SAVORING NONFOOD

JOEL ELSON

For many serious players in food retailing today, general merchandise has become an integral part of strategic positioning.

The large national chains as well as aggressive smaller independents have targeted key general-merchandise categories like books/magazines, pet supplies, home/office, housewares, cooking implements and the seasonal aisle to make a statement with high-margin goods.

Countless examples of concepts and tests are chronicled weekly in SN. H.E. Butt Grocery Co. in San Antonio rolled out 400-square-foot specialty reading departments in Austin, Texas. Wegmans Food Markets' new Pittsfield, N.Y., unit featured a Cook's Nook, an upscale specialty cookware shop. Independent Harmons in West Valley City, Utah, is known for its exemplary and massive seasonal aisle with prices set to beat all the competition. A&P, Montvale, N.J., introduced a 154-foot kids' toy and educational department at a Super Food Mart in Westfield, Mass.

The list of examples goes on as grocery retailers struggle to maintain their customer base amid fierce competition from various retail formats, including Wal-Mart Supercenters, Bentonville, Ark.

Supermarket nonfood executives will gather in Orlando, Fla., Sept. 11 to 16 at the GM Marketing Conference to discuss emerging general-merchandise categories and the stance they are taking with various categories. The conference is sponsored by the General Merchandise Distributors Council, Colorado Springs, Colo.

Those chains that choose to expand their general-merchandise offerings face a number of challenges, according to executives interviewed by SN.

Primary issues for retailers are gearing their product mix to store demographics, being price-competitive, working on longer lead times and finding adequate space for a meaningful presentation.

Despite these merchandising challenges, retailers and wholesalers agreed that developing general-merchandise strategies in today's highly competitive environment is key to survival in the next millennium.

It's all about "getting our business back from the category killers, increasing sales and making the shopping trip more exciting," said Dick Swain, president of Associated Wholesale Grocers, Kansas City, Kan.

The degree of aggressiveness that supermarkets take with a product category can be influenced by mass merchandisers or category killers already established in the area, said Swain.

This year Associated's retailers fought the encroachment of specialty retailers by establishing larger pet care and baby sections. "Retailers are making a real statement in getting this business back from the large specialty pet and toy superstores," added Swain.

Associated is developing a kitchen shop format stocked with upscale items with prices that top out at $59. The shops are slated for a fall rollout. The new products "bring something new and exciting to those sections," Swain said.

Michael P. Shinall, managing partner of Meridian Consulting Group, Westport, Conn., said general merchandise "is clearly [an area] retailers are looking at in setting the stage for their overall strategic direction, and what they are trying to be in the marketplace."

As chains continue to face pressure to create a stronger impression with expanded general- merchandise categories, finding the extra selling space will always be a major problem. This is especially true as chains increasingly planogram larger fresh- food and gourmet-food sections.

Yet many chains are finding ways to squeeze out additional space with store remerchandising projects, or by picking up the extra footage when dry-grocery gondola runs are scaled back.

This was the case at Affiliated Food Stores, based in Salt Lake City, when retailers enhanced general-merchandise departments by cutting back on dry-grocery displays, said John Harris, corporate merchandiser for general merchandise and health and beauty care.

Harris said the most important concern retailers and Affiliated officials faced "was determining where the space was coming from, and what category would be trimmed in order to expand general merchandise."

The overall impact on the grocery sections was minimal, said Harris. "In 85% of the cases, the grocery sections did not suffer any sales losses. We also implemented an efficient assortment at the same time using space management," Harris noted.

Indeed, while general-merchandise selling space has always been premium real estate in the supermarket channel, "it's more of a premium now," emphasized Roy White, vice president of education at GMDC.

As supermarkets evaluate new general-merchandise departments, products or subcategories, the decision has to be justified in terms of the additional sales and profits expected, he explained.

The 17-unit Cub Foods, Stillwater, Minn., met its sales projections after it boosted display space for pet care, stick goods, school supplies and toy departments by 20% to 25%, said Ray Wallace, nonfood director.

The retailer, with stores up to 110,000 square feet, had only "standard, internal supply concerns" to deal with when revamping these categories to the larger departments, said Wallace.

These expansions were based "on consumer demand, movement of product on the existing footage and improving the stockkeeping unit [mix] rather than due to competition from category superstores," Wallace said.

An expanding general merchandise category within the supermarket channel is the seasonal offering. "Nonfood is an integral part of the seasonal offerings, and that too is incremental business for many supermarkets," said White.

"To be effective with seasonal general-merchandise programs, retailers need to consider establishing a permanent section to make a statement," he said.

Another trend being pursued to build a better bridge to general-merchandise volume is solution selling. Solution selling that combines housewares or food-storage products with various food products throughout the store can produce incremental sales, noted White.

Those taking a more vigorous approach to general merchandise also must contend with the longer lead time needed for orders.

"Grocery people tend not to understand the long lead times required for seasonal and everyday general merchandise," said a supermarket nonfood merchandiser, who asked to remain anonymous.

"Lead times for preplanning general-merchandise promotions are usually five to six months out compared to six to 12 weeks for grocery products," the merchandiser pointed out.

Chains thinking of shifting categories into destination-department status need to weigh the competitive environment before proceeding, according to Marty Rodgers, manager of general merchandise purchasing and sales at Spartan Stores, Grand Rapids, Mich.

Last month, Spartan retailers began rolling out a small kitchen and personal-care appliance program. Rodgers noted the success of the program would depend on offering competitive prices.

The 8-foot section contains a product mix that accounts for 80% of most small-appliance purchases, at prices from $6.99 to $89.99. Selections include coffeemakers, toasters, irons, blenders, mixers, vaporizers, crock pots, water filters, electric knives, clock radios, blow dryers and curling irons.

It's hoped the small appliances priced for today's highly charged competitive environment may trigger solid impulse sales for retailers.

However, the size of a general-merchandise set may determine whether supermarket can compete against other classes of trade. "Twelve feet of home-office products cut into a school-supply set may not be effective in competing against a 60,000-square-foot office-supply retailer," stressed John Susich, vice president of general merchandise at Hy-Vee, West Des Moines, Iowa.

Offering a mix of faster-turning home-office products wouldn't be enough to make an impression on shoppers, he added.

Supermarkets thinking of embracing nonfood more forcefully must also bear in mind that to some degree this new image will be defined by the categories in the store and their depth of products, said Shinall of Meridian Consulting.

Before expanding into nonfood categories, retailers need to decide what statement these new or enlarged departments will make to their customers.

"If the core of a supermarket is food, do I try to show the consumer I am in that business for convenience, or is it a destination department?" asked Shinall.

Retailers also need to decide whether their nonfood image is based on pricing, departments with wide product variety or smaller convenience sections with limited offerings.

Other questions arise in committing to general merchandise: "Do I do it because I make money, or because it gets people into my store? And then what do I have to do from a variety and assortment standpoint to accomplish my objectives?" Shinall said.

Expanding the mix or introducing new categories based on emerging product trends is a crucial strategy for being competitive and current in general merchandise, declared Charles Yahn, vice president of general merchandise at Associated Wholesalers, York, Pa.

The wholesaler attends "the major trade shows to see where the industry is headed," he said.

Retailers intent on succeeding in a general-merchandise category, Yahn added, "need to first decide if they're going to be in it, and then make a strong statement. In reading various trade journals and using store demographics, retailers can determine the product areas consumers are buying."