May 10, 2007
GHQ: The softer side of GM
By Carol Radice
Through a special arrangement, what follows is an excerpt of a recent article from Grocery Headquarters magazine, presented here for discussion.
It doesn’t take a turnaround specialist to tell grocers they’re facing some extreme odds when it comes to preserving or even earning back their share of the general merchandise (GM) market. It’s a cold, hard fact that over the last several years competitive pressures and expanding perimeter departments have clearly squeezed the space available for many GM categories.
For what it’s worth, grocers are not alone in their struggle. In 2006, drug stores and even mass discounters experienced sluggish GM sales, as well. However, optimists say there may be some light at the end of the tunnel and 2007 could prove to be a turning point. Observers say grocers’ increasing willingness to look to unconventional products and merchandising strategies is beginning to make the difference between building future sales in the category and being defeated.
Focusing on products and categories that address lifestyle needs will be a critical piece of future success. So, too, is the recent focus on finding quality products that are interesting, different and not traditionally thought of for supermarkets.
“We continue to believe that a strong and aggressive seasonal program is a must for retailers who want to insure that consumers don’t go elsewhere when seeking out these high-impulse and high-margin items,” said David McConnell, president of GMDC.
GMDC also sees big prospects for a number of GM categories that tie into the burgeoning health and wellness trend.
“Living a healthy lifestyle today includes growing consumer awareness of the environment and how it impacts the health of families. This consumer has an increased interest in categories such as light bulbs, household cleaning products, home health care kits, batteries, books, magazines and water softeners,” said Mr. McConnell.
In addition to addressing lifestyle concerns, the ability to reinvent GM categories based on local market needs will be integral to grocers’ success with the category, said Jim Hertel, managing partner at Willard Bishop.
“Grocers increasingly understand that impulse purchases can be defined differently in GM,” added Mr. Hertel. “Hot prices on in-and-out seasonal merchandise – like lawn furniture sets and gas barbecues for summer and color televisions for Christmas – add excitement and an element of treasure hunt such as clubs have used so well.”
Particularly playing to the local theme, Wegmans offers gift baskets featuring products made in Buffalo, Rochester or other local markets. Its ‘Eat Well, Live Well’ positioning is also a winner. “They recently supported their online wine column with a discussion of why the right stemware needs to be paired with wines. And oh, by the way, that stemware was available at Wegmans,” said Mr. Hertel.
Mike Sleeper, president of Imperial Distributors in Auburn, Mass., sees a push in GM in-store strategies to do more with upscale, stylish, higher-priced offerings, especially in kitchen items. On the other hand, he said, are the dollar categories that have been a very high growth area for his company.
“Clearly, the items that are synergistic with food are having the best success as destination departments for grocers,” said Mr. Sleeper.
Discussion Question: What do you see as the opportunity to revive general merchandise sales at grocery? What strategies and/or tactics discussed in the Grocery Headquarters article or elsewhere do you see as being most effective in generating new opportunities in GM for supermarkets and other food merchants?
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Grocers need to stop trying to be all things to all people in general merchandise and take a more strategic approach based on the chain strategy, shopper base, and competitive environment. A more upscale supermarket with a Target in the same parking lot should offer very different lines than an outlet positioned for one stop shopping for lower income families. Selecting categories choicefully and tailoring items by store type can help grocers use GM to drive market basket, margin, and send the right message to shoppers.
The biggest GM problem for supermarkets is that the promotions and assortments are totally predictable. When the store’s a bore, the financials won’t be exciting. How many supermarkets are selling lawn chairs, disposable BBQ grills, and patio furniture sets this week? Does anyone care? Why not hire a creative GM buyer with innovative vision? Do you want your supermarket to look like everyone else and to look just like you did this week last year and the year before that for the past 20 years?
It’s not only competitive pressures and expanding perimeter departments that have squeezed the space available for many GM categories in the grocery channel, it’s also the grocery channel itself that has pushed itself out of this business by dealing with it the same way as it treats grocery, non-foods, and personal care; making it difficult for manufacturers and distributors to sell the trade with making any type of reasonable profits, and yet still have a resulting retail price within reason, even to the consumer that is willing to pay a small premium for the convenience of buying GM at the supermarket.
Get back to the basics of business marketing. Product categories deserve to exist within any retail outlet based on essentially two criteria. Impulse remains an acceptable reason to carry products. The “We have the footsteps, what can we sell them now?” merchandising philosophy is not the same as true impulse marketing. The second criteria is the ability to create and sustain a competitive advantage.
General merchandise, as a devoted department with the grocery store, seldom displays any characteristics of competitive advantage. Yes, seasonal displays with competitive prices have relevance, but not in and of themselves.
My argument is that general merchandise must be integrated into the food shopping-food consumption environment that grocery stores represent. To the extent that an item of general merchandise is relevant to food consumption is the extent to which it should be considered. And considered is only the first step. Next, is the product likely to be purchased without significant research, consideration or comparison? This is an extension of impulse marketing, but goes beyond traditional impulse items. Last, does the convenience of buying it in the grocery store contribute in some way to the consumer’s value?
Seasonal displays work best when they are oriented around food consumption. Summer displays with portable coolers, mini-grills, picnic accessories…and so forth.
The best approach to any of this I’ve seen recently is in about 30% of the new Ralph’s layout. About 1/3 of the store is merchandised with items of general merchandise relevant to the food product interwoven into the displays and aisles. It works. When shopping for wine, cheeses or mixers, there are party related offerings. This type of carefully chosen, integrated merchandising is, in my opinion, the best approach to general merchandise.
Alison is right. We have to stop drinking the “one stop shopping/one size fits all” Kool-Aid! Dave McConnell is correct when he says GM programs can stimulate incremental sales but it all depends who we are talking about; what their competitive set looks like; what their customer base looks like; and, of course, what they are trying to sell them. Television sets may indeed have a “treasure hunt” quality to them but they aren’t impulse items and I don’t think the Best Buy people need to lose much sleep over sales lost to supermarkets. What works for Wegmans doesn’t necessarily work for Safeway and vice versa. There’s no reason to stock any products that don’t sell or to tie up space with any inventory that doesn’t fit your customers’ need set. Maybe what we ought to be looking at is not GM sales in general, but rather how to really boost, where appropriate, GM sales in specific stores.
The best way for grocery retailers to revive GM sales is to solidify their overall position in the consumers lives. That means giving people more compelling reasons to shop their stores on a regular basis.
It is unlikely that grocery retailers can accomplish that through a greater focus on GM merchandising. Rather, they should try to win the battle for grocery and convenience oriented trips.
A second strategy would be to try to integrate GM into consumer solutions. For example, our research shows you can sell more wine magazines in the wine department and more pet magazines in the pet food aisle. Our research also shows the power of cross merchandising around occasions such as gifts–boxed chocolate and greeting cards for example.
The wellness program and club featured at the A&P banner stores is doing very well and is an integral part of their fresh formats.
Tying HBA in the center store with fresh in the perimeter, is a double edged approach informing consumers that each benefits the other as well as benefits the consumer.
Eating more healthy, taking better care of yourself, looking refreshed and being relaxed are key elements that supermarkets can expand upon to enable their customers to enjoy a fuller, integrated shopping experience as well as feeling better about themselves.
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Grocers need to stop trying to be all things to all people in general merchandise and take a more strategic approach based on the chain strategy, shopper base, and competitive environment. A more upscale supermarket with a Target in the same parking lot should offer very different lines than an outlet positioned for one stop shopping for lower income families. Selecting categories choicefully and tailoring items by store type can help grocers use GM to drive market basket, margin, and send the right message to shoppers.
The biggest GM problem for supermarkets is that the promotions and assortments are totally predictable. When the store’s a bore, the financials won’t be exciting. How many supermarkets are selling lawn chairs, disposable BBQ grills, and patio furniture sets this week? Does anyone care? Why not hire a creative GM buyer with innovative vision? Do you want your supermarket to look like everyone else and to look just like you did this week last year and the year before that for the past 20 years?
It’s not only competitive pressures and expanding perimeter departments that have squeezed the space available for many GM categories in the grocery channel, it’s also the grocery channel itself that has pushed itself out of this business by dealing with it the same way as it treats grocery, non-foods, and personal care; making it difficult for manufacturers and distributors to sell the trade with making any type of reasonable profits, and yet still have a resulting retail price within reason, even to the consumer that is willing to pay a small premium for the convenience of buying GM at the supermarket.
Get back to the basics of business marketing. Product categories deserve to exist within any retail outlet based on essentially two criteria. Impulse remains an acceptable reason to carry products. The “We have the footsteps, what can we sell them now?” merchandising philosophy is not the same as true impulse marketing. The second criteria is the ability to create and sustain a competitive advantage.
General merchandise, as a devoted department with the grocery store, seldom displays any characteristics of competitive advantage. Yes, seasonal displays with competitive prices have relevance, but not in and of themselves.
My argument is that general merchandise must be integrated into the food shopping-food consumption environment that grocery stores represent. To the extent that an item of general merchandise is relevant to food consumption is the extent to which it should be considered. And considered is only the first step. Next, is the product likely to be purchased without significant research, consideration or comparison? This is an extension of impulse marketing, but goes beyond traditional impulse items. Last, does the convenience of buying it in the grocery store contribute in some way to the consumer’s value?
Seasonal displays work best when they are oriented around food consumption. Summer displays with portable coolers, mini-grills, picnic accessories…and so forth.
The best approach to any of this I’ve seen recently is in about 30% of the new Ralph’s layout. About 1/3 of the store is merchandised with items of general merchandise relevant to the food product interwoven into the displays and aisles. It works. When shopping for wine, cheeses or mixers, there are party related offerings. This type of carefully chosen, integrated merchandising is, in my opinion, the best approach to general merchandise.
Alison is right. We have to stop drinking the “one stop shopping/one size fits all” Kool-Aid! Dave McConnell is correct when he says GM programs can stimulate incremental sales but it all depends who we are talking about; what their competitive set looks like; what their customer base looks like; and, of course, what they are trying to sell them. Television sets may indeed have a “treasure hunt” quality to them but they aren’t impulse items and I don’t think the Best Buy people need to lose much sleep over sales lost to supermarkets. What works for Wegmans doesn’t necessarily work for Safeway and vice versa. There’s no reason to stock any products that don’t sell or to tie up space with any inventory that doesn’t fit your customers’ need set. Maybe what we ought to be looking at is not GM sales in general, but rather how to really boost, where appropriate, GM sales in specific stores.
The best way for grocery retailers to revive GM sales is to solidify their overall position in the consumers lives. That means giving people more compelling reasons to shop their stores on a regular basis.
It is unlikely that grocery retailers can accomplish that through a greater focus on GM merchandising. Rather, they should try to win the battle for grocery and convenience oriented trips.
A second strategy would be to try to integrate GM into consumer solutions. For example, our research shows you can sell more wine magazines in the wine department and more pet magazines in the pet food aisle. Our research also shows the power of cross merchandising around occasions such as gifts–boxed chocolate and greeting cards for example.
The wellness program and club featured at the A&P banner stores is doing very well and is an integral part of their fresh formats.
Tying HBA in the center store with fresh in the perimeter, is a double edged approach informing consumers that each benefits the other as well as benefits the consumer.
Eating more healthy, taking better care of yourself, looking refreshed and being relaxed are key elements that supermarkets can expand upon to enable their customers to enjoy a fuller, integrated shopping experience as well as feeling better about themselves.