An attack from within

Many top supermarket executives are turning against the nonfoods category in favor of other segments. Nonfoods buyers need to defend their turf.

By Seth Mendelson

Nonfoods is under attack at the supermarket. The barrage is not coming from other types of retailers seeking to grab sales away with better assortments and sharper pricing. It is not even coming from consumers eager for a better deal.

Instead, it is coming from the boardrooms and corner offices of many of the same people that sign the paychecks of the nation’s nonfood buyers at grocery stores. The real fact is that while health and beauty care and general merchandise products continue to register growing sales, many supermarket chains and even other retailers are all but walking away from these categories.

Instead, they are giving away the space previously reserved for nonfoods to other categories of the store, confident that these sections will return more money to their bottom lines and keep consumers happy and coming back to their stores on a regular basis. Even the major drugstore chains, which have made their reputation on strong nonfoods departments, are now giving up some space so that they carry more beverages, snacks and candy.

The thinking, as far as I can tell, is that the top brass feels that nonfoods just does not deliver the necessary bang for the buck that they expect.

They are just plain wrong. Nonfoods continues to be a major player in the supermarket and it can contribute significantly to the profit of any supermarket chain willing to make a commitment to the category in terms of space, assortment and the right pricing strategy that will simply not chase consumers into other stores.

Here’s why:

1. Despite what some may say, most nonfoods categories carry margins that are significantly better than margins offered by many other categories, especially the center store segments. Nonfoods executives say that many GM categories, in particular, can offer margins that range to 50% and beyond. Many HBC categories offer margins that reach 30% to 40%.

2. Key nonfoods categories continue to grow at robust rates. Demand in such categories as hair care, skin care, oral care and many OTC segments is at an all-time high. In light of this, manufacturers are releasing new and improved items as quickly as possible. This, in turn, is leading to more excitement among consumers looking for the latest and greatest products.

3. The pharmacy is quickly becoming a key battleground between all types of retailers. Having a strong OTC section nearby is not only crucial to creating the perception that the store is a total health care solution center, but also registers big profits for the merchant.

4. Consumers want nonfoods products at stores they frequent. Virtually every study released in the last decade shows that consumers are willing to spend their hard-earned money on nonfoods products at the supermarket providing the assortment is sound, the price is good and the retailers do all they can to make the product visible to the shopper.

The most important point is that nonfoods does not need that much room to thrive in food stores. Besides a well-positioned pharmacy counter, nonfoods only needs a couple of aisles and a few endcaps to grab the consumer’s eye. Using sound cross-merchandising, particularly with the key general merchandise categories like baby care, batteries and housewares, is also necessary to maximize sales.

Of course, once in the section retailers must implement the best possible program to get consumers to come back. A three-tier—good-better-best—strategy, supported by a store brand where practical, will help drive sales. Using signage to promote the section, as well as any kind of promotional support, will get consumers excited about the section and will lead to more sales.

Spring allergies are as American as apple pie. I should know, they hit me fast and hard each year. This season has been a particularly rough one, with tree pollen being the main culprit.

A doctor’s prescription did not help one bit to relieve the scratching, sniffling and tingling that accompanies allergies. But advice from neighbors led me to the OTC section of my favorite supermarket and a concoction of three different pills (one morning, one afternoon, one at nighttime) that seems to have done the trick.

My sense is that many allergy-suffering consumers would welcome help from a pharmacist or knowledgeable store employee when choosing allergy products.
Seth Mendelson can be reached at 646-274-3507, or smendelson@groceryheadquarters.com.

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