Digital Payback

JIM KAROLEFSKI

As technology has changed how people listen to music and take photographs, supermarkets are seizing the opportunity to meet the digital buying needs of an increasingly sophisticated consumer.

A snapshot of endcap merchandise assortments shows a brand new picture: Small electronics accessories, such as those for digital cameras and MP3 players, are now occupying the space that was once dominated by rolls of film and disposable cameras.

“We've been carrying accessories for iPods and MP3 players for quite some time, and it's doing really well for us,” said Terry Cerwick, senior category manager, nonedibles, Bi-Lo, Greenville, S.C.

Due to impressive margins, he added that expansion of small electronics accessories will only continue.

“We just recently completed sets on iPod accessories, as well as updating our line of phone chargers,” said Doug Barnett, director of nonfood, Brookshire Brothers, Lufkin, Texas. “It has been one of the fastest-growing categories that we have in nonfood.”

At first, Barnett was hesitant to make the move, as he believed many of his competitors were stocking similar merchandise. Any lingering doubts were soon laid to rest.

“Once we added the products, sales really took off,” Barnett said. “We put it in right after the first of the year, and it just continues to grow as customers find out that we have it. We've seen double-digit growth month-to-month.”

Small electronics and accessories are rapidly taking the place of the diminishing film category.

“The film and camera piece of our business has declined like everywhere else, and has been mostly replaced with flash cards for digital cameras at retail,” said David Lowe, senior director, GM/HBC/seasonal, C&S Wholesale Grocers, Avenal, N.J. “It is part of the category now.”

He sees flash cards for digital cameras as an increasingly inexpensive solution for picture-takers. Although Lowe asserted that film hasn't been replaced entirely, he conceded that the old media “had its years” and that small electronics are becoming “a growing piece” of market share. Lowe and other retailer and wholesaler executives were interviewed during a recent conference of the Global Market Development Center, Colorado Springs.

FILM NOW SPECIALTY

“You may still see disposable cameras for a while, but rolls of film will be going away very quickly,” said consumer behavior expert Edward Fox, professor of marketing at Southern Methodist University and director of the JC Penney Center for Retail Excellence, Dallas.

“In the future, rolls of film will be mostly found in specialty photography stores, because people who use film now are more often enthusiasts and professionals.”

The basic axiom that business creates other businesses is something that Mike O'Shell, director of GM/HBC, the Penn Traffic Co., Syracuse, N.Y., noted — and that certainly applies to the area of small electronics and accessories.

“The speaker accessories, carry cases and extra adapters — we as an industry just need to keep up with the technology and not become stale at it,” he said. “As electronics become better, smaller, use different types of energy, different types of batteries, different types of power accessories, we need to stay in touch with those companies so that we can keep on top of the very profitable accessory lines.”

Since the iPod is overwhelmingly the MP3 player of choice among consumers today, will this lead to a standardization of accessories, such as cases, which would ultimately bode well for supermarkets?

Lowe of C&S thinks so, and he said that consumers are entertaining themselves more today than ever, so sales of digital music players will reflect that. He also said that he believes the category to be “100% impulse” and that a younger demographic may be driving the sales.

“As they pass by, maybe a son or a daughter has an iPod and they say, ‘Hey, look at the cool cases,’ because we are offering different colors and designs,” he explained. “Everyone always needs an extra cell phone charger in their car or somewhere else, so it has been very good for us.”

ENDCAP MERCHANDISING

Where is the ideal location to merchandise small electronics accessories?

Endcaps, because of the convenience and impulse purchase factor, said Bob Richardson, founder and chief executive officer of Associates Interactive, Buffalo, N.Y., which works with retailers and manufacturers to encourage sales growth.

“It needs to be at the front of the store, where someone is getting ready to check out and they realize they were going to make another stop and pick a device up anyway,” he said. “So they might as well do it in the supermarket.”

O'Shell and his team at Penn Traffic also found that the endcap front-end area, where the chain houses battery and power supplies, is where sales can be maximized.

“That seems to be the best area, as it's where the customers gravitate toward to make those purchases,” he said.

Nick Barainca, director of nonfoods, Scolari's Food & Drug Co., Sparks, Nev., said that iPod and cell phone accessories mix well with gift cards.

“We are seeing pretty good response to those, since they are all tied in together,” he said. “Where batteries and film used to be on endcaps, now we see that shrinking, and gift card endcaps are popping up everywhere.”

Barnett of Brookshire Brothers said that endcaps are home to small electronics, and that Brookshire has moved film over to the DVD and CD area.

“We are currently carrying about 30 SKUs, whereas before we only had four SKUs of cell phone cases,” he said. “So we reduced our SKUs on film, increased our SKUs on the small electronic accessories, as well as DVD discs in that category, so that has grown as well.”

ONE-STOP ADVANTAGE

With the current state of the economy, the location of the local supermarket may prove advantageous, given that consumers want to make as few shopping trips as possible to save gas.

“One-stop shopping is more appealing to consumers, which helps supermarkets,” said consumer behavior expert Fox. “They have much higher patronage than any other format.”

He believes that because most consumers are within only a few miles of a supermarket, grocers selling small electronics and accessories will reap the rewards of a consumer base that increasingly wants to consolidate trips.

“People do not want to get in the car and make a special trip just to purchase something like an extra pair of headphones, which may only have a $1 difference in price,” said Frank Squilla, vice president of sales for InComm, Atlanta, a distributor of gift cards and small electronics accessories for supermarkets.

Building the habit, according to Richardson of Associates Interactive, is the key to category growth in the future, where small electronics accessories can be the basis for bigger-ticket items.

“If shoppers are getting their accessories needs met at a supermarket through unwillingness to drive around to look for the product, when the economy is better down the road, it gives the supermarket the opportunity to expand the way they merchandise electronics,” he said.

Lowe of C&S also recognizes the potential beyond accessories.

“We offer a number of small electronics for the fourth quarter, which is probably our largest season,” he said. “And we cover all areas: music, keyboards, drums, boom boxes, DVD players, CD players and Blu-ray.”

The cost is such that the economic model is feasible, he said, adding that some of his retail partners have met with success in regard to big-ticket items.

“Some of our retailers sold 42-inch plasma TVs this past year, and did well with them,” he said. “The market is there. You can do it.”

Additional reporting
by Dan Alaimo