Category switching expands GM/HBC's role.
"The buyer re-examined the whole candy rack, checked with the manufacturers and came up with a better mix in better fixtures--something grocery didn't bother to do," this source says. "Now non-foods also buys bulk bars, which are better promoted than before." (At the chain, grocery continues to handle confections at the shelf)
Many in the industry say this isn't an isolated case. They believe there are many grocery categories, from candy to tobacco to even florals, where non-foods buyers could significantly improve sales by using non-foods sales techniques. Yet the issue remains largely untouched at many companies.
"All too often the department that's assigned to buy is an accident of history," says the sales vice president of one manufacturer. "They say, |We've always done it this way and it's worked OK.' And when you offer a challenge you're liable to get your head cut off. Everybody's protecting his turf, and what's best for the company often gets left behind."
That's why, he adds, "When it comes to managing product categories, the grocery trade is behind the times."
Many suppliers agree. They say supermarkets lag behind Wal-Mart and other major competitors in managing product categories for maximum efficiency and merchandising.
The process known as category management aims at rectifying the situation by looking at the possible shifting or realignment of categories between departments, such as grocery and non-foods.
Just how the situation shapes up for individual categories is easier to ask than answer. The reason: It's difficult--if not impossible--to provide clear recommendations suitable to all retailers. There are just too many variables.
The non-foods department may be highly advanced at chains with a strong headquarters staff, backed by space in advertising and a team of store people with multiple endcaps to work with. In smaller companies the GM/HBC presence at headquarters and store level may be minor or virtually nonexistent. Internal office politics is often a factor. In addition, what works in theory may not work in practice simply because of the varying abilities of the people involved.
One of the chief concepts behind category switching is that it can lead to better promotional and merchandising coordination. Of course, this becomes moot if grocery and non-foods departments are already working together, which is why some merchandisers are cynical about the possibility of these changes taking place. They believe the best coordination comes from having one person in charge and getting full credit for sales.
With all those caveats, here's a look at some of the categories most often involved in these discussions.
There is no grocery aisle as important as baby. Parents of young children are big buyers of merchandise throughout the store, so winning their business as the family starts to grow has long-term and short-term implications. Supermarkets have always tried to cater to these shoppers, but the situation has become critical as other retailers use the same strategy. Mass merchandisers and category killers like Toys R Us are making extraordinary efforts to win over young parents with powerful promotions at the same time as they are expanding their baby product lines and space.
Supermarkets can ill afford to lose their appeal to these customers. Yet, in most operations, as many as five buying desks can be involved, which creates the possibility of coordination problems on pricing, space allocation and promotion.
Some companies are consolidating buying and merchandising responsibilities and the non-foods department appears to be gaining influence in this aisle beyond baby care GM and HBC products. At several leading chains non-foods' control is spreading to disposable diapers, wipes and infant formula--all wholly or in part under grocery jurisdiction at most supermarkets. Publix in Florida has even moved baby foods to non-foods purchasing and management.
Of course, compromises are in order. One large chain has given non-foods managerial responsibility for the overall baby aisle, but still rings diapers, baby food and formula as grocery and continues to stock and ship the items from its grocery warehouse.
In addition, there is considerable controversy over whether product bulkiness and the shipping frequency of grocery lines are barriers to non-foods department control.
Several GM directors say they want no part of disposable diapers. They cite its low gross as a distorting element in their mix. However, that can be overcome. The vice president of non-foods for one California-based chain says he'd take the category "if management would take the low margin into consideration when they set up my profit goal." That might require nothing more than an accounting adjustment, he adds, "but it can be a problem when categories are shifted from one department to another."
The infant care national sales manager for a leading paper goods manufacturer worries that giving non-foods control over disposable diapers and baby wipes would fail to improve things and could actually give the baby section a severe setback. He thinks grocery should retain these paper lines "if non-foods is too profit oriented to take the aggressive pricing approach needed against the other formats." He adds that paper buyers have developed good relationships with paper suppliers, which impacts promotional dealings and informational exchanges.
"The whole baby department buying structure does not have to be dismantled if there's a real willingness to work together, especially on promotions," he says. "The idea is to balance loss leaders with profit makers, so the store can afford to be competitive. And buyers must work together and like it, or Wal-Mart will grab good customers away."
Still another manufacturer straddles the fence on this issue. "Just remember," he says, "the baby department is a strategic category. Let it be run by your best people, whatever department."
Yet some adjustments seem necessary. The non-foods vice president for one chain says he's given up on getting grocery buyers to give him sufficient lead time to buy ahead for cross-merchandising of his items with end display ad specials on diapers. "What I do now," he says, "is lay in an extra supply of some items like baby wipes, which are mine, at the warehouse. That way, when I learn of a surprise diaper ad special coming up in a couple of weeks, I'll be ready to send out shippers to get endcap adjacencies."
In addition, space allocation and shelf position among the categories are all issues that must be solved so that baby products can figuratively grow up to become a first-class operation.
The GM manager of one small chain offers an example of the infighting that handicaps this aisle.
"I try to get shelf arrangements that are best for us and the customer. But where should my wipes go--below baby GM/HBC where I have them now or as an insert above diapers, as I prefer? Forget it! When I got the space over diapers I was kicked out when a diaper salesman talked the grocery diaper buyer into taking my space to expand his category. That may have been the right thing, but there's no discussion as it stands now."
Wipes are not just for babies, of course. Some items are for more general use and are best located in HBC's skin care section. So, actually, wipes as a total category may deserve two separate locations, if not different buyers.
Another location problem occurs in large combos where the baby section may be located in an expanded non-foods area, far from grocery. "That's not where the traffic is," warns a baby goods supplier. "The baby department should be in a more convenient, accessible location; not near a stack of lawn mowers."
Another supplier believes grocery, not non-foods, should run baby foods, formula and paper products because he feels grocery is best for day-in, day-out promotion. But there must be coordination with non-foods, he emphasizes.
"There should never--repeat never--be a promotion on any grocery item in baby that's not accompanied by some kind of cross-merchandising with non-foods. That boosts profit and, for the customer, suggests items she may not have noticed before. The department should be considered as a whole. A really solid Baby Week or Baby Month promotion will also come out of this."
Traditionally a grocery category, confections appears to be edging its way to partial or even full management by non-foods. Competition from non-supermarket outlets has created the need for a re-examination of the category. The large and multiple candy displays in these other outlets have not gone unnoticed. In addition, the squeeze on supermarket sales and profits suggests that confections, an unusually profitable category, should receive high priority in category management.
That the non-foods department would be considered for a major confectionery role may come as a surprise, but it shouldn't. As outside candy jobbers have decreased in influence, some aspects of candy distribution have come up for grabs. The front-end portion of confections probably represents non-foods' first major penetration. This developed from the realization, rather late in the game, that to capitalize on checkout merchandising--where several different categories are sold--it's necessary to reduce the number of buyers/merchandisers involved.
To eliminate this problem, many companies have consolidated responsibilities in space, product arrangement and more to just two people: grocery's confections buyer and non-foods' buyer of publications. In some chains, the non-foods buyer has taken over checkout confections and other lines displayed up front, including cigarettes. This is the final step in consolidating responsibility and presumably developing a more efficient, better merchandised operation.
Many wholesalers and several chains have moved all confections to their non-foods departments, and many service merchandisers have established a confections niche.
Alan Dismukes, a buyer for Anderson Wholesale, a service merchandiser based in Muskogee, Okla., says the company does a big job with candy in convenience stores, providing a base for servicing candy in supermarkets.
In Portland, Ore., United Grocers' GM Manager Galen Itami says his department, which has dropped store service on non-foods, continues to provide service on candy and specialty foods, both of which come out of the non-foods warehouse. Big chains like Hannaford Bros. of Maine, Vons in Southern California, and Idaho-based Albertson's give candy to non-foods. Some smaller chains like Tidyman's in Spokane, Wash., have done the same.
A re-evaluation of confection's buying/merchandising doesn't always lead to non-foods' management. However, the question is being addressed at many companies.
A sales vice president for one large candy manufacturer says the subject came up at a recent share group meeting attended by a half-dozen major chains. Although he declined to state a preference, he cautioned that the category should not to be trifled with.
"Confections has been growing strongly in other classes of trade," he says. "It's profitable, has excellent turnover, responds to seasons and sells any time and any place in the store. Customers see it. They buy it. They eat it, perhaps finishing off the purchase that very day to come back for more."
He also described a meeting with a Northeast chain that had confections divided among five buyers: GM for front end, a seasonal buyer, a grocery buyer for the shelf, a DSD buyer for fancy chocolates and a produce buyer for bulk candy. "They finally decided to give the whole caboodle to the grocery buyer, feeling they had to find one person to head up the category."
Why can non-foods perform well as confections manager?
GM directors and several manufacturer sales people say the non-foods' staff is better able to service stores and maintain freshness in large stores and chains where non-foods has a sizable staff, multiple endcaps and significant promotional space. They say non-foods people are better at dealing with the seasonal changes and can tie in other items, such as Easter plush toys with Easter candy and Halloween GM items with Halloween sweets. In many of these stores, the non-foods staff takes more of an interest in confections simply because it represents a bigger share of the department's total sales and profits than it does for grocery.
A broker who has had a hard time breaking his line into a chain became exultant recently when the retailer switched its candy operation to non-foods. Candy is a very lively line with many new items, including novelties, he says. "The grocery buyer formerly buying candy wouldn't give me a chance because we're new and our items are strange to him--but not to the kids who buy them. The non-foods buyer, on the other hand, is wide open to new ideas and items."
The skills of non-foods' store people can be combined with the expertise of an experienced confections buyer in the grocery department. A few chains simply add labor hours to GM/HBC and give store staff additional candy stocking/ordering duties.
DSD fancy boxed chocolates are usually managed by non-foods, the main rationale being that the line ties in well with greeting cards.
Manufacturers are reluctant to take sides--publicly, at least--in favoring grocery or non-foods for confections. Says one executive: "We favor whomever does the best job, and this depends a lot on how a particular retailer operates, the skills of the people and their attitude."
One supplier adds: "On the whole, I prefer grocery running confections. There's no learning curve as there is when another department takes over. The grocery area is where the traffic is and that's where candy shippers and displays should be week after week, although candy will sell anywhere--meat, produce or dairy aisles. There's more to this business than seasonality. Grocery has to do a better job and be more aggressive."
Tobacco specialties like pipe tobacco, cigars and fresh snuff are best under non-foods management, according to Fran Willmes, a consultant from Grand Rapids, Mich. He says freshness is key for these products, and stores with a good non-foods staff are better able than grocery clerks to maintain rotation procedures. Picking and ordering in "eaches" is another non-foods characteristic that goes well with these items.
But Willmes believes grocery should handle cigarettes, the kingpin of the category, because of the more frequent delivery schedule.
Many GM directors say they don't want cigarettes because it carries low gross margins, has security problems and isn't doing all that well anyway. Other non-foods executives handle cigarettes whether or not they like it. Better security at warehouses and stores is often the main consideration. Store service counters, especially those with video rental and one-hour photo processing (and usually staffed by non-foods personnel), provide a fairly secure display location for packs and cartons. In some companies, the grocery buyer will continue to buy cigarettes, but the merchandising is left to non-foods in service sections.
One chain GM merchandiser says locating cigarettes in his stores' video departments did not increase sales, but shifting the buying from grocery and giving cigarettes added display space enabled the department to pick up additional allowances.
Another GM director who oversees tobacco specialties says he has been denied cigarettes for "God only knows" reasons. He feels he can do a better job than grocery and likes the dollar gross. Having handled specialties for many years, his buyer is aware of the tobacco situation and is well-equipped to take on cigarettes to the company's advantage.
Manufacturer sales executives say they haven't seen a noticeable move in either direction. One merchandising director for a tobacco company says cigarettes represent high dollar volume to the store. He says the category needs a "tight operational package" to balance possible pilferage and inventory-control concerns against the need for better display and space allocation. Having specific personnel assigned at store level, as in service sections staffed by non-foods people, can make more of a difference "than even category management itself."
Non-foods' ability to break cases and handle product in "eaches" makes it hardly surprising that the department's staff has been making inroads into some slow-moving edible grocery categories. Specialty foods and spices are among such non-foods areas of growth.
Non-foods departments in wholesale companies and service merchandisers have taken the lead over chains in this area.
Service merchandisers are leading the charge. One example is McKesson Service Merchandising's New Orleans division, where Eric Bouler, district food manager, says his serviced specialty foods operation has been introduced in 100 stores with up to 1,500 items. In just five years, specialty foods has grown to nearly 33% of his business.
Itami of United Grocers handles more than 1,000 gourmet food items through non-foods. He has successfully placed items in grocery, produce, bakery and service delis. "This is a profitable business for everyone," he says, "but it needs the detailed service that a non-foods operation can provide."
Dietetic and natural foods in bulk are also candidates for the non-foods department, says Houston-based consultant Bill Harris. "Neither grocery or produce can handle these items at the warehouse or store level," he says. "For one thing, the turnover is too slow for the kind of case or bulk packout they're best at."
It has little to do with category management, but several non-foods directors say they have taken over one "non-non-foods" section they'd never dreamed of being responsible for: florals.
Typically, florals is the province of the produce department, but when produce doesn't want it or can't handle it, the assignment may go to non-foods by default. That's especially likely when florals is basically a semi-concession with product and management provided by an outside source, usually a local gardening company.
There is a certain rationale for this seemingly illogical move. General merchandise can tie in gifts, novelties, greeting cards and other items in floral displays and do very well, particularly during big display times such as Christmas, Mother's Day, Valentine's Day and Easter.
Editor's note: This series on category management/realignment involving non-foods has been expanded to three parts. Part 1, which appeared in the March issue, discussed the argument for and against switching categories between grocery and non-foods. Part 2, in this issue, and Part 3 in May center on specific categories. Next month's article will include a look at pet supplies, bar soap, sanitary napkins, meal supplements and household supplies.
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|Title Annotation:||general merchandise/health and beauty care products; supermarket merchandising; part 2|
|Date:||Apr 1, 1994|
|Previous Article:||All customers are not created equal.|
|Next Article:||Solid gains for HBC in 1993.|