SAN DIEGO -- Governmental regulation has not always been kind to the supermarket business, but in the case of local and state laws mandating the use of cellular phone headsets while driving, it's creating a new business for grocers.
As consumers become aware of the legal and safety issues of driving while using cell phones, and then see the relatively inexpensive products in the stores -- most are priced between $5 and $10 -- it becomes an impulse purchase and an opportunity to merchandise other cell phone accessories, said nonfood executives polled for this story during this month's General Merchandise Marketing Conference of the General Merchandise Distributors Council, Colorado Springs, Colo.
"Phone technology is just going crazy," said Larry Ishii, general manager, GM/HBC, Unified Western Grocers, Commerce, Calif. "With cameras and all the different features on them, it's amazing."
Meanwhile, retailers are looking to take advantage of consolidated services for the activation of prepaid cards of all kinds, including phone cards, to create more impulse sales in the stores. Per-minute pricing on some phone cards that is lower than what consumers can get through long-distance service providers at home also contributes to this business, especially in low-income and immigrant areas, the retailers told SN.
Most of the executives reported that cell phone accessories are a new part of their nonfood product mix that now represents a small amount of sales volume, but with good growth potential.
"It's a relatively small area from a food store perspective," said Al Jones, senior vice president, procurement and merchandising, Imperial Distributors, Auburn, Mass. "But it seems to be a growth area because the laws are changing to benefit the sales of that kind of product. Customers are getting used to buying them in supermarkets."
These days, nearly everybody has a cell phone, pointed out George Satterwhite, director of nonfoods, Affiliated Foods, Amarillo, Texas. "Anything related to cell phones is a tremendous opportunity for us, especially in grocery stores because of the frequency of visits. Once a customer knows that a grocery store has this kind of item, they won't be so anxious to go to Wal-Mart or someplace like that," he said.
When an executive with a West Coast retailer, who asked not to be identified, bought his cell phone case in a convenience store, he realized there was potential for these items in supermarkets, too. "As I get into the category, I want to see if we can fit a few SKUs [stockkeeping units] of those things in," he said.
"It's an impulse item," said Charles Yahn, vice president, Nonfoods Division, Associated Wholesalers, York, Pa. "If someone is going through the store and the quality looks decent, they are going to pick it up."
Ishii noted that while good-quality headsets are available for very low prices, the old adage applies: "You get what you pay for." Even so, good-quality, impulse-priced items from well-known brands like GE-Sanyo are available and do well. A frequent user of the headsets, Ishii said, "If one lasts six months for me, it's doing good. Usually, the earpiece starts to deteriorate first. But I've noticed that with a brand like GE-Sanyo, it tends to last a little bit longer with better sound quality from the start."
A Texas retailer just put in a full line of cell phone accessories, said a nonfood executive, who asked not to be identified. To make room, the chain has reduced the space allotted to batteries and film "because those categories have gone down a bit. It's lower-end product that we are selling at $5.99 every day, making about 45 points, and the line that we put in is doing great," he said.
The diversity of cell phone models and attachments is an issue, but all the retailers polled at the GMDC conference said they do well just carrying accessories for the most popular brands. For example, the Texas retailer pointed out that about 36% of the phones out there are made by Nokia. "Can you carry everything? No you can't. But if you have accessories for the top three or four phones, you are going to be in good shape," he said.
"We are not going to try to cover the whole market," said Steve Urgo, GM buyer/merchandiser, Save Mart Supermarkets, Modesto, Calif. "It's a convenience category for us, so we will probably carry accessories for the top three phones only." Ingles Markets, Asheville, N.C., started with some in-and-out programs of cell phone accessories, and now carries about eight SKUs inline, said Dan Spears, director of nonfoods. "We find that we have to change those regularly because cell phones, like everything else, keep upgrading, and what's hot today could be changed to something else tomorrow. But as long as we get sales out of the items that we put in, they will stay," he said.