Nonfoods Talk: When the pipeline is overflowing

New nonfoods items keep arriving, but there is no more room on the shelves. What can grocers do?

By Seth Mendelson

An executive from an advertising agency contacted me last month to talk about the pet care category. Her company was pitching one of the major pet care companies and she wanted to know as much as possible about what is happening in the pet aisle at supermarkets and across the total retail spectrum to make sure they won the business.

After nearly 30 minutes of a back-and-forth and candid discussion, she quizzically asked, “Why are there are so many products out there that are so much alike.”

Great question and one that has kept many a retailer up at night wondering how they are going to fit all of these products into a category that has not received much more room on store shelves in decades. It is also a question that impacts the entire general merchandise and health and beauty care segments, as well as the supermarket as a whole, as more items flood the marketplace and space demands get tighter and tighter.

Nonfood suppliers say this approach is absolutely necessary. Many will argue that they need to keep the pipeline full of new and innovative items to keep consumers interested in their overall category. The result, they say, will be greater sales at retail and more profits for everyone involved.

Retailers say they understand this, but many quickly point out that suppliers tend to exaggerate innovations and that consumers often are quick to figure out that something new is not necessarily something better, especially if it comes with a higher price-point on the item. Often enough consumers just want to stay with their favorite product that retailers are forced to carry both the new item and the old item just to appease their customers.

This is where the nightmares start. Do the math: Too many of the old and too many of the new creates a dilemma for retailers with space restrictions. Making it worse is the fact many grocery store chains are cutting back on the space they devote to the nonfoods category—or at least not expanding the space.

So what is a poor retailer to do? The simple answer, of course, is to make it clear to suppliers that they market only the best-selling items and introduce products that are truly innovative and unique. But nothing in life is simple and we all know that the MBAs populating the headquarters of suppliers across the country get paid big bucks to keep the supply chain moving and changing.

Therefore, retailers must pay closer attention to what their customers purchase and eliminate on their own the slower-moving items in favor of the more popular ones. Yes, there are going to be unhappy shoppers looking for something unique, but stocking the fast-moving items will satisfy the bulk of the consumers and will ease the pressure on retailers trying to figure out to get everything on store shelves.

What nonfoods categories were the big surprises of 2011? On the upside, a number of retailers point to the strength of the pharmacy and some related categories, including cough/cold and feminine hygiene. Other segments showing surprising sales were some parts of the hair care and oral care categories. “The economy definitely hit us,” says one nonfoods buyer. “But consumers bought the products they needed to keep themselves healthy or to get over a sickness. Sales there were not impacted by the tough times too much.”

But it is the photo category, given up for dead by many retailers, which may be the most shocking segment of all. Many retailers said that while film sales are just about done, the processing segment is quite healthy. One official with Walgreens says that consumers are coming in at a strong rate to get their digital pictures developed and, often, placed in special displays. “We do a better job of developing the photos than doing it at home,” the Walgreens official said. “People will pay for that convenience.”

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