BUYERS BULLISH ABOUT BUILDING HOUSEWARES SALES

JOEL ELSON

General-merchandise buyers voiced enthusiasm for continued growth in supermarkets' housewares business.

The supermarket channel gained share points in retail sales in 1998, growing from 6.4% to 6.7% , according to the latest housewares figures compiled by the National Housewares Manufacturers Association, Rosemont, Ill., in its 1999 State of the Industry Report. During that period, sales rose 14% in the food channel, contributing $3.7 billion to the $63 billion industry.

"It's a strong category that still offers us a lot of potential," said Tony Federico, vice president for nonfood at Ingles Markets, Black Mountain, N.C. "It's also a category that the mass merchandisers use to make money," added the nonfood executive.

As food retailers travel to Chicago's McCormick Place to attend the 2000 International Housewares Show, Jan. 16 to 19, several interviewed by SN were confident that housewares will play a more important role in the overall inventory mix offered by supermarkets given time-pressed consumers' need for convenience. They were confident that supermarket chains can compete against the giant discount chains and supercenters, which dominate with 30.9% of industry sales.

Last year, for example, in a bid to boost impulse turns, grocery wholesalers and food chains devoted about 20% more display space to advertised specials, in-store features and seasonal displays. The strategy was effective for weekly promotions, during 25%-off category specials and in highlighting in-and-out sales campaigns, said nonfood executives.

"Running housewares events helps take flatness out of everyday sales," noted Kathy Hyman, general-merchandise category manager at Affiliated Foods, Amarillo, Texas.

Affiliated retailers now feature several off-shelf shipper programs like floor displays of kitchen gadgets, aluminum foilware and bakeware, cookie sheets and loaf pans during major holidays, said the wholesaler.

Linda McDonald, general-merchandise buyer for Olean Wholesale Grocery Co-op, Olean, N.Y., noted that the convenience of picking up everyday and promotional housewares at the supermarket will only grow in importance for consumers with little time to spare.

"People have less time to shop. If they can pick up something, whether it's plasticware, coolers, grills and other housewares, while food shopping, it's a convenience," said the nonfood buyer.

As it did last year, W. Lee Flowers, Lake City, S.C., will continue to take an aggressive approach this year by spotlighting weekly features and promotions at sharper pricing in ads and handbills to boost its housewares sales. "Inserting these into newspapers and using mailed fliers has stimulated housewares sales for us with a slight increase," said nonfood director Gerald Spearman.

What follows is how buyers see their housewares business shaping up as they enter the new century.

SN: Will the housewares category remain strong and growing over the next two years?

HYMAN: I believe so, especially for lower-priced basics rather than higher-cost selections. There are consumers that prefer the convenience of buying their housewares in a supermarket instead of walking a large mass merchandiser or discounter.

McDONALD: While housewares offers supermarkets solid growth potential, grocery retailers intending to stay in business certainly have got to get into the category. In some cases a few of our retailers have started to move into small appliances.

SPEARMAN: I see continued growth from housewares since the category is a very high impulse item. Sales growth will come from new items as well as promotion opportunities. We've begun to devote more off-shelf selling space to prepack displays, which move merchandise.

FEDERICO: Growth will come by moving into higher-priced merchandise like Mr. Coffee-type appliances and espresso makers, priced at $15.99 to $69.99. We plan to expand our program to higher-priced, quality housewares that Wal-Mart and Home Depot are selling.

Last year, our chain sold over 10,000 Sunbeam gas grills priced at $149. We also sold out of patio sets priced at $299. We're buying these imported products in full containers from overseas for better pricing.

SN: What are the biggest challenges supermarkets face in housewares?

HYMAN: Trying to come as close as we can to Wal-Mart pricing while still carrying quality products. We look for supplier deals that sometimes allow us to beat Wal-Mart pricing on some housewares items. Some of our larger independents post signs stating they are priced lower than the mass merchandisers on kitchen gadgets, laundry baskets and other housewares.

McDONALD: Retailers need to get the products out to consumers at a good price. But promoting housewares as ad features isn't necessarily the key. The consumer is in the grocery store anyway. If she sees the item she'll pick it up if she needs it, and not because we have clothes baskets in our ad this week.

SPEARMAN: Competing against the supercenters, specialty shops and discount stores.

FEDERICO: I don't think people shopping in grocery stores wonder about Wal-Mart gadget pricing. A more important concern for supermarkets is carrying the right housewares mix and positioning it in a merchandising system that makes items jump out to trigger purchases.

SN: How can you compete with supercenters, specialty stores and discounters?

HYMAN: In the past year or so retailers started to lower margins from 25% to 35% to 20% to 28% to become more competitive and keep the business from leaving the store. To develop better impulse sales they have increased housewares display space 35% to 40% with added clip strips and wing displays. They really are trying to put the merchandise out where people will see it.

SPEARMAN: We do volume buying and negotiate the best prices to stay competitive with the supercenters. Developing such programs for our retailers has moved their pricing closer to stores like Wal-Mart. Our housewares margins are running in the 20%, down from 25% to 35% a year ago. Cutting margins is necessary if you want to remain competitive.

SN: How have your housewares sales been?

SPEARMAN: The sharper pricing combined with aggressive ads and handbills inserted into newspapers each week, mailed fliers and promotions have stimulated our housewares sales. We're showing a slight increase.

FEDERICO: Our housewares sales are way up and have been growing at the rate of 25% to 27% a year.

SN: How much of a factor do promotional goods play in your overall housewares segments?

HYMAN: They are very important in helping to drive the overall category and it shows up in our housewares sales. Promotions help take some flatness out of the category.

SPEARMAN: Promoting three to four housewares as ad features weekly helps sales. Promotions are a big percentage of sales. You get a better lift when the products are set up as a display merchandiser or as an in-and-out seasonal event.

FEDERICO: Promotions are very important for building sales. We promote whole lines like all Farberware gadgets at 25% off or a buy one Rubbermaid product and get the second one free. Customers walking up to the Rubbermaid display see shelf tags for all the items and think -- 'wow, that's a deal.' This is more effective than promoting a few items at $1.99 in an ad.

We'll make 33% on an outdoor summer canopy or umbrella and sell it for $15 less than mass merchandisers in our trading areas that work on 55% to 60% margins.

SN: What are your best-performing categories?

HYMAN: Kitchen gadgets and tools priced under $3.

SPEARMAN: Kitchen gadgets, plasticware, domestics, utility plastics and laundry products priced under $5.

SN: How important are seasonal goods in housewares?

McDONALD: In this day and age with all the Wal-Marts and Kmarts of the world, seasonal housewares are very important. People have less time to shop and if they can pick up something while food shopping it is a convenience.

Plasticware, coolers, grills and other housewares are good sellers for the summer.

FEDERICO: Seasonal promotions play a huge role in our overall housewares, accounting for about 50% of sales.