Historically, the nonfood categories have been like a foreign land to supermarket operators. However, much has changed in management attitudes and in the categories that comprise the nonfood offering.
Many of the biggest and best chains have learned to become astute practitioners of nonfood strategies, and the traditional health and beauty care and general merchandise categories remain a vital part of any supermarket that aspires to fulfill the "super" part of its name. But the industry numbers show these are under intense competitive pressure and the return on investment is not what it used to be.
As a result, chains are looking to new avenues of nonfood growth. The most promising can be loosely grouped as pharmacy, fuel and fun.
Increasingly, pharmacy is being seen by supermarkets as the heart of the store, the place where food and HBC products converge to form a total wellness package that earns the customer's continuing business. The pharmacist is usually the store's most highly trained health professional. This is all the more important because of the complex Medicare Part D prescription drug benefit program that took effect this year.
While constrained by the pharmacist shortage, retailers are learning that by freeing up the pharmacist's time, they improve the overall function of the store by better serving their customers. A welcome byproduct is increased sales of related products.
This year has seen the rapid development of a relatively new concept linked to pharmacy: the in-store health clinic staffed by nurse practitioners with prescribing capability. These add to consumers' perception of supermarkets as a wellness destination.
Although not every store can put in a gas station, fuel has become a key part of promotional plans. Dollar sales will remain significant despite price fluctuations, and discounts linked to loyalty programs can be a powerful marketing tool. Fuel also gives supermarkets a natural entry into the evolving convenience store business.
Fun includes the entertainment categories, such as magazines, books and video. However, prepaid gift cards, as well as the various gifting categories - greeting cards, gift items and wrap, party goods and floral - contribute to the enjoyment of going to the grocery store, something most stores are sadly lacking. Seasonal selling is yet another way to make the shopping experience more pleasurable.
In these categories, magazines are solid contributors to store sales, books have immense promotional opportunities, and video seems continually challenged by market forces. The new competing DVD formats underscore this uncertainty, but the category keeps morphing into viable alternatives. While video rental departments are a faded memory in many stores, automated DVD rental kiosks are deploying rapidly. At the same time, while numerous retailers are downplaying hit sell-through movies by either cutting inventory or making it inaccessible, budget product is finding acceptance in stores, adding another component to the treasure hunt experience that makes shopping attractive to consumers.
While the old familiar HBC and GM categories are somewhat disparate from the core food offer, the pharmacy, fuel and fun areas present more integrated and promising marketing opportunities.