HILL CUTS MARGINS AGAIN IN WAR WITH DISCOUNTERS

JOEL ELSON

NASHVILLE, Tenn. -- H.G. Hill Stores here has slashed margins in health and beauty care to lure a steadier stream of traffic to the department at its 14 stores.

The chain also cut its HBC margins several months ago, by 5%, in a move to draw more consumers to the section and keep more sales in its stores.

Hill's efforts to rebuild HBC sales should bear meaningful volume gains by the end of the first quarter, according to Sam Foster, HBC and grocery buyer.

The retailer expects the new lower retail pricing approach to fully kick in and take a firmer hold with customers this year, Foster said. Hill has so far revamped four stores and has slated four more for recasting this year. "We wanted to keep our HBC business from going to our competition including the mass merchandisers and discounters," he said. "Lowering HBC shelf prices through the department seems to have had a positive impact on volume, as we were losing sales previously." Faced with the everyday low pricing strategy that the discounters, including Wal-Mart, use to merchandise HBC as a traffic draw, Hill went through "the whole department and lowered retails across the board in every category."

Foster focused the lower shelf prices especially at the faster-turning categories, including dental and hair care, product areas he said are critical to carving out a new lower price HBC image.

"We wanted to match as closely as possible the everyday low HBC pricing at Wal-Mart and other retailers that offer things like Crest toothpaste in a 6-ounce package at $1.88 everyday."

In hair care especially "shampoo and hair sprays were taking a sales hit as consumers went to other retailers for their product needs, but in the past several months we've been able to tell it's turning around."

The chain has played up its HBC advertised specials in ads "to really let people know about our lower HBC pricing, and include this in store circulars, although everybody's ad has become more aggressive in the HBC area," Foster noted.

Hill's new HBC merchandising formula also put a new spin on weekly loss leader ad features by running up to 12 items at or close to cost to better highlight the department and heighten shopper interest in the product mix.

The retailer also has taken steps to reposition HBC to a more desirable location in the shopping pattern.

"During store remodels we're giving HBC better placement in the traffic flow, moving it from a corner or alcove of the store to a more centralized location. At those times we remerchandise the department by tightening space and removing slower movers in the section."