GMDC’s vice president and chief marketing officer discusses taking the “general” out of general merchandise.
Grocery Headquarters: How important is general merchandise in terms of all channels of trade?
Mark Deuschle: GM is clearly a major part of the shopper experience and household spend. With 29% of all outlet sales coming from GM sales, or $404 billion, I think it is safe to say that GM is important.
With GM representing such a large percentage of total sales, why we do we not hear more about GM and the role it plays at retail and in particular the food channel?
By definition when you start the conversation off by asking about a large piece of the retail industry that is labeled “general” merchandise it speaks to the historical classification practices as GM first entered the food channel many years ago.
As GM started to gain space in stores there was no universally agreed upon category hierarchy or definition of what items belong in a particular category. In most cases it was left up to the buyer of this fledgling department and as a result today for GM it is not only possible but likely that one retailer classifies an item under one category and another retailer classifies it completely differently.
A good example is when you look at seasonal merchandise where a pet item such as a Christmas treat bag or dog sweater can be classified under the pet category for one retailer and Christmas/seasonal by another. The issue comes when the industry tries to measure the total impact or value of pet and due to a non-standard classification hierarchy the seasonal pet items are omitted from the overall pet category sales and evaluation.
GMDC recognizes this fundamental challenge unique to GM in that the industry does not have a consistent hierarchy and lacks reliable and trusted third-party syndicated data. As a result, it is difficult to provide quality analytics and insights into the overall size of the GM market, how that market is segmented by channel, relative strength and opportunity of each category and how consumer behavior plays into each segment. This lack of data and standardization leaves retailers with the absence of methods to benchmark their performance against peers, other channels or other departments within their own stores or banners.
How is GMDC involved in helping to solve the issue of limited data and category insights?
GMDC recognized that as the industry representative for general merchandise we needed to take a leadership role. We joined with Nielsen, Radian and a number of our retailer/wholesaler and supplier members to work on developing a GM resource that will provide a reliable and trusted tool to help better understand the benefits of a strong GM offering, how GM can be part of center store transformation in the food channel and how shoppers view GM as part of their trip mission in terms of how they shop and who they eventually shop with.
The first order of business was to create a common language or hierarchy framework that could be used to code and classify the nearly 30 million scanned retail items that Nielsen has been capturing for the past couple of years. This resource has been under development for almost a year and GMDC in collaboration with Nielsen will be launching this new data hierarchy and corresponding web platform in early 2013. Furthermore GMDC is committed to making sure that this “resource” serves the industry as more than just a data standardization platform.
To further enhance the insights, GMDC is working with Radian, which was a major architect in developing the hierarchy, to provide a series of category report deep dives that will deliver enhanced analytics and insights with an early emphasis on the larger or highest growth categories.
The hierarchy consists of 18 major categories have been identified and defined as Level 1 in the GMDC/Nielsen Hierarchy. These major or “mega” categories have been grouped using the perspective of shopper experience:
1. Items for me or my family to enjoy and experience
2. Items I need to help run and manage our household
Each Level 1 category is then further divided into the next level of detail or hierarchy structure. Not all categories have a core presence in the grocery channel; however the GMDC/Nielsen Hierarchy was designed to capture all channel activity in order to provide a single resource for the GM industry and a benchmarking tool for all channels and retailers.
There are some who believe that the food channel has lost the battle for the GM trip. What is your response?
I think that perception goes back to the issue of limited and credible information about GM. The facts are that the food channel is capturing 7% of all outlet GM sales. The GM trip is clearly important to the consumer as she still spends nearly $26 billion as part of her food store spend. The real insight around the value of the GM trip is revealed when you look at how individual retailers are treating GM.
Those who are committed to GM with a strategic and intentional plan are not only winning in terms of improving the size and mix of the market basket but also in overall store profitability. More innovative and progressive food retailer executives confirm that pet and baby departments, which have heavy concentrations of GM, are key areas of focus and growth as they are in many cases the gateway into the household. Categories linked to food preparation and food storage are a “natural” fit for the food channel and should by definition be dominated by the food channel. The mass segment and specialty channel “superstore” retailers focused on concentrated areas of GM such as pet, baby and sporting goods obviously generate a large share of GM sales. However as these outlets have expanded their space for food they are reducing their core mix of GM and leaving an opportunity for the food channel to fill the gap and re-capture the demand, the sale and the consumer.