Traffic-building general merchandise promotions are no longer dependent on selling the cheap stuff.
While in-and-out programs have gained ground, continuities remain a desirable option for many supermarkets. However, for both, quality and value are the watchwords, according to supermarket executives, vendors and other industry observers interviewed during and after the International Home & Housewares Show in Chicago last month, which included the first Promotions in Motion exhibition area.
To best make use of such promotions, typically sold from endcaps or other high-traffic locations at the front of the store, retailers need to capture shoppers' attention with unique products, or items that give them something extra for their money. Among those that are doing well are apparel, such as leather and fleece; accessories, like patterned purses, laptop cases and luggage; linens; pet goods; art reproductions; and even the old standbys of cookware, tabletop items and books.
GM promotions are “going up a notch in terms of trends, and getting fashion and color into supermarkets,” said a nonfood executive with a Northeastern retail chain, pointing to trendy square plates in one promotion at the exhibition.
After walking the Promotions in Motion exhibition, Doug Barnett, director of GM/HBC, Brookshire Brothers, Lufkin, Texas, said, “You don't see as much cheap quality. It looks like the vendors and manufacturers have concentrated on higher quality and not so many items. That's what we're focusing on: buying less items, but at a higher ticket per item.”
“If you get quality merchandise, you can get some nice rings on it,” Charles Yahn, vice president, merchandising, Associated Wholesalers Inc., Robesonia, Pa., told SN after the show. “If you are smart enough to get in and out of it, it works.”
In terms of such products, some in the supermarket business think that “if we can sell one we can sell two more,” but the key is to observe the in-and-out nature that describes how these promotions work, he said.
Continuities — the price-oriented programs that offer additional items each week — are “spotty” with AWI's customers right now, Yahn said. “Some still do very well with continuities, but others are just out of them. It's more in-and-out programs for most people.”
Whether appliances, patio sets, tabletop or leather jackets, “if it's a value, people will buy it,” he said.
“It's still a really viable business, especially if you keep in mind that we are chasing a fast-paced family market,” said a nonfood executive with a Midwestern retailer. One big change is that the retailer no longer views these promotions as just traffic builders, but as profit-generating programs.
“I'm doing much better with some of the apparel. We still sell cookware, although I don't sell as much dinnerware. I've been really successful with bags and luggage with country French prints. All of that appeals to our customer base, which is 80% female,” said the executive.
An executive with a West Coast retailer that runs warehouse-format stores was looking for promotions that come on pallets. The executive said the vendors at the promotions exhibition were willing to accommodate him. “Every day we are trying to do more and more promotions. We want to give our customers what they want, plus a little,” the executive said.
Upscale promotional items are a good way to boost incremental sales, said Dan Raftery, president, Raftery Resource Network, Antioch, Ill. “Everybody has got plates, everybody has got glasses. If you want to add another set to the customer's house, it has got to be better than what they have. You can do that with fashion, and you can do that with quality,” he said.
BUILDING ON STRENGTH
Brookshire Brothers is promoting more food-related products, “because we are a supermarket chain,” Barnett said.
“The supermarket has an authority position with food, and they can transfer that authority position to the tools for food preparation very easily,” said Perry Reynolds, vice president, marketing and trade development, International Housewares Association, Rosemont, Ill.
There are two types of promotional programs, and one focuses on affordable price points related to the needs of the supermarket customer, Reynolds said. The other “is the movement upmarket of products that relate to food, that carry a significantly higher retail, but that are appropriate for the consumer in that store. Consumers really do want to have products that are useful and meaningful to them and that last awhile. There's a significant segment of consumers that are either attracted by the durability or the design of a product, and if they value it in that way, they will spend what they feel is a fair price for that product,” he said.
Cross-merchandising with a promotional flair is a unique advantage that supermarkets have. “Making the connection between the food product and the nonfood product is, in the customer's mind, the key to getting that business done in the supermarket. If the customer's mind is on coffee, and you have coffee and the tools to prepare it, you'll be much better positioned than if all the coffee preparation tools are four aisles away,” Reynolds said.
In terms of other GM promotions, there are fewer continuities and “more of a focus on in-and-out promotions and a solid rotation of exciting, new, unique goods,” said David McConnell, president and chief executive officer, GMDC, Colorado Springs. At the promotions exhibition and other events, like GMDC's, “retailers should be looking for treasure-hunt items. It differentiates them. It enables them to provide a fresh, new product to their shoppers, and let those customers know that it is fun to shop in their outlets,” he said.
“General merchandise promotions will always be there, and there will always be a place for them, but you have to become more innovative, more trendy, more fashion-conscious, more exciting than just putting out another knife or plate,” said John Tucker, president and CEO, VAM Corp., Southboro, Mass.
Apparel and other soft goods represent ways to approach this. “There's more clothing in supermarket and drug chains now. Five years ago, you never would have thought you would see it there,” Tucker said.
Retailers want more margin from these promotions. “The days of running a program at a 15% to 20% profit are over. They want programs where they can make 40% profit, and in some cases, 50%.” Soft goods offer such margins, he added. “That is what supermarkets want now; they want to make money, they have to make money, but you have to buy the right things,” he said.
“What I'm seeing is retailer customers trying to upgrade their products in clothing, in housewares, in framed pictures, and in other products that we haven't seen at this show before,” said Alan Levin, president, Fine Arts Industries, Denver.
“People are trying to get away from the cheap look. They want better-quality products, and the vendors at this show are providing that for them. In all classes of trade, the days of junk are gone, because you won't survive,” Levin said.
Volume-oriented promotions driven by price are coming back, said Adam Napell, principal, Hog-Nap Promotions, Warren, N.J. “It's refreshing, because when you do that, you sell more product, and at the same time you have a chance to really affect the average transaction and total store sales.”
Items that provide a point of difference for a supermarket from other channels are more important than upscale offerings, said Adam Morgan, president, Advance Publishers, Maitland, Fla. These items need to be $9.99 or less at retail, he said. “When you get into higher-priced items, they have to be something that either is a tremendous value, or something that is so unique that shoppers can't find it elsewhere.”
Products customized for specific stores and communities are another way to build sales and loyalty, said Paul Stults, national accounts manager, Branded Apparel, Marion, Iowa. One example is the apparel, such as T-shirts, his company offers. “The retailer is actually promoting their local high school or town,” and part of the profits can be directed back to the schools, he said.
To Be Continued
Continuity programs remain a useful weapon in retailers' competitive arsenals.
While they are gradually giving way to regular in-and-out promotions, executives interviewed at the Promotions in Motion exhibition of the International Home and Housewares Show last month in Chicago said they will never entirely disappear. Continuities are programs where products are released and promoted on a weekly basis, usually on a guaranteed sale basis.
“They are really more like promotions, and we use them that way,” said a nonfood executive with a Midwestern retailer. “We don't use them as traffic builders, but we still use them for their profits.” Cookware, bakeware, apparel and books are still good continuity offerings, the executive said.
Brookshire Brothers, Lufkin, Texas, hasn't done a continuity for a year and a half, said Doug Barnett, director of GM/HBC. “But we're going to get back into that,” he said. “It looks like we will be doing one in each of the next three or four quarters. So continuities are still a viable part of our business, and we are looking to sign them back up.”
“Continuities will always be around,” said Adam Morgan, president, Advance Publishers, Maitland, Fla. “Like every industry, continuities are in need of innovation and a steady flow of new products, but the buyers are here and we're going to keep moving along.”
Because continuities have to be a guaranteed sale, they are harder for suppliers, who are moving away from them toward regular in-and-out programs, said John Tucker, president and chief executive officer, VAM Corp., Southboro, Mass. “You've got to have pretty deep pockets to do that,” he said.
However, he added, “it can be a very successful business if you do it right, if you computerize and really put thought into what goes into the store and what's going to have to come back, because there's a lot of freight both ways.”