You don’t have to be in the food retail industry to know many supermarkets don’t consider nonfoods a core segment.
The lack of strategy is often apparent on the shelves in areas ranging from general merchandise to health and beauty care. Less obvious, however, are the resulting market share losses to other retail channels, including drug, club and online.
“Some supermarkets do a good job, but others just treat nonfoods as a giant convenience part of the store,” said Jim Wisner, president of the Wisner Marketing Group.
In this month’s issue, SN analyzes categories across food, drug and mass, including those in nonfoods, which represent about $50 billion of sales in the supermarket channel, according to IRI. There are a number of pressing reasons for supermarkets to give nonfoods a higher profile at this point, and here are five I consider most important.
1-Excitement equation: Nonfoods are getting more exciting because manufacturers are innovating with new product launches. “CPGs are really focusing on raising the bar on what they can provide to consumers,” said Susan Viamari, IRI’s editor of Thought Leadership Marketing. This includes attributes such as “more powerful, faster, and longer,” she explained. Consider this: three cat litters made the top 10 list of IRI’s Nonfood New Product Pacesetters.
2-Household headway: Here’s an interesting statistic with special meaning for nonfoods: Household formation is increasing at a somewhat faster rate than overall population, at least partly because of more single households, according to U.S. Census data. This is a good sign for general merchandise categories, as Wisner explains with an example. “If you have six people in a household, you only need so many light bulbs. But if those people are scattered across six different houses, you need a lot more light bulbs, even though it’s the same number of people.”
3-Boomer bandwagon: Aging Baby Boomers are having an overwhelming impact on the personal care and HBC categories. Half of all OTC medications are purchased by people over age 50, and in the vitamin category, penetration is highest over age 60, Wisner said.
4-Trip tactics: Shoppers visit supermarkets frequently and often have vitamins on their shopping lists, yet many still look elsewhere for this category. So how can supermarkets take advantage of the fact that these consumers are always in their stores? Retailers should be more attuned to shopper price sensitivity and demand for larger packages for stock-up trips, Wisner said.
5-Margin math: Store brands typically represent more than 50% of sales in OTC medications, all of which spells high margins. Yet surprisingly, many supermarkets haven’t taken maximum advantage of this, even though consumers are increasingly welcoming of store brand medications after a series of national brand product recalls, Wisner said.
Here’s a closing thought on why it makes sense to revisit nonfoods.
This segment represents only about 16% of the supermarket channel’s total sales, compared to some 33% of sales in the wider world of multi-outlet retailing across a variety of channels, according to IRI. That indicates there could be a bigger nonfoods runway for supermarkets, Viamari concluded, a perspective that makes a lot of sense.
