Retailers are missing out on significant long-term profits by neglecting to merchandise their private-label household products as an entire solution, industry insiders say.While this method has had proven results among other categories within different departments in supermarkets, analysts say the Center Store aisles are still being overlooked as areas of high potential profitability, especially among

Retailers are missing out on significant long-term profits by neglecting to merchandise their private-label household products as an entire solution, industry insiders say.

While this method has had proven results among other categories within different departments in supermarkets, analysts say the Center Store aisles are still being overlooked as areas of high potential profitability, especially among the store's own brand of house care products, which include such items as sponges, foils and wraps, trash and sandwich bags, disposable cups and plates and chemicals.

"If retailers began to apply imagination to this category in supermarkets, it could add up to a billion dollars in sales," said Brian Sharoff, president of the Private Label Manufacturers Association, New York. "The question is whether solution selling can solve the problems of Center Store, which is running behind the rest of the store. This is one way of revitalizing it. Retailers are putting more emphasis on the periphery of the store, which becomes a serious dilemma for retailers because the mass merchandiser is able to take away from some of their other business."

Year after year statistics show that more consumers are discovering the equality of private labels to many national brands, particularly in the home care category. According to data from Information Resources Inc., Chicago, total dollar growth for both national-brand and private-label household products across the food, drug and mass-merchant channels climbed 5.1%, or $1.5 billion, for the 52-week period ended Oct. 10, 1999, making it the third fastest-growing megasegment, behind only beverages and dinner solutions.

Private-label non-edibles accounted for sales of $3.5 billion, up 0.5% from 1998, of the total sales of supermarket non-edibles, which were $31 billion in 1999, up 3.4% from the prior year.

Top category leaders in non-edible private-label grocery products across the combined FDM channels for the year ended Jan. 4, 1999, were foils and wraps, with a 28.74% dollar share and 36.5% unit share; cups and plates, with a 28.53% dollar share and 29.89% unit share; paper napkins, with a 27.77% dollar share and 29.98% unit share; charcoal, with a dollar share of 25.24% and a unit share of 34.16%; food and trash bags, 23.49% dollar and 30.55% unit; bleach, 21.06% dollar and 30.65% unit; fabric softener sheets, 14.97% dollar and 21.86% unit; and paper towels, with a 14.4% dollar share and a 19.6% unit share.

In supermarkets, all private-label household products tracked by IRI have gained in market dollar share from 1997 to 1998, with bleach gaining the most -- with a market share of 23.79% and sales of $113.1 million in 1998 compared with a share of 22.17% and sales of $105.2 million in 1997.

However, dollar growth of the house care segment in supermarkets only grew by 2.5% in 1999 compared with a 10.7% rise of the segment among mass merchants, driving home the collective industrywide belief that a lot needs to be done with the category at the retail level to remain aligned with the competition.

"Overall, there is an enormous window of opportunity for more solution selling at retail, particularly in grocery," said David S. Biernbaum, president of David Biernbaum Consulting, St. Louis. "Private label is in competition with national brands, and by doing more solution planning with private labels, retailers can build brand equity. In the long run, it's a lot more profitable for retailers than a one-time national promotion."

Biernbaum said he thinks the reason more retailers have not begun to cross merchandise their household inventory lies in the immediate financial gratification associated with national-brand campaigns, which he termed "instant profit centers," as opposed to pushing the store brand, which could take much longer to bear fruit. The suggestion he offers his retail clients involves an amended way of thinking, he told SN.

"I recommend retailers treat these promotions like mutual funds -- balance them. Don't stop promoting national brands, that would be ludicrous because they do need instant revenue. Come up with a strategic marketing plan with the right mix and it will become a self-fulfilling prophecy.

"The store brand is their only real point of difference today," Biernbaum continued. "Retailers tend to use the same brand name for their entire household category, whereas national brands use different names. Private label has the opportunity to capitalize there, building name recognition, brand equity and a trust factor."

Right now aisles are not schematically planogrammed for solution selling, he said, which also proves to be an obstacle for many retailers.

One retailer that has successfully implemented a cross-promotion plan for its private-label household line is Shaw's Supermarkets, East Bridgewater, Mass. Back in the fall of last year, Shaw's embarked on a co-branding campaign with biotechnology-based developer Safe Science to create an eight-stockkeeping-unit line of non-toxic household cleaning products under the Shaw's "Own Label" brand. Since the products were released last September, the retailer has been clustering all the items together on endcaps and watching them "outsell the national brands, except in laundry detergent," according to Bernie Rogan, director of public relations at Shaw's. In addition, due to their high-profile store placement and promotions, all the non-profit Ronald McDonald houses in the New England region have begun using the products, Rogan said.

"The term solution selling sounds cute, but it does have some real meaning. It involves taking products that solve the same consumer problem and marketing them together," Sharoff commented. "Retailers need to do that on a regular in-store basis and not make it a question of promotional sales.

"Many retailers are concerned about anything that radically changes the inside of the store, but between the mass merchants and the pressure of Internet sales, they don't have an alternative," Sharoff continued. "They should look at how their aisles are organized and how products are displayed and make changes. If they don't make this interesting, customers will buy on price alone. 'How do you increase sales?' You have to make it more exciting for the consumer."

If retailers cannot justify promotion of the category for promotion's sake, Sharoff suggests strategizing thematically: for example, a winter cleaning display, or perhaps a "storage and saving of leftovers" endcap; or even a recycling theme featuring trash bags for leaves, bottles, etc., along with merchandise from other departments. "I haven't seen anyone put out a bin to put these bags inside. You have to go to a hardware store for that," he quipped.

Indeed, cross promotions in other sections of the store have been done and have been done well and, according to Mel Korn, president and chief executive officer of the New York-based Saatchi & Saatchi Collaborative Marketing firm, the entire store has the potential to become a collaborative marketing medium, making prices almost irrelevant to consumers.

Korn points to the successful "Sunday Is Sandwich Day" promotion implemented by the Dominick's chain a few years ago, in which the store looked at the perishables end of the business and started to bundle items together, taking advantage of the needs of the consumer. According to Korn, the retailer focused its thoughts on consumption, not shipments, and brought all the items "to make for good football watching" together along with a booklet of sandwich ideas in one section.

"It made it appealing to the consumer and, for the retailer, the consumer didn't examine the depth of pricing," Korn said. "It was an introduction to category management through solution selling, and they bought an idea. Instead of being item-driven, it became idea-driven."

He also mentioned Albertson's and the retailer's Quick Fixin' Ideas promotion, which couples recipe cards, in-store demonstrations and dry groceries in an endcap display, as being one of the first times a major corporate chain looked at customer-driven solutions. Korn agrees that these types of vision can be easily applied to private-label household items, and told SN solution selling is a "vital plank in the platform today."

"It's not very complex," Korn said. "It takes departments within a chain working together. It's the same for manufacturers. If you're out to increase consumption, you have to be very consumer-driven and take into consideration the consumer's needs at home and the consumer's needs as a shopper," which he said revolve around convenience, time and simplicity.

"Whether it's a national brand, a regional brand or a store brand, the same pieces are at work. It boils down to how you drive people to your store, drive them to an aisle and give yourself a point of differentiation. And they're all looking for that these days," Korn said.