UNLOCKING NONFOOD SALES

STEPHANIE LOUGHRAN

Supermarkets seeking to expand their selection of nonfood items are finding room on the World Wide Web.

Safeway, Pleasanton, Calif.; Marsh Supermarkets, Indianapolis; and British retailer Tesco, London, are among those testing Internet-based merchandising solutions that expand their nonfood offerings beyond what they have available in their stores.

Safeway branched out its product offerings to include bedding, jewelry and home decor when the retailer's co-branded Web site with Overstock.com went live last December, according to reports. Officials at Safeway declined to comment on Safeway Club Exclusives or its companion Web site, www.safewayexclusives.com.

Patrick M. Byrne, president, chief executive officer and chairman, Overstock.com, Salt Lake City, said Safeway's move to partner with the online merchandiser was "prescient."

"A lot of supermarket companies aren't known for being that avant garde, but they were quite adventurous about developing this [program] and it's working out great," he said.

On www.safewayexclusives.com, Safeway loyalty card members gain exclusive purchasing power on the site, since they must type their loyalty card number during the checkout process to complete their order.

Overstock.com sells various brand-name items in housewares, bedding, toys and apparel at bargain prices.

In February, Tesco introduced www.marketplaceuk.com, where customers can buy nonfood items from more than 100 retailers.

Jon Hauptman, vice president, Willard Bishop Consulting, Barrington, Ill., said expanding product mix online could be part of the solution to the limitations of nonfood shelf space.

"Retailers get all the credit for a stronger variety without having to invest in larger brick-and-mortar stores," he said.

Others questioned the effectiveness of offering an expanded product selection online.

Lloyd Tomlinson, president, LTA International, a St. Petersburg, Fla.-based consulting firm, said that while such online efforts might help supermarkets build their sales, they don't help them compete against discount supercenters.

"The people are still leaving to go to the supercenter unless they're offering everything on their Web sites," he said.

Chris Darmody, vice president of meat/seafood, Shaw's, formerly a nonfood and pharmacy manager, also pointed out that e-commerce is a challenge.

"You've got the space thing licked, but some people are apprehensive to order online," he said.

Tomlinson agreed. "People don't want to buy a lot of GM over the Web; they want to feel and touch and see," he said.

While some retailers have started to provide a wide array of general merchandise online, other retailers are offering customers one kind of category on the Web, like magazines.

Marsh Supermarkets and Giant Eagle, Pittsburgh, carry approximately 150 to 200 magazine titles in stores, but last year they expanded the mix to 2,000 different titles through the help of a page on their Web sites powered by Newsstands Online, Dallas, a division of Kable News Co., New York.

Ben Martin, director of online newsstands for Newsstands Online, told SN that this Web component "doesn't replace the need to have [magazines] in stores, but it's a supplemental program." He said that there is a "huge" demand for magazine back issues and bulk sales in supermarkets.

In the last two months, Martin said the online magazine sales at Giant Eagle have tripled since the retailer began running in-store promotions for the Web site.

"They look at it as an added value for their customers, and they're happy with the program," he said.

Martin said Newsstands Online is in talks with other supermarket companies, including Safeway and Shaw's, to start similar programs.

Officials at Marsh and Giant Eagle could not be reached for comment on the program.

Other supermarkets, including Stop & Shop, Quincy, Mass., and Penn Traffic, Syracuse, N.Y., recently began to provide a Web-based merchandising solution inside their stores. Late last month, six Penn Traffic-owned P&C stores in the Syracuse area began piloting an in-store kiosk offering called "Endless Aisle" from NeXpansion, the North Brunswick, N.J.-based online grocer, according to Marc Jampole, Penn Traffic spokesman.

He said the retailer wanted to extend the typical product mix available in its supermarkets.

"We don't see us having a space issue," Jampole said. "What's an issue is getting more product to our customers."

The in-store kiosk offers products like specialty foods, books and electronics, which can be purchased using a credit card, "cyber dollars" or cash. Orders are shipped to customers' homes. Penn Traffic plans to expand the "Endless Aisle" program to other stores if the test program proves successful.

Some analysts said retailers also could overcome space constraints in nonfood departments through innovations in display.

Tomlinson suggested that supermarkets could re-allocate products and use shallow shelving and narrower gondolas.

"The biggest problem with GM and HBC in supermarkets is that they usually don't have a voice in the direction the store is going," he said. "It's been an unknown area, and top management doesn't understand it."

He said space problems are solvable through re-merchandising alone, such as cutting down gondola depth and length and decreasing the actual amount of products on shelves without decreasing product variety.

Utilizing vacant space in supermarkets, like displaying nonfood impulse product on lane blockers in closed checkouts, has been another way to solve space issues, according to Hauptman.

"You're using a high-traffic area to drive more sales," he said. "GM is continually challenged to maintain the space they have, and innovative concepts to allow maximum productivity of the space allowed is an outstanding concept."

A director of general merchandise and health and beauty care at a Southern retailer, who wished to remain anonymous, said sometimes space reductions in nonfood areas make sense.

"We continue to lose space, and sometimes rightfully so," he said. "Why have 38 feet of school supplies when you can do the same amount of business and have the same amount of selection in 16 feet?"

As retailers increasingly concentrate on other categories like deli, bakery and pharmacies, he added, "general merchandise gets hurt the worst in almost every case."

Murray Appelbaum, president, Selecto Products Co., Ardsley, N.Y., a supermarket nonfood distributor for the Tri-State area, agreed.

"Food stores take care of their needs first, and they don't plan on nonfoods. It's an [afterthought] for some people," he said.