HBC buyers say that supermarkets may be starting to win back consumers to their aisles. Can this trend be sustained?
By Seth Mendelson
Supermarket HBC buyers are about as enthusiastic about their category as they have been in the past 10 to 20 years, according to a survey of retailers by Grocery Headquarters.
The report found that health and beauty care buyers at many of the largest grocery chains say that sales in the category have stabilized and even increased a bit. More importantly, many of these retailers report that they are gaining market share in many key HBC segments for the first time in over a decade. If this trend holds—and many in the industry are uncertain it will—grocery stores may be finally changing consumer habits on where they shop for the bulk of the HBC needs.
Grocery stores once held nearly one-third of all HBC purchases. But the emergence of Walmart and Target, not to mention the excellent marketing job done by the major national drug store chains, has led to a steady decline in market share for supermarkets in the HBC section. The fact that supermarkets usually offered the same products at higher price-points and a limited assortment has not helped grocery stores gain an edge in the HBC arena.
Now, however, it appears that the inclusion of more and more pharmacy counters at supermarkets, plus the decision to give more space to several crucial HBC segments, including cough/cold, feminine hygiene and oral care, is helping grocers build awareness of the overall HBC segment. Several buyers report that their top executives have begun to allocate more room to their HBC assortments and are more willing to give the department prime space in their stores during redesigns.
The category is also being promoted more often in circulars and with in-store signage. “I have always said that the HBC category has suffered from a lack of attention,” says a buyer for a West Coast chain. “If we can just give it the attention it deserves and a bit more space, I think that the momentum will change in our favor. The result will be more sales and even more room.”
HBC buyers also note that higher price-points and margins from the category are playing a large role in the decision to increase the section’s visibility and space allocation. The bottom line is that many HBC segments carry large profit margins, though some buyers point out that they must be more aggressive on pricing to stay competitive with the drugstore chains.
Of course, not everything is positive with the category. Some respondents say the proliferation of drugstores in their areas is making it more difficult to keep up. One Florida retailer says that some of his stores are within a mile of three or four drugstore units. “Price wars are not uncommon here,” he notes. “But we can only go so far in this battle. We hope to win on the convenience factor and we keep tying HBC in with the fact that the drug stores simply cannot offer the selection of food products that we offer.”
Interestingly, a number of respondents said that Target now offers more competition on pricing than Walmart and that they were paying more attention to Target than its large competitor. Some also noted that Walmart had cut its assortment in some HBC segments, though the chain seems to be going in a different, more aggressive direction now.