BTS Challenge

AMY SUNG

With the pain of recession weighing heavily on consumers' pocketbooks this back-to-school season, supermarkets will need to concentrate on stocking exactly what shoppers want at the right price and capitalize on the convenience and nature of the grocery shopping trip to generate BTS sales, said retailers and observers polled by SN.

Retailers of all stripes will closely monitor sales momentum this season, which generally runs from July 15 to Sept. 15, to see if consumers can break out of their long spending slum. BTS is seen as an early indicator for fourth-quarter sales performance.

This season may be particularly challenging for supermarkets, which aren't shoppers' first choice for BTS merchandise, due to the emphasis discounters and office supply chains will place on price and value.

BTS sales in supermarkets have generally remained flat over the years, and industry experts on the whole agreed the trend will continue this year. Some, however, remain optimistic that supermarkets can increase sales slightly this year if they carry merchandise on school lists, are price competitive, offer value and use other in-store departments to cross-promote the season.

“Good value with quality and, of course, convenience and price, are really the indicators of whether or not we're going to be successful in the food stores,” said David McConnell, president and chief executive officer of Global Market Development Center, Colorado Springs, about this year's BTS business.

The recession has compelled retailers like United Supermarkets, Lubbock, Texas, to adjust their BTS inventory levels. “We are anticipating same-store sales to be flat compared to last year,” said Mike Osornio, United's business manager for general merchandise.

“[Shoppers] will focus on price, school-specific lists and snack/food products. We are sure they will be looking for the best bargains at all locations. Specialty office superstores are now increasing BTS promotions so they will get their share of business.”

Gordon Sanders, BTS category manager at Associated Food Stores, Salt Lake City, expects to see fewer shopping trips due to the economy this season. This could benefit grocery retailers, he said, forecasting an increase in sales.

With shoppers prioritizing value, Craig Rosenblum, partner, Willard Bishop, Barrington, Ill., said he believes that will make it more difficult for supermarkets to compete.

“From our dealings with the retail community, they are expecting BTS to be flat to slightly up,” he said.

“Understanding what a value-driven economy we are living in, the ability for supermarkets to compete on value vs. the dollar or mass [retailers] on non-grocery items is becoming more and more difficult these days, especially without sacrificing price image.”

GMDC's McConnell said he believes sales will at least meet last year's expectations; however, sales will come late in the season.

“Parents are going to hold back. Everything's tight right now, but I don't think they're ever really going to skimp on taking care of the needs of their kids in terms of BTS products. They've got to have what they need for their kids to learn,” McConnell told SN.

As a seasonal category, BTS is important. GMDC data indicates it can represent from 4% to 8% of total seasonal sales for a supermarket.

“That's fairly significant,” said McConnell, “although one of the big worries we have about the food business is that the seasonal selling areas have been getting squeezed. Space has been reduced. When we did some of our early work on seasonal selling, 2002-2003, BTS could be as high as 10% of seasonal sales and it's dropped down to 8% and less. New categories are coming into the store and operators are taking a real hard look on the ROI on their seasonal selling efforts.”

Still, retailers view BTS as an important seasonal promotion that will not go away.

“School is still a top general merchandise performer and critical to the department,” said Osornio.

SEEKING AN EDGE

To have a shot at competing with mass merchandisers and office supply stores, some supermarkets will narrow their focus on the necessities as well as on price.

Publix Super Markets, Lakeland, Fla., will carry standard BTS items that all students use, such as notebooks, pencils, pens, folders, crayons and rulers, said spokeswoman Maria Brous, who added that she expects shopper spending on core items to be the same but sees a decrease in purchases of incremental items.

Rosenblum noted that supermarket BTS aisles offer customers the convenience of a one-stop shop, but that retailers need to focus on variety and price, which may be difficult.

“Although convenience may be there, variety and price are not,” Rosenblum said.

“One thing retailers are doing is targeting the key items like Crayolas, highlighters and Elmer's Glue, but with bonus packs, shippers and display modules.”

Kirk Cornell, senior director of Strategic Insights at the Hartman Group, Bellevue, Wash., agreed that supermarkets are not top-of-mind with customers looking for back-to-school items.

“The supermarket may be an emergency stop or as an afterthought, not a place of first consideration,” he said.

Many retailers make it a point to carry at least the basic BTS items, especially during a recession when shoppers may be cutting back.

AFS is planning to promote pens, pencils, Mead notebooks, Elmer's Glue, 3M scissors, 24-count Crayola crayons along with other commodity items, Sanders said.

“I think that consumers will buy mostly the necessities,” he added. Osornio of United agreed and said he believes supermarkets can be as competitive as mass merchants with BTS.

“Depending on items, supermarkets are as competitive as drug and mass. Most choose their key items and focus on those with price.”

McConnell of GMDC said there are opportunities for retailers to gain an edge on BTS sales over mass merchandisers and office supply stores. Retailers also need to plan accordingly and in a timely manner, he added.

“Consumers really look at the supermarket as a routine destination as opposed to, say, a primary destination like mass or office supply stores. So it's real important that if supermarkets are in the [BTS] business — the real high-priority times frames to me are that last week of August and that first week of September when schools are opening up and parents are getting lists — supermarkets react to the lists,” McConnell said.

School supply lists are too often overlooked, according to McConnell. To ensure the right product assortment is carried, retailers should empower their store or department managers to go out to schools to collect the school supply lists parents are often going shopping with, he suggested.

“We found through our research that retailers need to get pretty local,” McConnell said. “Store managers need to get aggressive and empower some of the departmental managers to go out and make sure they have the school lists. We've got examples of retailers where they do some really nice displays where they've got the lists for the various schools in the market area that they're serving.”

Rosenblum also pointed out the importance of the school lists.

“Most back-to-school shopping is done from a list provided by the schools, and supermarkets can only hope they have the right brand, color, size, because shoppers tend to buy exactly what the list says with very few trade-out brands, even for price or value,” Rosenblum said.

While retailers tend to focus solely on the school/home office aisle in special promotions, there are cross-functional opportunities that can help boost sales, McConnell pointed out.

“The real trigger is food, and they've got to have low everyday prices and a good selection of products,” McConnell stated. “Parents of pre-high school kids are going out and getting new lunch boxes, buying food products that are more convenience-oriented to pack for lunch, and so on.”

Cornell said that if supermarket retailers plan on promoting BTS nonfood items, a prominent space at the front of the store to make it an event will boost sales.

McConnell agreed. “It's really important that supermarket retailers double the attention they pay to their end-line school, home and office areas and make sure that items are in stock. They need to have a presence inside and around the store in some ancillary categories as well as some stand-alone seasonal efforts on back-to-school.”

Running ads is also key to communicate to consumers that the store offers BTS supplies.