Nonfoods Talk: Facing a Catch-22

Nonfoods can’t grow unless supermarkets give the category more space, but without a stronger commitment the prospects for growth are dimming.

By Seth Mendelson

I got my heating bill in the mail last week. Once again it seems that the gas company raised my rates. They argued, apparently successfully to the appropriate state authorities, that they need to take a rate hike because consumers were lowering their thermostats at home and at work and actually using less gas.

About two hours later, I watched a commercial from the very same gas company pleading with me and whomever else was watching to lower our thermostats to save energy and lower our gas bills.

At the same time, this very same gas company is pushing the fact that we consumers need to “go green.” They even have a website dedicated to showing us how to cut energy consumption.

It seems like the ultimate Catch-22. We lower our thermostats to save energy and money and the gas company raises rates to make up for the fact that we lowered our thermostats to save energy and money. In the end, it seems that we are paying more for being a little bit colder during the winter months.

Another Catch-22 is what is happening at supermarkets in the never-ending struggle for space for nonfoods. More and more I hear from nonfoods executives that their bosses do not want to give more space and make a greater commitment to the category without any uptick in sales.

Of course, they argue back that there can be no significant uptick in sales volume without a greater commitment from the chain in terms of space and in-store promotional support. Hmmm.

In particular, this trend is impacting two major nonfoods categories: the pharmacy counter and the greeting cards/social expression department. As has been written here before, grocery stores will never get a larger share of the overall nonfoods category, especially the vital and profit-rich OTC medications, without making a big commitment to the pharmacy counter. That means more space, more pharmacists and more promotional support. It also means spending more money to make more money.

The same is true for the social expressions category. Say what you want about the Internet and how it is changing how consumers communicate with each other, people still treasure a real greeting card or some other product to show that they are thinking about one another. But, the key with this category is a broad enough selection so that shoppers can find a unique product that fits their needs and sentiments at that moment.

So who is wrong in this great debate? The answer, of course, is no one and everyone. Senior supermarket executives have to take into account the entire store and, right now, there are bigger fish to fry than the various nonfoods categories. They argue, correctly, that consumers are using the grocery store for a wide variety of reasons, including getting their fresh foods and basic supplies. Nonfoods will simply have to be happy with what space its gets and make the best of it.

Nonfoods officials have a point that variety, visibility and service are the keys to building nonfoods sales. And, none of these things can be accomplished without enough space and commitment from higher up. And, that commitment has been hard to nail down.

So here is what needs to happen. First, top grocery executives have to be more open to certain parts of the store that can generate more sales and profit for them. The nonfoods category is one of them. Second, nonfoods buyers and merchandisers need to make it perfectly clear that they have a plan with the section. They need to show that by adding space to nonfoods they can generate more profits.

A logjam does little to help supermarkets in their struggle for customer loyalty and, ultimately, profits. Retailers need to work together to make sure that at the end of the day they have enough money to pay the rent, the heating bill and have a bit left over for a rainy day.

Seth Mendelson can be reached at 212-979-4879 or at smendelson@groceryheadquarters.com.

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