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Canadian Grovers: Taking a bite out of general merchandiseTuesday, September 09, 2014 > 11:18:04
More grocers are banking on fresh food and the perimeter. So where does that leave general merchandise sales?
To embrace the greeting cards or dismiss the seasonal favourites?
Stocking general merchandise (GM) has become a hotbed of debate for grocery retailers of late: Should stores dedicate more shelf space and increase offerings, or keep it small, with basic lines only?
Now may be the time to test this category, with research from Nielsen and the Global Market Development Center (GMDC) in the U.S. showing that GM market growth is now driven primarily by supermarkets (up 0.7% in dollar value) and by convenience stores (hovering around 2.5% in dollar value).
On home soil, appetite for this category is also rising, as Doug Johnston from Johnston Wholesale, a GM distributor in Nanaimo, B.C., observes. But he cautions grocers to be selective and avoid price battles with heavy discounters such as Dollarama and Costco.
“There’s no point trying to go head-to- head on some products, such as household,” says Johnston.
“It’s better to stock the branded and higher-price items and earn the margin, such as pet toys or corkscrews, for example.”
Traditional top-selling GM products in Canada, such as magazines and batteries, remain among the top non-food categories, according to Nielsen (see chart, opposite page).
But growth areas are hard to pinpoint. Kitchenware is up 4% but bakeware is down 4%. Writing instruments for adults are up 10% but only 2% for kids. Non-disposable cutlery, meanwhile, is 11% higher. But disposable cutlery is down 1%. Go figure.
Josh Romaniuk, store manager at Summerhill Market in Toronto, says non-food sales have been steady in the last year at his store.
“We have seen a little growth in magazines and greeting cards, but they are more impulse buys. Positioning them near the front of the store is important to remind customers that we sell these products.”
Steady but small growth may be attributed to a distinct lack of shelf space, as argued by the GMDC.
“If focus is only spent on the grocery store’s perimeter, the centre will begin to shrink,” notes the report.
The research may be there, but are retailers really tapping into this market? Perhaps. Some are targeting categories carefully, tying GM with food-related offers in a way that adds value to both categories. For instance, they’re placing frozen berry and yogurt coupons with blenders or picnic-food items with picnic baskets.
Others are taking the promotional route.
“We have a dedicated section in our flyers–health and beauty, vitamins and pets–and a lot of in-store special pricing on our candy,” says Mark Guthrie, grocery buyer with The Country Grocer on Vancouver Island. Guthrie says his store works with vendors to “promote our candy via in-store displays.”
Seasonal products may be the obvious first choice for grocers, but as Guthrie explains, it’s no longer an easy sell. “Seasonal performs well in-store too, but not as well as it used to. It’s a category that’s difficult to compete in as it’s readily available at the big-box stores and drugstores.”
Johnston recommends retailers take note of events, and then bundle products accordingly, as he did with Earth Day.
“Five years ago, we did not know Earth Day existed. This year, sales have been through the roof.”
Johnston says retailers are using such occasions more effectively through promotions, and it provides an opportunity to sell a number of different lines, such as energy-efficient lights, beauty and household products.
Buying power is an obvious obstacle for smaller retailers, as is consumer shopping habits, as Guthrie points out. “It’s such a price-point driven market. It’s hard to offer a great price [and] still make some margin.”
Still, winning in GM may come down to creativity.
At a GMDC event last year, John Gehre, manager of general merchandise at Texas-based grocer H-E-B, told of his company’s efforts to boost its DVD business. Sales were down and the category was, as he put it, “struggling.”
A solution came from an unlikely source: Beverly Hills Chihuahua 3, a forgettable Disney flick starring comedian George Lopez. DVD copies were merchandised with snacks such as tortillas, and H-E-B gave away some foods with DVDs purchased.
“We sold 11,000 units in one week,” Gehre says, adding that H-E-B has since had success bundling other films with food. In GM, he adds, “You have to look outside the box and say: How do we drive business in our markets that makes sense.”