NONFOOD GAME PLAN

DAN ALAIMO / LIZA CASABONA

As competition from other channels becomes more intense, leading retailers are giving more time and attention to their nonfood offerings.

"The rules of the game have changed," pointed out the "Merchandising for Success" study put out by the New York-based Educational Foundation of the General Merchandise Distributors Council, Colorado Springs, Colo. It's no longer sufficient to be the "best in class," the GMDC study said. "For the consumer, there is only best."

Such research provided valuable guidance to retailers struggling to sustain or even survive in the face of heightened competition from mass merchants, drug chains and limited assortment stores.

As part of this special issue, SN presents five nonfood initiatives that can help retailers achieve some of the results promised by the studies. The nonfood categories of health and beauty care, general merchandise, pharmacy and video are central to creating the impression in shoppers' minds which stores are "the best."

These actionable items are:

- Develop a comprehensive entertainment section strategy.

- Make plans to transition to digital photo processing.

- Make a nonfood statement in one or more new categories.

- Integrate pharmacy with a whole health program, and tie into a Web site.

- Implement a merchandising plan to take better advantage of impulse categories like batteries and magazines.

Among the leading traditional supermarket operators who have effectively employed one or more of these strategies are: Stop & Shop, Schnuck Markets, H.E. Butt Grocery Co., Hy-Vee, Kroger and some of its divisions, Albertsons, Lund, United, Bashas', Wegmans, Giant Eagle and many others.

-- DAN ALAIMO

INITIATIVE 1: PUT IT TOGETHER

Some retailers are maximizing the merchandising excitement of categories like video, magazines and books by putting them together into a comprehensive entertainment center department.

A prominent example is Stop & Shop Supermarket Co., Quincy, Mass., which was given SN's Supermarket Video Retailer of the Year Award earlier this year for its Bestsellers! sections. These departments also include products like music, video games, comic books and related licensed products. The Ahold division has more than 100 of these sections, which typically take up 1,600 square feet.

"Our overall marketing strategy is to make our customers' lives a little bit simpler. What Bestsellers! does is allow us to enhance the one-stop shopping experience for them," Peter Hettinger, vice president, nonfoods, Stop & Shop, told SN.

According to industry sources, other supermarket chains, like Ingles and Smith's, are experimenting with the concept to varying degrees. None have carried it as far as Stop & Shop, which plans to add 20 to 25 new Bestsellers! departments a year, according to Marco Cunha, buyer at the chain.

"Supermarkets are already in the book business and they are already in the magazine business, so it is just a matter of integrating a decent video sell-through section into the businesses they are already in," said Andrew Miller, director, supermarket division, Rentrak Corp., Portland, Ore. "It makes all kinds of sense. It's incremental business and it's attractive to the customers."

"Stop & Shop has been a leader in developing a successful in-line sell-through entertainment section, setting an example for other supermarket chains to consider," said Bill Bryant, vice president, sales, Ingram Entertainment, LaVergne, Tenn.

"Many other supermarket chains have begun experimenting with similar in-line video departments with a great amount of success," Bryant said.

Tom Adams, president and senior analyst, Adams Media Research, Carmel, Calif., said he is preparing a report suggesting that video specialty stores, now struggling with a decline in the rental market, offer a more comprehensive array of products. "The bookstore chains have proved it to be a workable model, so I'm not sure why it couldn't work in supermarkets on a smaller scale," he said.

-- DAN ALAIMO

INITIATIVE 2: GETTING THE PICTURE

Drug stores and mass merchants have been setting the pace in digital photo processing.

These channels may be in the lead, but supermarkets are well-positioned to reclaim their share of photo print-making. An untold number of digital images are sitting on computer hard drives waiting to be printed because home printing is an expensive proposition. Research has shown use of in-store processing options to be steadily increasing.

Supermarkets, with their traffic and one-stop shopping convenience, can benefit if they are equipped to meet increasing digital print demands. Advances in small digital processing kiosks will make them the solution of choice for most supermarkets, industry sources said.

For example, Lund Food Holdings, Edina, Minn., has Sony Digital Print Station kiosks in all 20 of its Lunds and Byerly's stores, and two of those stores have two kiosks. The number of kiosks will increase "in stores where it is justified," said Dennis McCoy, category manager, HBC/imaging.

"The kiosk strategy is probably going to work best for most grocery chains," McCoy said. The devices provide a relatively low-cost entry into digital imaging, he said. "If you don't have a kiosk or something else, people are going to go to your competition."

InfoTrends/Cap Ventures, Weymouth, Mass., recently polled Internet users who use photo kiosks on where they use them, reported Kerry Flatley, consultant. While 69% said mass merchants and 39% said drug stores, 11% said they went to grocery stores. When asked where they would like to use one, 70% chose mass merchants, 44% picked drug stores and 41% wanted to go to grocery stores, she noted.

"These survey results show that digital camera owners are interested in using a photo kiosk in a grocery store, even though many have not had the opportunity to do that yet. Grocery stores are extremely convenient since everyone must buy food," Flatley said.

"One of the biggest opportunities for the least amount of money is the kiosk," said Jon Rousseau, director of trade relations for chain stores, Photo Marketing Association International, Jackson, Mich. "The potential is great. It is just a matter of easing into it."

Kiosks have a small footprint and are relatively easy to maintain and use, said Gary Pageau, the association's group executive, content development and strategic initiatives. "Consumers get kiosks; they understand them. That's a big opportunity for the food stores that perhaps may not have had anything more than a [film] drop box," he said.

-- DAN ALAIMO

INITIATIVE 3: MAKE A NEW STATEMENT

Making a statement in new categories is generating incremental sales for some retailers.

Supermarkets are increasing the space they allot for home office products and are co-branding in-store sections with specialty retailers such as Office Depot, Delray Beach, Fla., and Staples, Framingham, Mass.

Kroger, Cincinnati, embarked on a test of co-branded store-within-a-store sections with Staples late this summer in Smith's Food and Drug Stores in Las Vegas and Salt Lake City, Staples told SN. Albertsons has carried products from Office Depot since late 2003.

Ahold-owned Stop & Shop Supermarket Co., Quincy, Mass., implemented store-within-a-store office supply departments in 2002 through a partnership with Office Depot. Earlier this fall, Stop & Shop started switching its branded sections to Staples.

"Chains such as Stop & Shop have begun partnering with the office-supply superstores to create co-branded stores within the store. This promises to be an effective strategy because it might otherwise be difficult for a supermarket to position itself either as being an office supply destination alternative or a price competitive player in this very large market. Co-branding immediately gives you recognition as a player in this market," said Jim Wisner, president Wisner Marketing Group, Libertyville, Ill.

Home office products can be used to attract more business-to-business customers to the supermarket in a range of categories, including takeout foods, non-edible grocery supplies, soft drinks, etc., said Bill Bishop, president, Willard Bishop Consulting, Barrington, Ill.

With the dawn of the metrosexual age, men's personal care is also breaking new ground, with a number of new product introductions over the last few years driving some significant category growth, industry sources said.

Brands like Axe, Adidas, Old Spice, Suave for Men, Vitalis, Gillette and others have introduced new personal care and hair care items targeted specifically to men in response to an increased interest from men in pampering themselves.

Supermarkets have the opportunity to leverage off the already well-developed shaving and deodorant sections for men, Bishop said.

-- LIZA CASABONA

INITIATIVE 4: INTEGRATE HEALTH

Retailers can capture loyal consumers by integrating the pharmacy with a whole health program ties into other store departments.

According to the Food Marketing Institute's 2004 Supermarket Pharmacy Survey, the pharmacy is a department that has the ability to meet the "whole consumer."

"Pharmacy gives a supermarket great value to their current customers and can have a dramatic, positive effect on health and beauty care sales and on same-store sales," said Jeff Manning, managing partner, F&M Merchant Group, Lewisville, Texas.

Schnuck Markets, St. Louis, launched a project earlier this year that pulled items from all categories of the store with the slogan, "Love Your Heart. We Do."

The "Love Your Heart" program started in the pharmacy with a brochure and a point of contact with pharmacy staff. Consumers then followed a "yellow brick road" marked by signs through the store. Shelf-talkers and posters featuring the program slogan carried the pharmacy message through the store, and extended it to include food products, cookbooks, medical and exercise equipment, and videos on yoga and exercise.

"Many supermarkets are beginning to make strides in becoming health destination locations for their customers. Providing health and wellness information, informational kiosks, and health-related food-focused merchandising activities can establish supermarkets as a partner in helping their customers manage their personal health and well-being," said Jim Wisner, president Wisner Marketing Group, Libertyville, Ill.

Most supermarkets do have some sort of early health and wellness initiatives under way, he said.

Another way to leverage the pharmacy to capture consumers is by offering consumers a convenient place to get health information.

Retailers, including Stop & Shop, Giant Food and Hy-Vee, have experimented with HealthSmart Rx, Chicago. HealthSmart Rx, developed by the University of Illinois at Chicago College of Pharmacy, provides an area next to pharmacies that has an informational kiosk, hosts health screenings, and features books, magazines, videos and related products.

Retailers like Raley's, West Sacramento, Calif.; Kroger, Cincinnati; Costco, Issaquah, Wash.,; and others use health and nutrition Web content and kiosks from Healthnotes, Portland, Ore.

-- LIZA CASABONA

INITIATIVE 5: ACT ON IMPULSE

When properly presented, high-margin, high-turn impulse categories offer retailers an opportunity to increase consumer basket size and shopping frequency, industry sources said.

The importance of channels for shopper loyalty has gradually faded, to be replaced by a new consumer focus on merchandising. Impulse items like batteries and magazines can be successfully merchandised to benefit supermarkets.

"The best way to take advantage of both batteries and magazines is to display the product in ways where it's easily seen by shoppers, and draws their attention," said Bill Bishop, president, Willard Bishop Consulting, Barrington, Ill.

Best practices for batteries, according to the "Merchandising for Success" study published this year by the General Merchandise Distributors Council Educational Foundation, New York, include increasing the number of product touchpoints and the category visibility by placing batteries wherever there are electronics.

"There are not many categories in nonfoods that carry the sales dollars and the potential increases in sales dollars that batteries do," Al Jones, vice president of procurement and merchandising, Imperial Distributors, Auburn, Mass., told SN.

Categories like batteries can generate stock-up trips by themselves as well as generate purchases in other categories while customers are in the store, said Jim Wisner, president, Wisner Marketing Group, Libertyville, Ill.

"Those stores that find it difficult to compete on space, variety or overall pricing levels for nonfoods must find within each category some sort of destination offering that can generate volume by itself," he said.

Magazines also offer supermarkets an increased opportunity to improve store turns when merchandised in more than one location throughout the store.

On average, store inventory turns 8.5 times per year, according to a study released by The Magazine Publishers of America last month. Magazines average 17.4 turns per year by comparison, according to the study, conducted by Kreisky Media Consultancy, Boston, for the MPA.

Supermarkets and mass merchandisers have put magazine racks in produce, baby, sports, hobby and electronics aisles featuring topic-appropriate publications to increase visibility, Bishop said.

-- LIZA CASABONA