March 19, 2007
Does General Merchandise Need a Wellness/Environmental Mantra?
All CPG sales through the three mass-market channels grew by 2.5 percent in dollars last year, but, in contrast, sales of general merchandise products alone dipped by 4.7 percent, according to IRI’s Times & Trends report. While it’s true that the rate of decline in 2006 was slower than in 2005 (when the dip was 8.2 percent), general merchandise sales performance in drug stores, supermarkets and mass merchants (including Wal-Mart) was nothing to write home about last year, even though products were excellent with many innovations and were strongly promoted and widely distributed.
To put this into context, the overall CPG 2.5 percent 2006 sales gain was well in advance of the 1.6 percent gain posted in 2005, and even though IRI tells us that price increases played an important role, real growth was also a significant factor.
To add to this, healthcare products posted a well-above-average 3.3 percent gain last year, the sixth fastest growing category IRI tracks in mass-market channels. So the issue isn’t about nonfoods.
But what is the issue? Part of it is the decline in photography supplies, which posted a 36.9 percent sales loss last year as the category continues its adjustment to a digital world. On the other hand, such categories as kitchen supplies and batteries were flat, so the problem is a wider one.
Underlying trends for overall CPG increase provide some insight. Products offering health and wellness benefits very obviously led the CPG growth charge. Among healthcare products, for example, anti-smoking items, clearly health-oriented, experienced sales gain last year. Beverages, fueled by the health and wellness benefits offered by teas, bottled water and sports drinks, were the fastest growing major category with a 4.7 percent increase.
Also according to IRI, consumers are shifting from weight management to total health management, which has boosted beverages as well as functional foods. IRI rated functional foods, which offer health and disease prevention benefits above and beyond basic nutrition, as being “at the cusp of a major growth wave in the U.S.”
In another strongly health-and-wellness oriented area, total natural and organic products sales were around 11 percent higher last year than the year before. Indeed, the gain in sales of organic products was close to 15 percent.
IRI’s Times & Trends report also noted environmental and social consciousness is becoming increasingly influential. Consumers are predicted to increasingly focus on eco-friendly, sustainable packaging, local sourcing, and “fair trade” practices.
Discussion Questions: Where does the consumer focus on wellness and environmental sustainability leave general merchandise? Does the general merchandise category need a message that positions it as addressing these trends in some manner?
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Any potential wellness, natural, or sustainability hook should be leveraged ASAP. Most products aren’t innovative, so any special approach is meaningful. Cost is often the real issue. CPG manufacturers’ reluctance to spend any significant money for reformulation is often well-founded, based on previous failures. The trade off between a higher cost and a worthwhile marketing hook is hard to judge without careful testing and market research.
Just a question–to what extent is the decline offset by online sales of general merchandise? There is hardly an item of general merchandise you would find in the three channels studies that isn’t available from the major online retailers.
In my opinion, the key to survival among GM products may lie in two key strategies: 1) assortment of GM products at retail in many cases must be limited to “convenience” items and “must haves–too much space devoted to a declining sales outcome is never sustainable;” and 2) GM product manufacturers should consider searching for ways to modify their unique selling proposition to relate to the health and wellness phenomenon. Far fetched? I don’t think so…could a flashlight manufacturer not add a magnifying component that allows elderly patients to better see medicine labels? It’s that type of out-of-the-box development that will revitalize GM and make it a vibrant category once again.
This seems to be a non-connection IMHO. GM needs to recognize the impact of wellness into the mainstream, and it has. As we become more health focused, this impacts everything from the organic breakfast food to sales of organic meats and eggs. Natural spun clothing is all around as are other “green” products from cars to energy saving TVs. GM doesn’t need a wellness mantra, it only needs to continue to recognize and allow for the category growth of these “green” products as consumers seek to demand them. This is being done, and the successful retailers reflect this in their store offerings and mix.
The Drug channel seems to have carried the majority share of General Merchandise decline at -6.8%, so it could be very much possible that migration to other channels, including online, may have eroded the Drug market’s share of the GM category. Although total Non-Store Retailers account for less than 10% of total Retail sales, it is more than likely that the bulk of the items included in Non-Store Retailer’s NAICS category is General Merchandise. The other possible explanation is that the majority of retiring baby boomers are not buying much General Merchandise anymore.
As we discussed earlier this week, there is a significant difference in attitude between the UK and the US on the subject of sustainability and packaging. There is a tremendous backlash here about what consumers believe to be excessive and/or un-recyclable packaging. This is something that applies particularly to CPG; manufacturers should address it sooner rather than later if they want customers back onside.
As baby boomers pack on the years and the weight, their attention turns to health, leisure, gift giving, and mid-life hobbies. Their closets are full with stuff they like. Their pantries are also full. Their houses are cluttered with general merchandise.
Retailers need to understand the transformation of this enormous group of consumers as they progress beyond their working and child-raising years.
First off, the question should have been framed as referring to NONFOODS or GM/HBC, rather than General Merchandise. GM is often understood as referring to products other than health and beauty care, and when you speak of health, you’re more likely to be referring to Health & Beauty Care (HBC) rather than GM.
OK. Now GM’s contribution to the Environmental Mantra would center on light bulbs (fluorescent) and batteries (rechargeable) SP. If the store is posting green signs in product areas, then the SM could likely put in a claim on the shelves of these two important GM lines.
HBC also can post some claims. The natural/organic wellness mantra would include many products. especially skin care, natural toothpaste (Toms of Maine) and even some over the counter drugs such as baby aspirin. Also, as mentioned in your article, anti-smoking items.
But let’s not loose sight of the biggest wellness deal of all–the pharmacy/pharmacist, which most supermarkets have today, and the most recent development–in-store clinics.
As for the sales loss of photo supplies, this can be at least partially mitigated by turning to in-store digital photo printing equipment and/or downloading from homes or tying in with outside finishers with printing picked up in the store. (In-store photo services benefit the store by boosting traffic and are valuable to digital camera-toting customers who avoid printing at home because they don’t want to bother knowing how, find frequent restocking of ink cartridges annoying and costly or simply haven’t–yet–purchased home computers or photo printers.)
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Any potential wellness, natural, or sustainability hook should be leveraged ASAP. Most products aren’t innovative, so any special approach is meaningful. Cost is often the real issue. CPG manufacturers’ reluctance to spend any significant money for reformulation is often well-founded, based on previous failures. The trade off between a higher cost and a worthwhile marketing hook is hard to judge without careful testing and market research.
Just a question–to what extent is the decline offset by online sales of general merchandise? There is hardly an item of general merchandise you would find in the three channels studies that isn’t available from the major online retailers.
In my opinion, the key to survival among GM products may lie in two key strategies: 1) assortment of GM products at retail in many cases must be limited to “convenience” items and “must haves–too much space devoted to a declining sales outcome is never sustainable;” and 2) GM product manufacturers should consider searching for ways to modify their unique selling proposition to relate to the health and wellness phenomenon. Far fetched? I don’t think so…could a flashlight manufacturer not add a magnifying component that allows elderly patients to better see medicine labels? It’s that type of out-of-the-box development that will revitalize GM and make it a vibrant category once again.
This seems to be a non-connection IMHO. GM needs to recognize the impact of wellness into the mainstream, and it has. As we become more health focused, this impacts everything from the organic breakfast food to sales of organic meats and eggs. Natural spun clothing is all around as are other “green” products from cars to energy saving TVs. GM doesn’t need a wellness mantra, it only needs to continue to recognize and allow for the category growth of these “green” products as consumers seek to demand them. This is being done, and the successful retailers reflect this in their store offerings and mix.
The Drug channel seems to have carried the majority share of General Merchandise decline at -6.8%, so it could be very much possible that migration to other channels, including online, may have eroded the Drug market’s share of the GM category. Although total Non-Store Retailers account for less than 10% of total Retail sales, it is more than likely that the bulk of the items included in Non-Store Retailer’s NAICS category is General Merchandise. The other possible explanation is that the majority of retiring baby boomers are not buying much General Merchandise anymore.
As we discussed earlier this week, there is a significant difference in attitude between the UK and the US on the subject of sustainability and packaging. There is a tremendous backlash here about what consumers believe to be excessive and/or un-recyclable packaging. This is something that applies particularly to CPG; manufacturers should address it sooner rather than later if they want customers back onside.
As baby boomers pack on the years and the weight, their attention turns to health, leisure, gift giving, and mid-life hobbies. Their closets are full with stuff they like. Their pantries are also full. Their houses are cluttered with general merchandise.
Retailers need to understand the transformation of this enormous group of consumers as they progress beyond their working and child-raising years.
First off, the question should have been framed as referring to NONFOODS or GM/HBC, rather than General Merchandise. GM is often understood as referring to products other than health and beauty care, and when you speak of health, you’re more likely to be referring to Health & Beauty Care (HBC) rather than GM.
OK. Now GM’s contribution to the Environmental Mantra would center on light bulbs (fluorescent) and batteries (rechargeable) SP. If the store is posting green signs in product areas, then the SM could likely put in a claim on the shelves of these two important GM lines.
HBC also can post some claims. The natural/organic wellness mantra would include many products. especially skin care, natural toothpaste (Toms of Maine) and even some over the counter drugs such as baby aspirin. Also, as mentioned in your article, anti-smoking items.
But let’s not loose sight of the biggest wellness deal of all–the pharmacy/pharmacist, which most supermarkets have today, and the most recent development–in-store clinics.
As for the sales loss of photo supplies, this can be at least partially mitigated by turning to in-store digital photo printing equipment and/or downloading from homes or tying in with outside finishers with printing picked up in the store. (In-store photo services benefit the store by boosting traffic and are valuable to digital camera-toting customers who avoid printing at home because they don’t want to bother knowing how, find frequent restocking of ink cartridges annoying and costly or simply haven’t–yet–purchased home computers or photo printers.)