STAKING A CLAIM

AL HELLER

When it comes to selling general merchandise, as it is with real estate, location and timing is everything.

Association executives who oversee big volume general merchandise categories sold in mass retail channels point out, however, that location in this case means more that just the physical positioning of the merchandise or department within the store.

It means having an adjacency with food -- supermarkets' core business -- and interdepartmental cooperation in order to fully take advantage of the many synergies offered in food retailing today. Location means reaching beyond the sales floor into the local trading area where demographics become a key factor in helping to capture impulse sales with the right products. It means capturing the moment during peak seasonal selling periods. It's also about creating the image and making the statement that you are in the business. It means offering shoppers a convenient solution during their frequent shopping trips to the food store.

"What's really important in stocking the racks is matching titles to the demographics of the store," noted Tilly Young, director of retail consumer marketing, Magazine Publishers of America, New York.

"Stores need to pick their shots based on their local trading areas. Merchandising concepts such as seasonal selling and whole health mandate interdepartmental collaboration, which is more forthcoming than in the past," said Roy White, vice president education, General Merchandise Distributors Council, Colorado Springs, Co. "Housewares has a very natural association with food, and offers solution selling opportunities throughout the supermarket. They lend naturally to one another, making supermarkets a perfect venue for many food prep and presentation items," commented Perry Reynolds, director of marketing, National Housewares Manufacturers Association, Rosemont, Ill.

As the annual sales figures of the over $15 billion in general merchandise categories tracked by Information Resources, Chicago, indicate, mass merchandisers have mastered the art of selling general merchandise by capturing just over 60% of the market share. Supermarkets, with nearly a quarter of general merchandise sales, can gain some ground in these high-profit categories, said association executives interviewed by SN on the eve of the General Merchandise Distributors Council GM Marketing Conference held this week, June 2 to 6, in Orlando, Fla.

As the GMDC celebrates its 30th anniversary year, SN explored growth prospects for a variety of GM categories and discussed issues facing food chain operators. Executives discussed opportunities that general merchandise offers supermarkets despite the intense retail competition for share of consumers' disposable spending.

Also participating in the virtual roundtable were: Steve Jacober, president, School, Home, & Office Products Association, Dayton, Ohio; and Gary Pageau, associate publisher of editorial, Photo Marketing Association International, Jackson, Mich.

Here are the association executives' comments on the issues and opportunities in general merchandise.

SN: Retail channel blurring continues as mass and drug get more into food, and supermarkets take on higher-ticket general merchandise. What does this mean for GM sales in supermarkets?

WHITE: Channel blurring is more and more of an issue. Note that food executives are now running Rite Aid. Still, supermarkets are capable of selling almost any type of general merchandise. In batteries, for instance, supermarkets grew dollar sales 7% in 1999. That's more than four times the growth posted by drug, although it's less than the 13% gain at mass. Here's a category where mass has over half the share, and drug and grocery split the remainder. But supermarkets can do a great deal with their traffic as long as they present merchandise well.

YOUNG: Trade class blurring won't adversely affect magazine sales. Supermarkets have to keep in-line and front-of-store displays filled on a timely basis, and particularly avoid out-of-stocks at checkout because so many checklanes aren't open all at the same time. Cross merchandising throughout the store sells both magazines and related products. That's the beauty of magazines. Precious few categories in the store can do that with authority.

REYNOLDS: Housewares present itself well in many channels. A lot of retailers who didn't start out with it now see it's a nice fit, and they've adapted it to their specific customer bases.

Housewares have a very natural association with food, and offers solution selling opportunities throughout the supermarket. They lend naturally to one another, making supermarkets a perfect venue for many food prep and presentation items, even candles and aromatherapy goes beyond the expected kitchenware and food storage.

JACOBER: Yes, channels are blurring, but the main question is competition. Can a supermarket transform its school and home office section to compete against a category-dominant retailer? Not with the same type of offering. Yet they have the advantage of customer traffic. They must look at the demographics of each store and tailor the mix to the needs of the local population.

PAGEAU: Supermarkets must decide what their business is -- low maintenance and low investment photofinishing drop boxes or on-site service, which is not unnatural for them but requires considerable investment, floor space and staff training. It takes commitment. Digital imaging ties into supermarkets very neatly because of the freedom it gives customers to use images in many ways. Frames for enlargements make sense for supermarkets, both within housewares and as an extension of photofinishing. Photo greeting cards are also tremendously popular. Supermarkets can have a wholesale photofinisher provide this service, or they can use digital kiosks in their own stores, which are usually chemistry-free.

SN: Of the major GM categories such as housewares, photo, greeting cards, magazines/books and light bulbs, which offer supermarkets the greatest potential for growth and further development? Why?

WHITE: There's no reason supermarkets shouldn't do well with any of them, given their traffic and convenience. Stores need to pick their shots based on their local trading areas. Merchandising concepts such as seasonal selling and whole health mandate interdepartmental collaboration, which is more forthcoming than in the past.

Our Birthday Best Practices study shows that supermarkets have all that's needed to work really well -- all the products, the right customers in the women who hold the parties and identify the supermarket as a source. There's photo, party supplies, greeting cards, cake molders, candles, and the cross-category strengths with grocery.

YOUNG: Public interests are reflected in new magazines. In health and fitness and computers, for instance, as reader interest grows, so will title sales in those areas. Magazine Retail Advisory Council studies show that gross profits, turns and GMROI are quite high on magazines -- which account for less than 1% of store sales but more than 4% of operating income in supermarkets.

REYNOLDS: Housewares have shown strong, steady advances over a long period of time. The supermarket trade class, including supercenters, now has just under 7% of our category's $63 billion in retail sales.

JACOBER: Growth patterns in our industry link to growing numbers of home office workers, changing work patterns in the labor force, and continued growth in the numbers of students across the nation. It also goes to increased technology in homes. The computer itself creates sales opportunities for supermarkets in products that organize, or are replenished often like printer cartridges, paper and discs. While school and home office categories can be SKU-intensive, this better enables supermarkets to make a statement and satisfy a wide range of consumer needs.

PAGEAU: What makes digital fun is the possibility of manipulation or personalization of photos. The growth isn't just in exposures but in scrapbooking, merchandise-bearing photos, and the ability to transmit over the Internet. That's why the Kodaks and Fujis of the world are pushing their digital kiosks. It's where the higher-margin incremental business is.

SN: Should supermarkets be as competitive in general merchandise as the category killers and mass merchandisers? Has industry consolidation made food stores better able to compete?

WHITE: Supermarket prices are generally in between drug and mass. Variety is the bigger issue.

Supermarkets could cherry pick best sellers, and glean the convenience side, or choose to make a statement with depth, as Wegmans Food Markets does in pet supplies.

Consolidation creates larger companies with greater buying power. But issues we deal with are more of ideas than critical mass. It's more important to develop categories you can leverage with a merchandising concept, and by collaborating with grocery. You don't need to be large in order to do that.

SN: Seasonal merchandising is gaining importance in supermarkets. Why should this continue to have positive impact on general merchandise sales?

WHITE: It makes sense. Supermarkets bring so much to seasonal that others can't because of their breadth of product. Drug chains are best practitioners of seasonal with perfectly arrayed displays, but they lack the food and food preparation categories, which are vital to so many seasons.

Seasonal tends to be incremental business for supermarkets, which should look to the GMDC Educational Foundation studies for skills on merchandising Valentine's Day, Halloween, Easter, Back-to-School, and more. Seasonal makes sense to consumers, so it also should to upper management and nonfood executives.

YOUNG: Seasonal is big by region and by title. Think of crafts around Christmas, gardening in growing seasons, skiing and other seasonal themes. Good category management helps here.

REYNOLDS: Housewares contribute to virtually every season, whether picnic or holiday sets, and there's the natural affinity between food and housewares. I believe the best opportunity to sell a seasonal kitchen or table item is when people are buying food for that same season. Use the visual and spatial opportunity to sell them together -- particularly if as during Thanksgiving they're not the kind of food prep tools people might use year-round: basters, lacers, roasting pans, carving sets.

JACOBER: Back-to-school shows a tremendous spike from July to September, but we're also taking a look in the first quarter at New Year's organization. Tax preparation becomes a subset of that, as does the beginning of the second semester at school. Pursue school and home office seasonally as aggressively as you go after Halloween and Easter.

PAGEAU: Definitely, urge consumers to take along a camera on a picnic outing, or an Easter egg hunt, or Halloween trick-or-treating, or more. When you do so, you give them convenience. It's a great way to augment what you're already doing. Christmas/Hanukkah is the number one picture-taking occasion, Thanksgiving is number six, and Easter is number seven, according to our consumer surveys.