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HOME TECH SUPPORT

The home office and school supply selections of many supermarkets are melding into one higher-priced, computer-friendly category.Industry sources identify the rising use of a dedicated home office space by both parents and children as driving the category's changing emphasis.Next to notebooks, pencils and pencil cases, retailers are displaying 500-count printer paper, ink cartridges and computer cables,

The home office and school supply selections of many supermarkets are melding into one higher-priced, computer-friendly category.

Industry sources identify the rising use of a dedicated home office space by both parents and children as driving the category's changing emphasis.

Next to notebooks, pencils and pencil cases, retailers are displaying 500-count printer paper, ink cartridges and computer cables, a natural change that provides for the essential needs of many households.

"Home office and school supplies used to be two separate and distinct categories, but with kids in front of computers, these categories are coming together," said Jack Serota, vice president of GM/HBC, Price Chopper Supermarkets, Schenectady, N.Y.

"When you look at a basic home office, mom, dad and kids share products," he said. For example, in the past, kids would use products like composition books, while computer printer paper was mainly for adults, he said. Now everyone in the family uses the computer.

School reports are done on a computer and printed out on a home printer, Serota said. "Nowadays, kids are not writing with composition books and filler paper like they used to."

The need to relate these two categories more closely has grown with the increased importance of home office products, retailers said.

Publix Super Markets, Lakeland, Fla., told SN that its school and office supply section has had an upsurge in sales each of the past three years. Although some of this increase may be due to a higher overall customer count or the opening of new stores, Maria Brous, director of media and community relations for the chain, conceded that "more home computers equals more need for home office materials."

"The two bellwether retailers right now are Stop & Shop Supermarket Co. , Quincy, Mass., which has a partnership with Staples, Framingham, Mass., and Albertsons, Boise, Idaho, which partners with Office Depot, Delray Beach, Fla.," said Don Stuart, managing director, Cannondale Associates, Wilton, Conn., a sales and marketing consultancy. He described a visit to Stop & Shop's home office and school supply section as "dropping into a mini-Staples."

Having a co-branded department from an office superstore shows dedication, according to Stuart. "Supermarkets are recognizing that home office, small office and school supplies can be an integrated section that becomes a destination for shoppers."

A source with a Northeastern supermarket chain who asked not to be identified said that while the retailer does not consider itself a pioneer in the category, it plans to increase offerings in home office and school supplies over the next six months. The reasoning behind this increase is that "you can't get away from the convenience issue," the source said.

"As long as the office and school supply products are priced competitively, consumers will purchase them at a supermarket. Consumers are very interested in how much time they can save," the source said.

Time constraints are driving the need for a computerized home office area. While a rising number of workers are bringing work home due to the continued downsizing in corporate America, a dedicated space is needed for efficient management in the home, said Steven Jacober, president of the School, Home & Office Products Association, Dayton, Ohio.

"Managing the home is more complex than it ever has been before," Jacober said. "Consumers manage replenishment of household products just as retailers manage replenishment of stores."

With more refined ways of running the house, such as using Internet research and spreadsheets to compile shopping lists, sophisticated office and computer products have become another necessity.

Parents are also interested in making sure their children have high-quality products for school. This creates a demand in supermarkets for higher-priced items, although they may carry a lower profit margin.

Supermarket traffic and parents' desire to secure quality items for their children's learning efforts are keeping the school supplies and home office category turning over quickly even with higher-priced items on the shelves, according to industry sources.

"I think the nice thing when it comes to [education-related products] is that price is not as big a deal as in other categories. A good educator or parent will pay a bit more when it comes to the education of children," said Bob Rawlins, national sales director for Learning Horizons, Cleveland, a supplemental educational materials provider owned by American Greetings.

However, traditional brick-and-mortar learning methods, such as reading from books and writing in composition notebooks, are thriving side by side.

"Computer-based media has made it easier to teach, but hands-on learning will continue to be there," Rawlins said. "Kids also use computers to relax and play games, while parents may still want them to have quiet time reading from books and writing. The need for computer paper and the need for notebooks definitely complement one another."

Meanwhile, discount office supply stores, like Office Depot, Staples and Office Max, are making it difficult for supermarkets to maintain significant profit margins on school and home office products that carry higher price points. "This category has a slimmer profit margin due to big-box stores, which keep customers looking for value in the supermarket," Price Chopper's Serota said.

With products like ink cartridges that can fall in a higher dollar range -- $20 to $30, depending on the printer type -- it is difficult to bring in a value offering, Serota said.

"Home office stores are definitely taking share of the market away from grocery retailers, and it has been this way for the past three to five years," agreed Cathy Kennedy, nonfood buyer, Bashas' Supermarkets, Chandler, Ariz. Although Bashas' ran its back-to-school promotions from July 13 through Aug. 31 this year, sales were soft, the retailer said, and according to ACNielsen, Schaumburg, Ill., the return on marketing investment for Bashas' class of trade was also off.

As back-to-school season breaks after the Fourth of July, sharp ads and hot prices come in from discount office supply stores and supercenters. "Supermarkets are getting into very competitive turf with office supply stores, and Wal-Mart and Target. They need to become a destination for shoppers without getting totally trashed in a price war," Stuart said.

The highly promotional back-to-school season is the second biggest time on the retail calendar after the December holidays, said SHOPA's Jacober. Even though growth of the number of incoming students has been slowing in recent years, the "baby boom echo" is moving up though middle and high school and leading to strong growth in college enrollment, which drives marketing efforts.

"Supermarkets are targeting the back-to-school college segment," Jacober said, referring to large displays of college dorm room products, which "have both a higher turnover rate and a high profit margin." Jacober told SN that the college segment is both an example of the bridge between school supplies and home office supplies and a great way to promote products from these and other categories, like cleaning supplies.

The real strength for supermarkets, however, is in frequency of consumer visits. Stuart reported that shoppers make between 60 and 70 trips to a supermarket per year on average and said this is a "key reason that supermarkets don't have to get down and dirty to compete on price."

Year-round traffic gives supermarkets an edge and an opportunity to "keep things humming along" by continually offering computer and home office-related products, Stuart said.

A steady stream of shoppers is a strength worth leveraging, and the safest way to do so is by carrying the essentials year-round, Serota said.

"We have the basic items to be used in any home office. Those items are the bulk- pack paper, ink cartridges, ink cartridge refills and the basic selection that customers would expect to find at anyone's desk if they were to open the top drawer," Serota said. Paper clips, staples, staple removers, pens, pencils and erasers were among the necessities he referred to.

For Publix, it is all about having the right products. "You must carry the right product mix, including traditional basics as well as new designs," Brous said.

To stay on top of trends, Publix makes sure to attend the SHOPA show regularly to "see what is new and innovative," Brous said.

"Smart merchandisers are out in the field or out in the marketplace looking at their competitors from a reactive standpoint and from a proactive standpoint, researching which product categories are in the highest demand," Jacober said. "It is crucial for a retailer to stay informed."

Dollar Store Wars

CHANDLER, Ariz. -- Dollar merchandise is in a prime position to become part of supermarkets' home office and school supply offerings.

"Dollar stores are an outlet that has hurt grocery," said Cathy Kennedy, nonfood buyer for Bashas' Supermarkets, here.

Stationery is one of a dollar store's top categories, and according to Kennedy, dollar stores have taken stationery share away from supermarkets and are continuing to grow in this category every year.

"In a category review I did two years ago, the dollar store share of the stationery market was approximately 5%, and I am sure that has grown significantly in the past two years," Kennedy said.

One driver for strong growth may be the skyrocketing gas prices, said Steven Jacober, president of the School, Home & Office Products Association, Dayton, Ohio. "Those consumers that are in the lower income demographic are really watching their pennies because of this. Supermarkets, with their captive traffic, should capitalize on that need," he said.

"Wal-Mart does it, so supermarkets should look into having a dollar category as well," said Don Stuart, managing director, Cannondale Associates, Wilton, Conn., a sales and marketing consultancy. "I haven't seen a very big push there yet but it is only a matter of time before the lower- to moderate-income consumer segment skews some product offering in that direction."

However, supermarkets should not be overly concerned, Stuart said, because although dollar stores are a clear threat with an increasing presence, their target audience is not as broad or well aligned to the home and office category as that of supermarkets.

"The dollar category has a place not just in the dollar store segment but in the supermarket, mass retail and drug store segments as well," Jacober said.

-- Wendy Toth