For supermarket general-merchandise buyers it's back-to-school time again.
This week the annual School and Home Office Products Association Show gets under way in Atlanta, Nov. 4 to 7, with 580 exhibitors taking up 40,000 square feet of exhibit space at the Georgia World Congress Center.
As retailers and distributors comb the show floor for deals, new products and trends, supermarkets will be contemplating their positioning in what is a $10.3-billion business, according to a survey of 253 companies conducted by Dayton, Ohio-based SHOPA in its 1997 Distribution Trends Report.
According to the report, for the first time in several years, supermarkets in 1997 showed a slight uptick -- 0.8% -- in their share of total manufacturer shipments. Speculation is that the gain may be the result of consolidation within the food channel.
However, over the last two years mass merchandisers and office superstores have been coming on strong, capturing lead shares of 15% and 19%, respectively, in the back-to-school category. Supermarkets maintain a 6% market share, slightly ahead of drug stores, which have 5%.
The dominance of mass merchandisers and office superstores in back-to-school has put a lot of pressure on price points and margins for grocery retailers. Many find they have to invest too much in commodity goods that are often sold as loss leaders in order to compete. Others find that their customers choose mass merchandisers as their destination for the majority of their back-to-school goods.
A SHOPA consumer study, conducted prior to the back-to-school season, confirms the strength of the mass merchandiser as a destination for shoppers. When asked where they planned to shop for school supplies, excluding apparel and shoes, almost nine out of 10 said discount stores. Only one-sixth of respondents said supermarkets.
"The category killers like Office Depot, Office Max and Staples, and Wal-Mart and Target, which run notebook papers for 25 cents and notebooks at three for $1, are killing us,"said Gary Gist, general merchandise category manager, Emco Distributors, Oakland, Calif.
"Even though our pricing was competitive and we promoted back-to-school with ads and circulars, mom picked up the pens, pencils and paper along with the blue jeans, shirts, blouses and tennis shoes all at once at a Wal-Mart, Kmart or Target," said Mike Meyer, director of general merchandise and health and beauty care, Homeland Stores, Oklahoma City.
Marc Nosal, back-to-school buyer at Nash Finch, Minneapolis, summed up the dilemma for grocery retailers: "Competing with [discounters' and superstores'] low-ball pricing is driving margins down. There are so many commodity items sold at back-to-school like paper, crayons and writing instruments that you lose margins on, and it is very difficult to make any money on these."
According to retailers and distributors surveyed by SN, 1998's back-to-school season ran the gamut from dismal to great. Those that were committed to the category and devoted the most space said they reaped the benefits.
"Our back-to-school business has grown steadily over the past five years through consumer response and by expanding our product offering," said Marc Lajoie, general merchandise category buyer, Imperial Distributors, Auburn, Mass. "This has made it worth the merchandising effort, and over that period we've probably doubled the [product] mix." Imperial's retail accounts will typically devote 50 square feet of floor space to back-to-school displays, Lajoie said.
"This year we made a major space commitment to back-to-school, with an average 16 to 24 feet of space, in a seasonal promotion area. The program had strong management support, and the display had a big impact that substantially increased our sales," said a nonfood executive at Jitney Jungle Stores of America, Jackson, Miss.
Although actual 1998 dollars spent on back-to-school won't be measured until next year, Steve Jacober, SHOPA's president, said this was merely an OK back-to-school year. "I think it was a decent back-to-school, but it wasn't the best season ever. It wasn't a season in which retailers were exceedingly disappointed either."
Moving forward into next year, supermarkets are weighing their options in taking on the competition, though no one can deny that grocery's big advantage is the frequency of trips shoppers make to stores. Supermarkets may be better able to take advantage of their customers' impulse spending habits when it comes to back-to-school.
"Look at the facts that the average household shops about 2.6 stores for back-to-school and spends an average of over $100 on supplies. If consumers are in supermarkets two-plus times a week, these are big numbers that offer tremendous opportunity," Jacober said.
Due to the changing nature of the business, the big seasonal push may no longer offer the most potential for supermarkets, some in the industry say.
Gist of Emco Distributors said the business is becoming more year-round. "The business is spreading out through the year without the big sales spike from August through September. Many schools now go all year, and sales are not really growing. They aren't decreasing either and are kind of just hanging there."
Binney & Smith, a subsidiary of Hallmark based in Easton, Pa., is looking to grow its grocery business in the drawing, coloring, drafting and art-supply category.
Tom Roberts, director of field sales, looks to greater opportunities outside of the eight-week back-to-school season and four-week holiday period. He estimated both of these seasonal periods represent less than 40% of Binney & Smith's total back-to-school business.
Roberts said he wants to tap the everyday opportunity back-
to-school offers. "This is a primary objective of the company next year.
"I don't think we've done a great job of that. That is what we are going to be doing to drive growth in the category," he said.
In concentrating on everyday impulse purchases at supermarkets, Roberts hopes to obtain more secondary merchandising placements in other departments, such as the cereal aisle and at checkout, through clip strips, shelf extenders and power panels.
Jackie Thompson, Binney & Smith's product manager, crayons and chalk, said that one initiative the company pursued this year for both its food and drug accounts was to redo displays so that each account had the optimal product mix. To that end, Thompson developed teams to service trade classes individually.
In keeping with a brand-building strategy begun in 1997, Binney & Smith also will maximize its potential during peak seasons and tap the everyday opportunity through its core crayon, marker and colored-pencil products, said Roberts.
"We're seeing a big upside for greater attention to everyday selling at retail aside from improvement to the retailers' bottom-line profitability," said Jacober. "It's making a statement to consumers that you are in this business on a day-in, day-out basis. When you get into the seasons, the consumer is already in your store and thinking of you as a source of product, which supports the big pushes."
Some retailers are turning their attention away from core back-to-school categories to dis-
tinguish themselves from the competition.
"We'll stress more home-office items like computer accessories and ink cartridges next year," said the Jitney Jungle source.
"I think in the future we'll have to find a way to sell more computer products than everyday commodity items," said Nosal of Nash Finch, who believes that computers may negatively affect demand for some traditional back-to-school products.
Many retailers also cross merchandise other nonfood items, like food-storage products, during back-to-school to maintain strong margins, and some try merchandising higher-priced fashion goods along with their commodity offerings.
However, Lajoie of Imperial said the best way to compete with the mass merchandisers is to offer "a diverse selection of brands at the right retail price."
