SUPERMARKETS CAN REGAIN NONFOOD SALES AND PROFITS 2004-06-14 (2)

David Merrefield

Conventional wisdom in the food retailing business has long held that it makes a lot of sense to do as much business in nonfood as possible. After all, that's where some of the big margins can be captured.

That wisdom is still valid, but the execution of it has become a good deal more complex than it used to be. In years past, it was possible to offer kitchen accessories, batteries, health and beauty care, and the like at fairly aggressive price points. Sales would be produced by impulse- and convenience-oriented buying.

Now, as is pointed out in the news feature on Page 33, that's changed. Nonfood categories have transcended class of trade to the degree that the choice shoppers have is ample and in many instances, discounted price points are expected. So the profit model used in the past by supermarket operators isn't so productive at the present time.

The news feature, written by SN reporter Liza Casabona, cites new research presented in recent days by the General Merchandise Distributors Council. That research points out that supermarkets now need to shape their merchandising strategies with this question in mind: "Why buy here?" That is, why should shoppers decide to buy GM or HBC at a supermarket instead of from drug, mass or another non-supermarket channel? No longer is it of much use to merchandise nonfood categories with a competing supermarket in mind.

Said one observer, "The competition is no longer within class. It is across class. Particularly for [GM and HBC], it is more important for supermarkets to be concerned with what mass, drug, home centers, club stores and dollar stores are doing than it is to be concerned about what other supermarkets are doing."

That being the case, what can be done to make supermarkets shoppers' destination for nonfood? The news feature offers a number of basic concepts. Among them are these: Recognize that shoppers don't care about channels; know that destination identification creates shopping trips; observe that there are few nonfood categories that can be merchandised in a routine manner; be sure the price and environment are right; and see that the section is fun and interesting.

To execute against those concepts, it's necessary to examine the cross-channel market. That should involve queries such as these: What store has the best value for specific items? Where are different and unique products available? Where is the best promotional work being done? Who is out first with new items?

Answering such questions leads to solutions involving methods to capture shopping trips, fostering critical categories, and emulating retailers that are best in class.

Absent such market evaluation, said one observer, the news won't be good: "If you are simply carrying what everyone else has and not differentiating yourself, you're probably not even going to get the convenience business anymore."

Take a look at this news feature to see more about how to build nonfood sales and profitability in general and for specific categories. You'll notice that many of the concepts set out in this news feature about nonfood have far wider application than to just supermarket nonfood categories.