GM INNOVATIONS ARE INTEGRAL TO SUPERMARKET SURVIVAL

Dan Alaimo

Lately, I've been hearing from different sources that they want to help supermarkets grow their general merchandise sales. The question is, how many supermarkets will take them up on their offer?

First came the magazine industry at the Magazine Publishers of America's Retail Conference, saying it plans to address the top executives of all retail channels, including supermarkets, about the importance of a prominent and extensive magazine section. "For too long, we've apologized for the negatives of our industry, but we have a wealth of positives to brag about. The pluses are overwhelming," said Michael Pashby, MPA's executive vice president.

A few weeks later, I heard from Disney's video division, Buena Vista Home Entertainment, that it was going to renew its efforts to sell more product in supermarkets. Many studios have been active selling in supermarkets with excellent programs, but Disney's is based on ongoing cross-marketing relationships with other major brands, and that will have strong appeal to retailers and their customers. The cross selling and rebates will help offset the mass merchants' loss-leader pricing on hit titles, while giving supermarkets a way to differentiate their market presence.

More recently, fashion industry veteran Jack Mulqueen told SN he plans to sell apparel through leased space shops set up in the center store areas of supermarkets. (See Page 32.) Mulqueen expects to start testing this fall in leading chains, with a rollout next year. Plans call for selling better-quality goods -- similar to Talbot's or Banana Republic -- at prices like Target's.

Mulqueen looks at Wal-Mart's Asda operation in the U.K., where apparel and food are integral parts of the offering, and concludes that U.S. supermarkets can use the same concept to better compete with, ironically, Wal-Mart. "We believe this is the solution" to diversifying GM offerings, he said.

On Page 27, Ron Pearson, chairman, and Jon Wendel, vice president, GM, relate the importance of GM to Hy-Vee and how focusing on it is helping the retailer compete. Innovation is a constant at Hy-Vee, especially at store level, where store directors have significant autonomy. "General merchandise has to be just as important as fresh meat or lettuce in our stores," Pearson said.

Hy-Vee features prominently in the new "Merchandising for Success" study, which will be officially unveiled later this week at the General Merchandise Distributors Council's GM Marketing Conference in Orlando, Fla. This is another groundbreaking study by the GMDC's Educational Foundation, which has often pointed retailers to new trends and opportunities. The challenge of responding to competition from other classes of trade with aggressive GM merchandising is the topic of this study.

What all this tells me is that supermarkets have some powerful allies in their struggle to maintain market share in the face of competition from other channels, notably supercenters -- and especially Wal-Mart's. As I hear it, they are all saying the same thing: Aggressive innovation in nonfood categories is the key to survival.

What isn't being said openly is that suppliers are concerned about too much buying power concentrated in too few companies. A strong supermarket industry is their best hope of defusing this, and they seem willing to back programs that will bolster the traditional food retailers' competitive position. It seems clear to me that retailers should take advantage of this.