Car care shifts into high.
Some over-expectations for a new department, the ill effects o recession and an ongoing learning process have contributed to a somewhat bumpy road. On the whole though, non-foods buyers and merchandisers give automotive high marks.
A Progressive Grocer survey (see table) finds the section achieving a 33% "excellent/very good" response to its sales, a similar rating by respondents for its profits and 29% gave an excellent rating to car care's customer interest.
Although 26% to 34% of merchandisers voted "fair" or "poor" in their evaluations, the overall results of this year's survey of the current automotive scene showed improvement from the previous study in 1981.
The survey's report on the future outlook for automotive was les optimistic than before. Explains one merchandiser: We thought we could just breeze in, but we soon found out that was not the case. Car care is no easy trick."
Even so, supermarket automotive sales have taken giant strides. Progressive Grocer's research department has determine that 85% of supermarkets carry motor oil and that 64% also carry other auto supplies (up from 33% in 1976). Forty-seven percent said motor oil was a shelf item in all of their new stores.
The survey also found the typical respondent reporting that 90% of his company's new stores had car care sections. The average new-store department is 17 linear feet, with the range from four to 100 feet.
Grocery store sales of car care products in 1983 totaled about $350 million, according to Progressive Grocer's preliminary estimates, or 0.14% of total grocery sales. That puts car care, a relative new-comer in most stores, in the same league as non-foods' long-established pet supplies. In some highly trafficked stores with large, heavily promoted car care sections, the category reportedly reaches 0.5% of distribution, exceeding school, stationery and office supplies.
The concept of selling automotive products in the supermarket is based on some solid points.
* Virtually universal interest.
Almost everybody is interested in cars. In 1982, 145 million people in the U.S. held car registrations, a number totaling more than 70% of the population over the age of 16. A total of 125 million passengers cars are registered, or an average of 1.7 cars for every household.
* More clunkers on the road.
The average car today is 7.2 years old, 31% older than the average in 1970. Old cars, of course, need more attention, use more motor oil and other automotive supplies.
The high cost of new cars, now averaging around $11,000, tends to maintain the higher average age of cars. (Car care marketers point out that the high cost of new cars--the average family's second largest investment after a house--stimulates interest in car maintenance.)
*DIY keeps growing.
With the high cost of repairs and the continuing strength of the do-it-yourself (DIY) movement, it's not surprising that an estimated 85 million Americans do some maintenance and repair work on their own cars.
As a measure of how DIY has grown, consider the passenger car motor oil business. In a $3 billion market once dominated by service stations, take-out sales now account for about 70% of the gallons sold and 60% of dollar sales, according to Automotive Chain Store magazine. About 60% of households today have at least one family member changing or adding motor oil, compared to 30% in 1975.
The sharp decline in the number of service stations (down to 139,000 in 1983 from 227,000 in 1972) has contributed to do-it-yourself activities. The shift to self-service gasoline marketing (accounting for two-thirds of gas sales in 1982) also abets DIY, as drivers, not service station attendants, check under the hood and handle necessary replenishments and minor repairs.
* Lower gasoline prices.
Despite the increase in federal and state taxes, gasoline prices seem to be declining. Coupled with an improving economy, this should increase traveling by car, hiking sales of motor oil and additives.
* Behold--not beware--the woman driver.
Almost half of all U.S. Car registrations are held by women and some sources estimate that more than 10 million have cars of their own. Industry figures show that women are the registered owners of 27% of new cars.
Millions of women drive to work, so the proper care of their transportation is more vital to them than ever. Therefore, the woman--the supermarket's primary customer--becomes a good candidate for a host of automotive product offerings. A manufacturer source estimates that women account for 20% of take-out motor oil sales.
* Attracting the male shopper.
Women shopping for car care products often do so at the behest of the men in the household. This indirect influence of men on supermarket automotive products is supplemented by their direct purchases. More and more men are shopping, attracted by the late hours and to assist the working woman in the family. Not only car care purchases are involved. Men are notoriously good shoppers of high-profit impulse items in all departments.
* Riding a traffic-puller.
With the promotion of motor oil, the car care department has a powerful traffic-building tool. Motor oil on promotion equals or surpasses many top grocery products. It draws customers to the automotive section--and to the entire store.
* Ferocious competition between manufacturers.
Motor oil marketers, facing downward trends in their overall market, are combative in seeking supermarket distribution. This has led to lucrative trade deals and to the companies devising packaging and programs shaped to the grocery store.
Facing the Negatives: Clouds With (Mostly) Silver Linings
While most non-foods merchandisers rate car care sales and profits as good or better, a subtantial percentage view automotive with a jaundiced eye.
The doubts, disappointments and equivocations penetrate virtually all segments of the industry, including manufacturers. Yet an analysis of interviews with dozens of merchandisers indicates that the clouds, while they are there, more often than not are edged with silver linings and that the faults are correctable over time.
Some reatilers complain that in their areas "there seems to be an automotive supply store on every corner" and that loss-leadering of motor oil is an everyday thing. "They have assortments we cn't meet in our 12-to 16-footers," says one chain division non-foods director.
There's no doubt that supermarket automotive centers are facing a tougher run for their money, especially considering that a few years ago there was less car care competition between supermarkets themselves.
But supers have at least two advantages over non-supermarket competitors: longer hours and convenience.
"It's mainly a question," says one sales executive, "of supermarkets going after the business in a professional manner with the right selection, merchandising and sufficient promotion."
Geography and Demographics: Factors To Be Considered
According to most merchandisers, supermarket car care does best in Sun Belt areas where there's much more driving throughout the year and where oil changing is not hampered by cold weather.
That would seem to be a hardship on operators in colder climes, yet some non-foods executives in colder areas agree with Dom Guarneri of Price Chopper, Schenectady, N.Y., who says automotive is, "a great department, which is doing well and growing." Others says cold weather encourages extra sales from a wide variety of profitable winter merchandise--from snowbrushes to gas-line antifreeze.
No matter what the weather, stores in rural areas are often outstanding in car care success. And low- and middle-income shoppers are seen as the best supporters of car care departments. Some merchandisers say stores in inner city ethnic areas with high black and Hispanic populations are very successful with car care.
Automotive fares less well in high-income neighborhoods, perhaps because the better-heeled have newer cars and can better afford can servicing by others. A contrary opinion to this is voiced by the automotive buyer for an Eastern chain, who says, "We have stores in high income areas that do very well. We have large 40-foot departments and very high traffic. That may make the difference."
Why Bother With Automotive at All? Car Care Vs. Other GM
Merchandisers who frown at car care base their points of view on one or more arguments: There are other, more productive non-foods categories that need the space; departments under 16 feet fail to make a consumer impact; and the profits are simply not there.
According to the non-foods director of a top chain: "Except for stores that have 48 feet for automotive--and these are doing very well--I just don't see much of a future for car care in supermarkets."
The possible conflict with other non-foods space needs is a point well taken, but not unassailable. One service merchandiser says, "We can't always get open space next to health and beauty aids or school, stationery and office supplies, our two fastest growing categories. When some space does become available in other store aisles--usually during a remodel--we find automotive fills the slot very well."
Two other full-line service merchandisers compare automotive products very favorably to housewares.
Rick Miller of Dale Sales, Evansville, Ind., says, "Many categories have been soft because of the recession. Automotive has been good in our stores, has done better than housewares because it has many consumable items."
And Cloys Patton of M-K Housewares, Houston adds, "In turns and ROII, the car care we supply (excluding motor oil) does as well or better than housewares and doesn't need as much shelf space."
Another service merchandiser says, "I don't like to give up space for automotive except when the other sections are large and aren't turning the dollars, which does happen. Some grocers are giving us space out of grocery, especially when they're remerchandising or remodeling."
Ever since car car came on the supermarket scene, arguments have been raised over whether smaller sections of four, eight or even 12 feet are worth the trouble and space.
The opposition to small departments is that they are so limited that a proper profit mix is difficult to attain and that there's very little consumer identity, especially in the four-or eight-foot sections. "Four feet," says an oil marketer, "is a waste of time--except possibly as a consumer convenience."
That last phrase is a key to it. Interviews with several store operations executives and owners show that the final say for a small department is not always a decision for non-foods people. Here are some typical comments of the subject:
* "It's better not to have an automotive department if it's under 12 feet. But when our retail accounts say they want car care even if they only have four or eight feet to give, they must have reason. They think their customers want it."
* "We need four-foot sections in our smaller stores to support the motor oil, antifreeze and other car care promotions we're shooting chainwide. The products need a home and the shelf turnover is very good."
* "We have four- and eight-foot auto sections and, despite plenty of competition, they move merchandise. I think we have enough space for health and beauty aids and school supplies. Car care sells and serves the customer. I don't need a calculator to see that."
* "Automotive gives us variety (in a 15,000-square-foot store). I see women buying it. I have more men shoppers than ever and they're buying it. Housewares is a one-time buy. Auto has a lot of consumption. I prefer to have more non-foods departments with the best sellers than fewer sections with a complete line."
Some non-foods merchandisers also had opinions on the subject. These were:
* "We're very pleased with 12-foot sections in our stores under 30,000 square feet. They can be effectively merchandised and are best of turnover and sales per foot. We have sections as small as six feet, which is better than nothing. They have the basics."
* "Eight-foot departments are standard with us. They make money because they're properly merchandised."
* "Four to eight feet may be enough for some stores and 24 feet may be too big. A four-footer has to be merchandised very carefully, concentrating on motor oil, selected additions and waxes and polishes. When supplemented by floor displays, the four-footer can be marginally effective."
Questions about car care's worth compared to other non-foods items and its productivity as a small section are moot for most large-size stores in the $20 million a year bracket with automotive departments of 36 feet and large. With few exceptions, high-volume superstores and combos have no qualms about car care's viability. The Distribution Tangle: Car Care Is a 'Peculiar Animal'
Most non-foods categories are distributed in a fairly simple way--from manufacturers through grocery non-foods warehouses operated by the chain or grocery wholesaler, or through an outside service merchandiser. Care care, however, is often a different, even peculiar animal.
In many supermarkets, car care products may come from two sources: the grocery/non-foods warehouse and also from an outside service merchandiser or from a feeder or automotive wholesaler.
When the warehouse provides the motor oil--as is usually the case--the outside non-oil supplier may suffer a communications gap: He's not usually informed about upcoming motor oil promotions. Possible merchandising tie-ins are short-circuited and potential profits are lost.
An even worse aspect of this sharing of merchandising responsibility is explained by a service merchandiser in Maine. "Our accounts ge their oil and antifreeze through their grocery wholesaler. But no matter how good a job we do, our efforts will be in vain if motor oil is not strongly promoted. In other words, the department's success is out of our hands. It's dependent on our accounts' commitment and skill in getting promotional allowances and monies for the key products we don't carry."
He adds that auto products are not like school supplies and health and beauty aids. "These departments are more on their own. They have to be promoted too, but their items are now fully accepted by the shopper. Auto has to win recognition."
Some wholesalers, such as Spartan Stores in Grand Rapids, Mich., avoids this situation by providing a full-line of car care, including motor oil. Some service merchandisers do the same.
Dale Sales is one. Miller says the company has built up a big business in automotive and has learned to live with the problems of handling heavy, bulky, low-margin motor oil.
This results, he says, in "having more control over our destiny on the sales floor. Since we work with retailers on their motor oil promotions and advertising, we're in a better position to tie-in profitable floorstands, baskets of accessories, etc. with special displays."
There can be complications even with a single distributive source within the same company. Because of its weight and low margin--or just tradition--motor oil in some chains and grocery wholesalers is bought and merchandised by the grocery department, not the non-foods department. This causes problems in space allocations, for one thing, and may provoke intramural battles over control of the section.
Some non-foodsmen in this situation say, "Let grocery have it; we don't have room in our warehouse anyway." Others wish they had the motor oil because they feel they can merchandise it better for the whole section's advantage.
In contrast with other non-foods categories, some wholesalers and service merchandisers are not buying car care merchandise directly from the manufacturer. They're going through a feeder, which can add to the cost. "We can always buy in big enough quantities to get a price break," says a service merchandiser. "We pay a few points more, but it's worth it."
A wholesaler says he stopped buying direct: "The price breaks are too high for us. I found I was floding the warehouse to make the truckload price. Now I get most of what I needed hrough a jobber. He buys in bigger quantities and has clout with the manuafacturer. He also gives us a lot of help in product selection and even in planograms. He knows what's going on in the industry, much more than we do. We even buy motor oil through him except when we get good deals for in-and-out promos."
Both the grocery non-foods wholesaler and the service merchandiser face special competition in car care. Auto supply wholesalers are in the supermarket act, some in a big way. They claim their specialized knowledge of the aftermarket business, wide assortments and lower merchandise costs enable them to do a better job for the grocery store. (They deliver to the stors or ship UPS).
Of course, this view is disputed by the traditional supermarket non-foods distributors. Their rebuttal is summed up in these quotes from a wholesaler and two service merchandisers.
"Feeders don't always pass along their lower costs and they sell what they want to sell. Our inexperience in the category is exceeded by their ignorance of what supermarkets need."
"there's a lot of putting in of high profit 'ones' in this business and we're good at that. We know supermarkets and since we're in the stores with other products we can service them efficiently, even small departments. Because of these other departments, we have a bigger stake in doing a good job in car care."
"Feeders have had a head start in product knowledge, but that's something that can be acquired. We've responded to several retailers' requests for car care by hiring a new buyer experienced in automotive, including a strong background in obtaining ad and promotional allwaonces. We'll learn the business, just as we have learned others." The Education Process: "Blind Leading the Blind"
If ignorance was bliss, says a marketing man with a major oil refiner, car care in supermarkets would be one happy category.
As a chain non-foods chief says, "Considering we don't know much about the automotive aftermarket business and the automotive sales and marketing people don't know much about supermarkets--it's like the blind leading the blind."
The complaint about car care "ignorance" is widespread. Manufacturers complain that many buyers of supermarket automotive goods are inexperienced, aren't able to evaluate products or to exploit promotional allowances. Planograms are often faulty, they say, and shelf selection and merchandising is poor or ineffective.
Buyers lament the inability of many manufacturers to understand their needs and fail to offer unselfish ideas or realistic planograms. Buyers say they want more off-invoice allowances, less cumbersome performance requirements, more prepacks sized to supermarket needs, more information on other outlets, lower price breaks on volume purchases and the elimination of having to buy through franchised distributors.
They complain about manufacturers' representation, saying that typical reps, while they may know the automotive business in mass-merchandising outlets, don't know about supermarkets and can't offer in-store service. Food brokers, too, are criticized. "They know supermarkets and can give store device," says a wholesaler, "but some don't really understand the automotive products they represent."
Happily there are rays of sunshine breaking through the clouds. Supermarketers say they see a definite improvement in manufacturer understanding of supermarket merchandising. Many, for example, hail the 12-pack case of motor oil.
A chain buyer explains the two-way street learning proposition this way: "There's too much competition between manufacturers to allow them to sit back and do things the old way. They are definitely improving in coming up with better programs and presentations and they're making headway in developing staff and field reps more oriented to what supermarkets want."
Buyers themselves are working hard on their homework and building up their knowledge of the field. They're attending automotive shows, exchanging information with other buyers, making suggestions for improvement to manufacturers.
Tony Zwigart, president of Pacific Southwest Marketing, a car-care specialist brokerage firm affiliated with Kelley-Clarke brokers in Los Angeles, says his company "has bridged the gap" on promotion for several supermarket chains.
"We've recognized the need for help in selecting promotional and profitable items for large-space ads and coordinating the paperwork. We do this for chains and provide promotional monies up front, even take care of leftover merchandise if necessary."
He adds that this kind of promotional coordination, which gives a big lift to automotive, is not limited to Los Angeles. "It requires expertise and want-to," he says, "but there's no reason why car care can't make similar advances anywhere in the country."
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|Title Annotation:||part 1; supermarket survey|
|Date:||Feb 1, 1984|
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