September 14, 2006
GHQ Cover Story: Health & beauty flair
By Deborah Garbato, Grocery Headquarters
Through special arrangement with Grocery Headquarters magazine, we present these opportunities to discuss the subjects of GHQ’s monthly cover stories.
From a supermarket standpoint, health and beauty care isn’t all that healthy these days, or particularly good-looking either.
According to Information Resources, Inc., HBC sales in supermarkets totaled $14.1 billion for the 52 weeks ended July 16. This represents a decline of 0.1 percent from the prior year. Drug stores, by comparison, recorded HBC sales of $19.9 billion, a 3.7 percent increase. Sales at mass merchandisers (excluding Wal-Mart) were $6.6 billion and growing.
“There are some real challenges,” said Dave McConnell, president and CEO of the General Merchandise Distributors Council (GMDC). “If you look at IRI and Nielsen, there has been slippage in the categories. Wal-Mart has changed the way a lot of supermarkets go to market with these categories. In the traditional food format, it is hard to have a lot of sizzle and excitement.”
Experts say supermarkets needn’t go toe-to-toe with other formats to achieve significant top and bottom line contributions from HBC. Stores that have achieved the most success are those where HBC offerings are carefully picked, well presented, and frequently updated and replenished.
Some have differentiated from the competition by creating HBC sections that revolve around health and wellness and/or natural and organic products.
“A grocer’s assortment is not complete without HBC,” said Larry Ishii, general manager of general merchandise/HBC for Unified Western Grocers. “Basics are the biggest keys to success. You must be in stock on items shoppers always want. Lastly, focus and be dedicated to HBC. This will drive incremental sales. If the attitude is just ‘we stock that too,’ the results will only be negative.”
The key to making HBC work, said Bob Spicer, sales director at Procter & Gamble, is for stores to focus on the 20 percent or so of shoppers who represent 75 to 80 percent of sales.
“A supermarket can choose key HBC zones to focus on if they are diligent in their research and understanding of prime shoppers,” he said. “It might seem counterintuitive, but when a retailer eliminates the slower sellers, shopper perception is that variety has increased simply because the shopper can find the items they are looking for more quickly.”
Something else consumers are looking for in HBC, say the experts, are new products.
“HBC is all about new,” said P&G’s Spicer. “But new products require much in-store consultation and education. If a supermarket is willing to be first, fastest and flexible with new products, they will be successful with their prime shoppers.”
Bill Fogarty, senior vice president of sales and trade development for Adams Respiratory Therapeutics, said some of the challenges faced by supermarkets relative to new items are self-imposed.
“New products come out at different times of the year. But a number of grocery retailers get locked into the idea of this month we do this planogram, so this is the only month we do new items. The most successful retailers are quick to implement new products. If you look at other classes of trade, they often have more flexibility to take advantage of new items,” he said.
Price has been and remains an issue with supermarket HBC.
An executive with a major HBC company requesting anonymity told Grocery Heaquarters, “Pricing is the biggest challenge, and not just in HBC. They’d charge $1.49 for Suave one week and 89 cents another. This high/low scenario encourages cherry picking. Supermarkets don’t need an everyday low price, just an everyday fair price. While you need an opening price, you shouldn’t sell a bottle of shampoo for less than a bottle of water.”
Discussion Questions: What are the keys to differentiation and success for supermarkets in health and beauty care? Are there lessons from other channels
that supermarkets can learn and apply to drive top and bottom line results?
BrainTrust
Recent Discussions
Discussion Questions
Poll
When stores sell all the same products, price and store location (convenience) usually run to the top of the list of reasons for why consumers shop where they do.
That said, the key to finding a point of difference is having products unique to your store and/or having employees visible in the aisles to answer questions and help find product ala Whole Foods.
One aspect often brought up as a means to differentiate is using the expertise of the pharmacist to raise the profile of the department and create add-on sale opportunities. Sounds good. Doesn’t really happen.
Lastly, ease of shopping is also key but unfortunately for one local retailer, we do our HBC shopping in its stores because there are so few customers. We know we can always zip in and out when we need to pick up some ibuprofen, shampoo, etc.
Alix Partners’ consumer research shows that consumers value convenience above other factors when considering where they shop for “drug store” products.
This suggests that grocery chains should satisfy shoppers’ needs for the HBC staples that a shopper will seek while shopping for the other products a grocer carries. This is good news for grocers, since they can safely use purchase data to identify those products that they should carry and those that need to be eliminated. The other good news is that low price is less important than fair price.
I agree with Spicer; in-store consultation and education would sway me to be a more loyal versus sporadic consumer. I’ve given up grocery stores and the Wal-Marts/Targets for more boutique retail locations. Better chance to have questions answered and someone to go back to if the product does not work.
HBC sales in grocery outlets are driven by shopper traffic (where do our shoppers go to buy x?). So the real question is, what do shoppers want / expect when they shop for their HBC household needs, market by market. Channel “blurring” is a reality, and shoppers relate specific trips for their needs not by channel, but by where they get the best of what they expect. HBC is no exception. Shoppers will tell you the same basic answers for where they buy their HBC selections; whether it is at their local supermarket, the local drug store, or at Wal-Mart, Target. Costco, etc.
Once the local shopper’s needs and expectations are clearly understood “re-inventing” the HBC department to meet those expectations will lead to loyalty and growth. Supermarkets have an advantage in shopper frequency, since everyone buys food needs most often. The key is understanding how to meet their HBC expectations, to “connect” with them in a way that makes you their “destination of choice” for their HBC needs.
Wal-Mart is not the only challenge here. Ulta has a whole store devoted to HBA. Some of the “drug” stores have a tremendous range of HBA. The space is limited in grocery stores so the variety that can be offered is limited. Bob Spicer is absolutely right. To make HBA profitable, the grocery stores need to identify the 20-25% of consumers that are valuable HBA shoppers and provide the variety THEY need. That variety is likely to vary from store to store. The potential variety is so large that grocery stores can’t compete on variety so they need to target consumers.
No doubt supermarkets are losing HBC share to drug stores and mass merchants. But the cause has little to do with pricing or assortment changes. It’s simply that the number of conventional supermarket locations isn’t growing as fast as the number of drug store and mass merchant locations. Supermarket HBC pricing and assortment difficulties are not new problems, and those problems are the same at drug stores and mass merchants.
Why is service not on this list in addition to location, etc.? Being creative, I would recommend that, on specific days, P&G and the other cosmetic leaders offer class sessions, and/or individual make-up periods per shopper – in store or at a specified location, near the store.
And why not! The cosmetic brands are doing the above in department and specialty boutiques. I bet sales would advance.
Our industry is a service driven operation….Hmmmmmmmmmmm
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When stores sell all the same products, price and store location (convenience) usually run to the top of the list of reasons for why consumers shop where they do.
That said, the key to finding a point of difference is having products unique to your store and/or having employees visible in the aisles to answer questions and help find product ala Whole Foods.
One aspect often brought up as a means to differentiate is using the expertise of the pharmacist to raise the profile of the department and create add-on sale opportunities. Sounds good. Doesn’t really happen.
Lastly, ease of shopping is also key but unfortunately for one local retailer, we do our HBC shopping in its stores because there are so few customers. We know we can always zip in and out when we need to pick up some ibuprofen, shampoo, etc.
Alix Partners’ consumer research shows that consumers value convenience above other factors when considering where they shop for “drug store” products.
This suggests that grocery chains should satisfy shoppers’ needs for the HBC staples that a shopper will seek while shopping for the other products a grocer carries. This is good news for grocers, since they can safely use purchase data to identify those products that they should carry and those that need to be eliminated. The other good news is that low price is less important than fair price.
I agree with Spicer; in-store consultation and education would sway me to be a more loyal versus sporadic consumer. I’ve given up grocery stores and the Wal-Marts/Targets for more boutique retail locations. Better chance to have questions answered and someone to go back to if the product does not work.
HBC sales in grocery outlets are driven by shopper traffic (where do our shoppers go to buy x?). So the real question is, what do shoppers want / expect when they shop for their HBC household needs, market by market. Channel “blurring” is a reality, and shoppers relate specific trips for their needs not by channel, but by where they get the best of what they expect. HBC is no exception. Shoppers will tell you the same basic answers for where they buy their HBC selections; whether it is at their local supermarket, the local drug store, or at Wal-Mart, Target. Costco, etc.
Once the local shopper’s needs and expectations are clearly understood “re-inventing” the HBC department to meet those expectations will lead to loyalty and growth. Supermarkets have an advantage in shopper frequency, since everyone buys food needs most often. The key is understanding how to meet their HBC expectations, to “connect” with them in a way that makes you their “destination of choice” for their HBC needs.
Wal-Mart is not the only challenge here. Ulta has a whole store devoted to HBA. Some of the “drug” stores have a tremendous range of HBA. The space is limited in grocery stores so the variety that can be offered is limited. Bob Spicer is absolutely right. To make HBA profitable, the grocery stores need to identify the 20-25% of consumers that are valuable HBA shoppers and provide the variety THEY need. That variety is likely to vary from store to store. The potential variety is so large that grocery stores can’t compete on variety so they need to target consumers.
No doubt supermarkets are losing HBC share to drug stores and mass merchants. But the cause has little to do with pricing or assortment changes. It’s simply that the number of conventional supermarket locations isn’t growing as fast as the number of drug store and mass merchant locations. Supermarket HBC pricing and assortment difficulties are not new problems, and those problems are the same at drug stores and mass merchants.
Why is service not on this list in addition to location, etc.? Being creative, I would recommend that, on specific days, P&G and the other cosmetic leaders offer class sessions, and/or individual make-up periods per shopper – in store or at a specified location, near the store.
And why not! The cosmetic brands are doing the above in department and specialty boutiques. I bet sales would advance.
Our industry is a service driven operation….Hmmmmmmmmmmm