THE LEARNING CURVE

JOEL ELSON

The back-to-school season has become a balancing act for supermarkets.

When nonfood buyers shop the upcoming School & Home Office Products Association Show, Nov. 17 to 20, in New Orleans, they'll be looking for deals on commodities that will allow them to compete with the mass merchandisers, drug stores and category-killer office-supply superstores. At the same time, they'll be scouting for less price-sensitive items such as licensed goods and computer-office supplies, which allow supermarket chains to make it a profitable season.

For most retailers, BTS, although highly competitive, has become a seasonal opportunity too important to be ignored. "You don't walk away from BTS because of the mass merchants out there. It's a customer convenience," said Polly Smith, general-merchandise coordinator for Angeli Foods, Menominee, Mich.

Competition from alternative retailers "is increasing for BTS, but the category is still a solid draw for grocery," noted Gordon Thompson, BTS category manager for Associated Food Stores, Salt Lake City.

To counteract the competition, supermarkets increasingly use loss-leader promotions to draw traffic to their school-supply displays. The trick is to weight commodity sales against moving moneymakers. Many retailers still find the BTS season "can be very profitable," said Steve Jacober, president of the School & Home Office Products Association, Dayton, Ohio.

Rather than rely "on mundane dump displays and floor bins, food chains can make their BTS displays more appealing by playing up the creative side of merchandising," stated Jacober. This can be achieved by adding product adjacencies, color, fashion and licensed products for more appealing and eye-catching displays. Additional products can range from basic educational software and specialty computer papers for school and art projects to supplies like mouse pads with patterns and features that appeal to kids, he added.

"Expanding BTS promotions beyond basic commodities would enhance food-channel profitability, even with the risks [of taking markdowns]," Jacober declared.

He also said supermarkets might be losing register rings by avoiding merchandise priced over $10 or $20. Broadening the mix with higher-priced selections "offers the chance to make money on a variety of different quality and product levels, which would also make the mix more appealing and interesting."

With that thought in mind, Jacober noted that SHOPA studies have shown that children are increasingly shopping with their parents for BTS supplies. "There are a lot of kids in the supermarket, which is a great opportunity for impulse purchases," he emphasized.

"Our BTS promotions are profitable, but we don't make a whole lot of money," said Smith of Angeli Foods.

Even so, retailers like Angeli are taking a more aggressive stance to win BTS sales.

While its BTS mix hasn't changed much during the past few years, Angeli remains primarily focused on basic pencils, pens and notebooks, its best sellers. This season, the retailer took a proactive approach by contacting local schools to find out what was on the required-supply list. The retailer arranged its school-supply displays, which consisted of a 12-foot off-shelf display and the regular 24-foot in-line school-supply and stationery set, based upon the recommendations.

"We tried to stay competitive with Wal-Mart and Kmart on these items," said Smith. Angeli lost money on its one-subject notebooks, priced five for $1, but it made money on its overall program, which included licensed Winnie the Pooh and Disney notebooks, lunch boxes and pens, Smith said.

Co-op wholesaler Associated Food Stores developed a program for its retailers "to come closer to mass-merchandiser pricing," said Thompson. "They took a more aggressive approach with 70-count theme books, 10-pack pens and gel pens, all promoted basically as loss-leaders," he added. Associated's retailers set up 8- to 30-foot promotional sets that turned profits for its retailers.

"Fifteen years ago BTS was a great opportunity for grocery, now everything is price-driven," Thompson pointed out.

Associated's BTS promotional mix "sticks to the basics," he added, noting backpacks at $9.99 were the top-priced item sold by retailers. "Gel writing instruments retailing at $1.49 have done well and appeal to all ages, up to college students," he said.

During the summer, Associated bolstered its school and home-office sets by adding about 20 computer supplies. Priced from $1.99 for diskettes or CDs to $29.99 for ink cartridges, the items went into some 30 to 40 larger Associated stores in time for the BTS season, said Thompson.

But there was concern about pilferage of the higher-priced computer accessories like ink cartridges merchandised on display stands in stores. "The biggest concern about ink cartridges for our stores is theft potential due to the high ring. A lot of our stores have started to display blank ink cartridge boxes with call tags. Shoppers bring the tags to a service counter for the actual product," said the wholesaler.

Thompson pointed out that although supermarkets' dollar share of BTS sales has fallen off over the past several years, a majority of sales "are on impulse by consumers who are in the stores food shopping."

Harps Food Stores, Springdale, Ark., claimed the "cheapest prices in town" this BTS season, said Bob Yehling, director of general merchandise.

The chain stressed loss-leader ad features from Crayola crayons and Elmer's Glue to 150-count filler paper and 70-count spiral notebooks. "We were as cheap or cheaper than discounters like Wal-Mart," Yehling said. Harps store managers matched any lower prices for the loss-leaders in their areas. According to Yehling, the only price retailers lowered was on Elmer's Glue.

Yehling believes supermarkets "almost have to be cheaper than anyone because of the Wal-Marts of the world. You have to make the impact that you've got the lower price for customers to believe you," he added.

Harps' BTS turned profits between 20% and 30%. Even though the retailer lost money on the loss-leaders, it made it up with products like family socks sold at a 30% profit. Family socks for men, women and children, which retailed for $5 for a six-pack, were arranged near the main BTS display.

Harps' BTS mix included backpacks, priced up to $15, and seat mats, priced for $4 and $10. The chain also introduced its first computer print paper for BTS, with 100- and 500-count packs at $2.99 and $3.99, respectively. Packs of gel roller pens were $1.50 to $5.96.

Harps managed to salvage what might have been dwindling backpack sales, after selections were shifted to clear and mesh styles because of security reasons. "We caught the change in schools mandating students use either clear or mesh backpacks just in time, and adjusted our orders," said Yehling.

BTS offers supermarkets an opportunity to cash in on their high traffic and consumer-shopping patterns, stressed Jacober. "Our data show, on average, households this BTS season reported spending 6% more dollars than they did in the previous year. And as the market for school, home and office grows, it also widens the opportunities for supermarkets."

To capitalize on heavy supermarket foot traffic, Jacober advises retailers to ensure that adequate space is devoted to the category. "It makes a statement to the consumer that you are indeed in this business with a variety of products."