He said: "Non-foods people are fond on grousing that grocery people don't understand the non-foods business. Well, I think the non-foods people don't understand the grocery business. They're so used to high margin, low-turn items that motor oil blows their minds."
His point, apparently, is that loss-leadering is a cornerstone of supermarket merchandising and that non-foods people ought to work on the same basis.
While there may be something in what this vendor executive says, it surely doesn't apply to health and beauty aids, where promotional pricing has been well established in supers for more than a decade. His criticism, if applicable at all, would bear on HBA's brother category, general merchandise. GM's Wide Product Range
General merchandise consists of a much wider range of product categories, each a miniature marketing of operations and merchandising. Compare, for instance, the different "worlds" of magazines and housewares, of greeting cards and soft goods.
Some years back Progressive Grocer published an in-depth article on light bulbs. At that time, light bulbs were moving from the grocery department to nonfoods, where the product is firmly ensconced today. Asked how light bubls were faring under the different jurisdictions, several merchandisers said that while the non-foods department is much better at setup and servicing, grocery people hit harder in promotion and are "unafraid" of lower margins.
Photo film is another category involved in this type of situation, but here the question concerns day-to-day percent margins. The margins are relatively low compared to houseware, pet supplies or greeting cards, for example. Several service merchandisers have admitted to dragging their feet in merchandising photo because of the relatively low gross profit.
"Photo is a retailer service as far as we're concerned," says a top service merchandiser executive. "We can't make money on it."
His attitude is not unusual and the result is a weak-kneed merchandising and promotional posture that unjustly penalizes a vital, growing line with good turnover and ROII. Concerntrating on high percent gross is not only unprofessional, it's unfair to all concerned, including the consumer.
The philosophy that the "fast nickel" is preferable over the "slow dime" has worked wonders in separating the supermarket from the old-fashioned grocery store. "We take dollars to the bank, not percents," grocerymen are fond of saying--and it's hard arguing with their success.
Admittedly, margins aren't the whole story. Operating costs are an important factor in getting down to the real bankable item: net profit. And while non-foods largely evades the burdens of perishability, packaging, high utility costs and labor expense, the turn of its products is essential in bringing in the "real" dollars. Percent margin alone is not the answer to profit.
As for motor oil, there's no doubt that its frequently low promotional price departs sharply from the usual penny profits per unit sold of most non-foods items. Yet there are some dollars obtained and the other benefits are not inconsequential. For one thing, motor oil promos boost the whole automotive department, and car care--like any new department--needs all the help it can get in establishing itself in the mind of supermarket shoppers.
Perhaps even more importantly, motor oil promos move cases of merchandise and assist in building store traffic. That's something top management, supervisors and store managers can appreciate. Nonfoodsmen should welcome the opportunity to ingratiate themselves with the powers that control their future.
We don't think non-foods merchandisers have lost touch with the realities of supermarket merchandising. Nor do we think price alone is the key to success. Still, the quote that led off this article provides a cautionary note. The supermarket style of merchandising has been too successful for too long to resist a broader application to non-foods. Notes
bill Petrocco has Left Wakefern Foods Corp., Elizabeth, N.J., where he was procurement manager, to become corporate director of HBA of Peter J. Schmitt. The wholesaler supplies some 600 stores in New York and Pennsylvania and expects to hit $1.5 billion in sales this year. Moving up at Wakefern is Clay Bogan, who had served as sales and marketing administrator.
On the supplier side: Chevron has announced two new appointments in response to its growing involvement in mass merchandising: Karl Spiller has been named sales manager West and Rick Williams is sales manager East...American Sponge and Chamois Co. has changed its name to Spontex Distributors...Wayne M. Koenig, formerly with Del Labs and Jakwell Sales, has taken over sales for Hazel Bishop Industries' western region. G.S.
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|Date:||Mar 1, 1984|
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