WEIGHING POWER CATEGORIES

JOEL ELSON

They represent big dollars, high-impulse sales and are essential for one-stop shopping.

But increasingly the powerhouse general-merchandise categories -- batteries, film, lightbulbs, greeting cards, baby and pet supplies, among others -- are becoming the bread and butter of nonfood.

While these general-merchandise areas are often national-brand driven and supported by supplier promotions, the marketing trend overall is shifting to value-added merchandising strategies, said retailers and wholesalers interviewed by SN.

The squeeze from mass merchandisers, specialty chains and price-conscious shoppers has pushed some of these categories into the loss-leader zone for supermarkets.

"The trend is staying ahead of the mass marketers out there, even if it means giving items like film away," declared Barb Zugmier, director of nonfood at B&R Stores, Lincoln, Neb.

General-merchandise executives meeting May 21 to 26 in Palm Desert, Calif., for the GM Marketing Conference, sponsored by the General Merchandise Distributors Council, Colorado Springs, Colo., will be discussing with suppliers how they can offset some of the margin being lost by the demand for value buys. They will be looking for other products that can help them maintain their general-merchandise margins.

Looking ahead, the emphasis in these product areas "is going to be lower price points," said Jim Key, vice president of marketing for Community Cash Stores, Spartanburg, S.C.

Value-priced products like those featured in general-merchandise dollar-day events and similar promotions are "where some of the growth is going to come from in nonfood," he stated, which is one direction Community Cash is considering in becoming more aggressive in big-volume general-merchandise categories.

Based on sales and profit, the top general-merchandise categories for the chain are greeting cards and stationery, pet supplies, stick goods, film and batteries.

"Consumers are always looking for better values in nonfood," said Zugmier. Therefore, "pricing is something supermarkets have to address in their general-merchandise approach."

Zugmier considers film and batteries the most competitive categories. To offset margin erosion from loss-leader pricing in these categories, Zugmier cross merchandises film with higher margin picture frames.

"I lose money every day on 24-exposure 200 speed. But I try to make it up by cross merchandising film with photo albums."

Cross promoting film and single-use cameras with outdoor cooking and picnic supplies has also boosted sales for both categories, she said. But B&R stopped cross promoting the products in the baby and pet aisles due to pilferage.

Although cross merchandising usually generates added sales, less than 40% of the food chains are taking advantage of the benefits of cross promoting products like film and single-use cameras in other departments, said suppliers.

Albertson's and Safeway are the exception. "These chains take a proactive stance with store-level film and photo displays," said one source who works closely with the chains.

In April, Safeway, Pleasanton, Calif., started running an in-and-out Fuji single-use camera promotion chainwide. Two 5-foot-high display towers were arranged at high traffic locations of stores. Customers who purchased one single-use camera at $12.99 received another free. These photo-display towers, "which are more characteristic with mass merchandisers, help the products stand out and build sales," the source said.

Dick Swain, executive vice president of Associated Wholesale Grocers Valu Merchandisers nonfood subsidiary in Kansas City, Mo., pointed to the seasonal aisle and pet as power general-merchandise categories. Swain serves as this year's chairman of the board of the GMDC.

"Seasonal is becoming a category unto itself," he said. "It's becoming huge and developing as the category that offers the biggest potential in general merchandise for supermarkets."

For many retailers, the seasonal category is a year-long effort, merchandised according to the time of year or holiday. Swain noted that about 15% to 25% of Valu's accounts now maintain a dedicated seasonal area.

Seasonal is unique for its cross-merchandising opportunities, said Swain. "Many items can be tied into many departments, from cereal bowls at grocery to balloons with candy at Valentine's."

He agreed that value and lower pricing are becoming more crucial for top general-merchandise categories sold within the supermarket channel. "Pricing merchandise correctly is important if we want to compete. Mass merchandisers and specialty retailers keep pecking away at the food chains," he stressed.

While there are the price-sensitive shoppers, others are willing to spend at higher levels, noted retailers. Swain mentioned good movement on $200 grills and $29 plush dolls.

Another area of growth is the pet aisle. Over the last 18 months, Associated Valu's retailers have created pet destination centers. This area has proved effective in cross promoting items such as single-use cameras. "Pet owners take almost as many pictures of their dogs or cats as they do of their children," Swain said.

Combining high-impulse general-merchandise items like underwater, flash or daylight one-time use cameras on outdoor cooking displays or at checkouts also suggests a purchase, he said.

At Fleming Cos., Oklahoma City, pet accessories, stick goods, lighting, food storage, film and batteries are among the top general-merchandise categories that represent areas for growth, said Mike Poe, corporate director of general merchandise.

But each of these departments "has its own unique characteristics as far as what attracts customers -- price, brand or promotion," said the wholesaler.

Film, batteries, pet supplies and lightbulbs are the powerhouse general-merchandise classifications for retailers supplied by Supervalu's Northeast general-merchandise division warehouse, Easton, Pa., said Thomas Shively, head general-merchandise buyer.

In a bid to strengthen one-stop shopping on the nonfood side, some 10 or so of the region's retailers have embarked on creating larger 80- to 100-foot pet destination sets. Forty-foot pet care centers are now in two stores.

"We're trying to be in the same arena with the specialty stores by creating destination departments for shoppers," Shively said.

Shively also mentioned good response to value-priced greeting cards that sell for $1 as a growth area for supermarkets. The attention major card manufacturers have given to their value-priced lines allows retailers to maintain full margins in the regular card mix without discounting, while offering a lower ticketed card to price shoppers, Shively said.

"Value cards definitely have a market niche. They keep shoppers in the store rather than going to a discount drug store or a Wal-Mart," the buyer said. "These cards do well with consumers who have balked at the higher priced cards that have been on the market for years."

While film, batteries, baby general merchandise, motor oil and lightbulbs are top volume producers for Handy Andy Supermarkets, San Antonio, it's promotional apparel that brings in profit, said Marshal Borman, general-merchandise buyer.

Softgoods is the chain's best dollar profit category, and specifically printed shirts run as an in-and-out promotion. Borman said the shirt promotions are hugely successful and profitable and that demand has yet to wane.

Handy Andy, which first started handling the products last summer, now promotes a different T-shirt, polo shirt or sweat shirt every month at 50% on a $1 cost per item. T-shirts and polo shirts retail for $1.99, and sweat shirts are priced at $3.99.

The shirts are merchandised on a rack at the front end where customers can clearly see them when they walk into the store. "We now change the printed design on the shirts in each re-order to maintain customer interest," Borman said.

To build traffic for batteries Handy Andy spotlights a different product almost weekly in store ads. Lower-end motor oil also sells well on a permanent endcap.

Price and promotion activity "more than any other aspect drive general merchandise in our stores," Borman said.

Mike Meyer, nonfood director for Homeland Stores, Oklahoma City, said he shops "the world for different items," and is always on the lookout for unique general merchandise. During the past year Homeland has carried Furbies, Beanies and other toys, "which were successful and sparked unplanned purchases," said the retailer. This summer Homeland is promoting Gazebos for $30 and park benches from $29.99 and $59.99.

Meyer, who plans to be at the GMDC's GM Marketing Conference, will be hunting for promotions and new programs that can serve as a jumping-off point for future nonfood activity, he said.