COLORADO SPRINGS, Colo. -- The General Merchandise Distributors Council has a reputation for being in front of the curve on many industry trends. This year, its Educational Foundation is developing a major study on merchandising, which will be officially unveiled at its GM Marketing Conference in Orlando, Fla., next month. However, when SN sat down with David McConnell, GMDC's president and chief executive officer, earlier this month, he said one of the biggest hurdles facing the GM side of the business was technological -- specifically, getting suppliers and retailers involved with UCCnet and radio frequency identification.
SN: GMDC has a major study coming out on merchandising practices, but where else are you focused now?
McConnell: This year, my big concern is where we are in terms of the general merchandise manufacturing community, and even some of our retailers, in preparing for what's coming down the pike in RFID. With RFID on the horizon, we sat down with UCCnet and looked at the composition of the people registered for the upcoming [GM] conference. We found that only about 33% of our manufacturers have begun to register products, and only about 25% of the retailers and wholesalers were beginning the process of getting engaged with UPC and data synchronization. You can't do anything else without doing that first. That's a big cause for concern. Wegmans had contacted us and said they were moving forward on data sync and the biggest hole they have is in the general merchandise categories. So in our annual Pulse state of the industry report at the conference, we're facilitating a panel discussion on this issue. RFID seems like space and Star Wars to a lot of people, but that's way downstream. You have to start first in this arena.
SN: The merchandising study is a major effort for GMDC and your Educational Foundation. What are some of the highlights of what you'll be presenting at the GM conference?
McConnell: They've come up with some great concepts, such as turning the aisles inside out. This concept applies to high-consumable GM categories like batteries. With over 50 touch points of batteries in a Wal-Mart Supercenter, food retailers need to be more places with this category if they want to play in the business. Our data, the store tests and our focus group work with consumers are bearing that out. If you just put in an inline set of batteries or if you got a couple of endcaps, you might as well not be in the business. You've got to turn the aisles inside out and create more buying opportunities for customers. At the conference, we're going to offer some case studies of effective implementation of programs geared towards housewares as an example.
SN: In research from Information Resources Inc. and ACNielsen, we've noticed an ongoing trend of categories like batteries and light bulbs in single-digit declines. What is behind this and what can turn it around?
McConnell: It comes back to Wal-Mart and the 50 touch points of batteries. It's essential to let the customers know you're a destination for those products. Light bulbs are another example of that and I believe you need to have a store brand next to the national brand, as is also true in batteries. Store brands are going to carry the banner for you, but you need that value perception. In the housewares categories, the food industry is too focused on price and tends to forget about quality. As a result, we lose sales. If they're not coming in for the durable goods in our housewares departments, then they're probably not buying some of the other items because they're making another trip anyway.
SN: So you are saying it can be done, that Wal-Mart can be competed against in these categories?
McConnell: Absolutely, and service still makes a huge difference. That crosses all categories. The common denominator of the Hy-Vee and United Supermarkets stores I saw recently was the great people. Although the stores are unbelievable, the people are a huge win. They're enthusiastic and they understand the categories that the customers are shopping.
SN: How are retailers meeting the challenge of GM differently this year?
McConnell: I was in a brand new Hy-Vee in Kansas City and they had a great dollar section that they were doing a terrific job with and they also had a nice candle program. What I liked about their candle program was it had value-oriented candles, as well as more upscale products that included nice scents and embraced the concept of look good, feel good that is a part of women's well-being. So there are product options for both upscale customers and those at a medium income level or below. Even the higher income folks are not just buying price, but looking for values, and I see the successful retailers offering more of an assortment to get that done. Another exciting thing I've seen recently is the two new Market Street stores that United Supermarkets built in the Dallas area. When you go into the Dish, their upscale housewares department, you'd think you had walked into a Williams-Sonoma.
SN: Looking ahead, what are your expectations for general merchandise for the rest of the year?
McConnell: I think it's going to be a solid year for general merchandise, particularly in the seasonal areas. I think that we came off of a year last year that, as we discussed, wasn't particularly good for general merchandise, and not terribly strong for seasonal. This year, I sense an uptick and enthusiasm. An election year is always good for the economy, for confidence, although it has been challenging with the war in Iraq. I'm very optimistic about what's going to happen in the major seasons, beginning in the fall, and moving forward.