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Happy Harry's nurtures GM.

NEWARK, Del. - Happy Harry's Discount Drugs is willing to go to great lengths to foster the success of its general merchandise categories.

There's the jewelry program, for instance. While most drug chains use rack jobbers, Happy Harry's jewelry and gift buyer Pat Smith puts in the extra work needed to buy directly from manufacturers. She visits Providence, R.I., which she refers to as the costume jewelry capital of the world, two or three times a year to stay on the cutting edge.

The direct-buying approach was initiated by Diane Levin, wife of Happy Harry's founder Harry Levin. "Buying directly is very profitable, and it allows us to merchandise the department the way we want to," says Smith.

"We can cater to kids or career women. We can control merchandise much better than rack jobbers who lay back and wait for deliveries. We can get in on fashions early and then get out before it's too late."

The chain's jewelry and gift departments are built around the centralized service departments/film counters. To avoid messy jewelry presentations, which Smith says can resemble flea markets, she has an assistant who regularly checks set-ups. The chain also provides seminars for clerks on managing jewelry sections. The upshot is jewelry in a department store presentation at drug store prices, according to Smith.

In gifts Happy Harry's size enables it to get in on trends very fast. Smith recalls buying a small amount of trolls, then quickly reacting to what was becoming a fad. "We got in on it within a week and rode the crest for two-and-a-half years. Trolls were a million-dollar item for us. When other stores in Delaware didn't have them we had 4 feet."

Smith also buys the greeting cards program from American Greetings Corp., which she calls a "wonderful" supplier. To build sales from Happy Harry's end each card department is given its own in-store manager. The managers then get together for two or three merchandising meetings a year. "There's never any questions about what they're supposed to get, when they're supposed to get it and how they're supposed to handle it," notes Smith.

She is also responsible for photofinishing and claims that Happy Harry's is the No. 1 processor in Delaware. The chain is the only one in the state to provide complete service, with no drop boxes and nothing to fill out. "We have knowledgeable clerks behind the counters that do all that," Smith says. "If customers ask questions our clerks can answer them."

With the help of Qualex Inc., Happy Harry's prints a quiz for photography managers and part-timers every quarter covering the questions most asked by customers. "It keeps the clerks on their toes," Smith remarks. "Very seldom do we have to correct quiz responses. We always try to keep our people involved and interested, and it works."

Happy Harry's seasonal merchandise gives the chain a little flair, with the chance to draw customers in with unexpected items, according to buyer Rick Beeson. The chain has been doing well, for example, with patio and lawn furniture for spring and summer. And for Halloween the company has found strength in makeup, masks and costumes. "We let discounters have the low-end products," says Beeson. "Fabric is our niche."

Happy Harry's is also emphasizing upscale items for the back-to-school season as opposed to commodities. The chain has done well with Mead Corp.'s high-end Five Star line and First Gear theme books. Student planners have also sold well.

Beeson says that the key trend for Happy Harry's seasonal merchandising has been the tendency of customers to shop later and later as holidays approach. By making sure that it's in stock up to the last minute, the chain can outperform big box retailers that may have run out of certain items.

Happy Harry's doesn't break down its B-T-S department, for example, until after September. And as the start of school nears the chain's B-T-S aisles are known to be three-deep with shoppers. Likewise the chain's centralized power aisles are often all but impassable around other holidays.

"It's very difficult to get in a price war with some of the large chains," says Beeson. "It's not a war that we can win. But customers know we'll be in stock right up to and after holidays and still offer value."

Consumers are also increasingly viewing Happy Harry's as a place to buy convenience food, according to buyer Laurie Mauragas. Sales of consumables at the chain rose 23% in 1993, 13% last year and are running 9.5% ahead in 1995. Half of the stores now have grocery sections of 12 feet to 20 feet, including expanded assortments of warm and cold drinks.

Milk, bread and microwave products are among the retailer's strongest performers. Happy Harry's is also doing substantial volume with lunch food, Mauragas notes, citing Oscar Mayer's Lunchables.

Special ordering is one way the chain drug retailer has built loyalty in the category. When Nabisco Brands Inc.'s production of Snackwells devil's food cookies couldn't keep up with demand, and other retailers ran out of product, Mauragas held out part of her supply for loyal shoppers.

Every Happy Harry's circular features several consumables, along with laundry or dish detergent. "Procter & Gamble Co.," Mauragas notes, "dominates the household products market at Happy Harry's."

"In general, Happy Harry's does well with food and household products" she says "because ifs a very, very pleasant place to shop. People enjoy coming in, so while they're there they may as well pick these things up."
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Title Annotation:America's Top Community Drug Chains; Happy Harry's Inc.'s general merchandise categories
Publication:Chain Drug Review
Date:Jul 3, 1995
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