales for King Bio, based in Asheville, N.C. Gerhardt says as one of the fastest growing segments of natural products in the grocery channel, it is critical for retailers to stay on top of new product launches. “Consumers are looking for natural and safe HBC solutions and suppliers are reacting by continually introducing new products,” he says. “As such, the number of consumers looking for solutions that do not have negative side effects, yet work fast and effectively has catapulted sales in products that address colds and flu-like symptoms, asthma, allergy, sinus congestion as well as with those offering solutions for children and infants.” Gerhardt emphasizes that it is important retailers know that just as consumers have changed their buying habits to include more natural foods, they are incorporating more natural over-the-counter medicine options as well. “In response to consumers asking for alternative choices, many mainstream grocers are scurrying to bring in more natural products, including natural, homeopathic medicines, to satisfy that demand, and to keep more OTC dollars inside their stores and away from the drugstore chains,” he says. “More products equal more choices which equal more opportunities to keep customers in grocery stores and away from other competitors.” The trial and travel segment of HBC is experiencing similar issues. Reflecting back on the past year or so, Mike Stotts, vice president of sales for Navajo Manufacturing Co., based in Denver, says in many instances either grocers did not focus on this area due to the underperformance and share of the overall HBC category or totally abandoned the segment. He says the reason for the lack of performance at retail stems from years of treating the category as a “trial” business. “Consumers shopped the category to try new items before investing in larger sizes. Due to manufacturer supported price promotions and other reasons, it started making less sense to purchase the smaller sizes and consumers began to purchase the regular size, even to just try the product,” he says. While 9/11 and changes in the TSA rules transformed the segment from a trial to a travel business in the eyes of consumers, many retailers are continuing to approach the segment from a pricing perspective—as they had done in the past. “The result is a segment that is now flat with many retailers facing the same challenges today as they did 12 years ago,” says Stotts. Another challenging category for grocers to merchandise is feminine care. There are many categories for which private label has been the growth engine behind sales, but in cases such as feminine care, sales of branded products carry the most loyalty. Officials at Cincinnati-based Procter & Gamble say women that shop this category are extremely brand loyal. Quality and trust are the two most important attributes driving their decision on which brand they buy. P&G spokesperson, Velvet Gogol Bennett, says that Always and Tampax have the highest loyalty rankings in the category. She adds that beyond brand there are other factors that come into play that retailers should be aware of to effectively merchandise the set. For instance, Gogol Bennett says that 70% of women routinely use two or more forms of protection (pads, liners, wipes or tampons). In response, last year P&G launched the Radiant Collection from Always and Tampax. “The Radiant Collection provides women with one premium brand experience to meet all her fem care needs and includes all four forms women use—pads, liners, wipes and tampons,” says Gogol Bennett. The Radiant Collection has recently expanded to include Tampax Radiant Compak and Always Infinity Radiant for Teens. Thus far, she says the response to this introduction has been positive from both retailers and consumers. Eyes wide open While being quicker to market with new item launches and offering a broad variety of national and store brands is critical, so too is a retailer’s willingness to identify emerging opportunities and explore expanding assortment in smaller HBC sub segments—especially where consumer demand dictates. James Liu, president of Chicago-based SeabuckWonders, says the past year has been a positive one for natural skin care. Consumers are looking for products that bring out the best in their health, many of whom feel those types of benefits cannot be found as readily in conventional products. For instance, he says products in the SeabuckWonders lineup offer a key ingredient component that addresses both skin care ailments from the “outside in topically” and the “inside out systemically.” The company’s Omega7 Complete product and its four skin care products (facial cleanser, serum, facial cream and body cream) are all made with 100% USDA Organic Sea Buckthorn from the Himalayan Mountains in Tibet. Liu says Sea Buckthorn is rich in Omega 3, 6, 9 and the elusive Omega 7. “It is the Omega 7 that is proven to be beneficial for hair, skin and nails when taken internally and used topically. It is also hugely beneficial for the gastrointestinal and UTI tract,” he says. Additionally, Sea Buckthorn contains over 190 Phytonutrients, which company officials say contribute to overall health, cardiovascular, immune, hair, skin and nail health and vitality. Liu says that in a world filled with “me-too copycat” suppliers, retailers should look to partner with companies that stand for something. “As one of the oldest and most respected companies producing USDA Sea Buckthorn products, we are synonymous with persistent quality, integrity, quality control and consistency,” he says. Indeed, skin care is one of the most frequently identified, under utilized and often imitated segment of HBC, says Suki Kramer, founder and president of suki clinically-proven natural solutions skin care, based in Northampton, Mass. She says today’s consumer has evolved and retailers that do not keep pace are missing out on sales. “There was a point in time when women were attracted to products that smelled nice. However, the mindset of women in 2013 is focused less on that and more on discovering ways to take charge of their health and well-being by embracing authentic products that actually work,” says Kramer. Based on a 77% repeat business rate, Kramer knows she is spot-on.  “Suki has always stood for integrity, transparency and 100% synthetic-free, non-GMO, etc. and our consumer conversion rate speaks volumes as to what consumers want,” she says. The suki line of products was created to provide essentials for every skin type: balancing for combination to oily and acne, nourishing for combination to dry and mature along with clinical proof and backing. “We start with these scientific actives, sourced from botanicals, in the highest potencies possible and blend those with 100% synthetic-free ingredients and perform third-party clinicals on the final formula to back our claims as well. What we do in natural is what is done in mass and prestige, but no one else is doing it because the formulation integrity just isn’t there,” says Kramer. Solutions abound Observers say much can be learned from what benchmark grocers are doing to build their share of the VMS. Some grocers are starting to take a page from the successful drug store planograms and are focusing on offering a wider variety of product selection instead of emphasizing multiple sizes of the same SKU. “Grocers are beginning to see that three strengths of Vitamin E are not really necessary to get the sale. They are seeing that offering E 400iu alone, for instance, covers the majority of consumer needs, plus it frees up at least eight inches of valuable planogram space,” says Mason Vitamins’ Pigott. Officials from King Bio believe that if response from this year’s ECRM show is any indication, grocers may be overcoming their reluctance to add new products into the mix sooner rather than later. “Our Safecare brand of asthma and allergy products is selling extremely well in food, drug and mass outlets,” says Gerhardt. “Based on the reaction we got at the 2013 ECRM show from buyers looking at filling shelf space for the 2014 cough, cold, allergy season, it is evident that many retailers are planning a year ahead, and some will be more spontaneous and place new product orders earlier.” In exchange for grocers’ commitment, Gerhardt says the same high expectations are being placed on homeopathic companies as they are for other OTC companies. He says sales per item, per store, per week have not been lowered in order for them to maintain shelf space. Nor has promotional expectations; advertising, both nationally and locally, is also required of the homeopathic manufacturers to support their brand and drive the consumers into the stores. With the goal of thoroughly understanding the consumer decision tree and understanding what the solutions are from the purchaser’s perspective, Navajo has been conducting research as to why the consumer purchases trial and travel products where they do. Retailers may be surprised to learn that price is very low in the consumer’s decision process. “Above all else, consumers want a large assortment that is neat and well organized,” says Stotts. To address these opportunities, Navajo created the Dispensit, a multifunctional gravity fed display that offers a clear view of the brand and product and also serves as an inner within the case pack. “This allows for the retail display to always remain fresh and clean, since a new Dispensit is received with each reorder. As a result, the consumer will always experience a fresh, clean and orderly environment that is easy to shop,” says Stotts. Stotts adds that while successful retailers know that selection, ease of shopping and a fresh display are the keys to building sales, they also need to routinely remind the public of the carry-on restrictions for air travel. “We do note on our displays that these items are ‘TSA compliant’ and increasingly we’ve seen retailers promoting this as well,” he says. “Associated Foods Stores in Salt Lake City, for example, includes floor graphics which remind the consumer they can safely purchase those items with confidence and that they meet government regulations.” As a result of these efforts, double-digit growth in both units and sales are commonplace with this and other retailers, adds Stotts. “What this demonstrates is that the trial and travel segment can be a high growth business if managed properly. Price has played a low importance in the retail execution of these successful retailers, leaving a great deal of room for growth in gross margin dollars.” Navajo may focus on HBC offerings, but the company is always looking for new categories to expand into to keep assortments fresh. Recently it expanded its offerings to include Hottips cell phone accessories. “As anyone who travels can attest it is commonplace to accidentally leave behind a cell phone charger or the like. We believe accessories such as these offer retailers the opportunity to gain high margin, incremental sales that the travel public is seeking,” says Stotts.