With sales forecasted to grow only 1% per year through 2020, grocery stores need to capture a bigger portion of shoppers’ spend. It’s also imperative that retailers cultivate Millennial shoppers, who have higher reported buying rates in grocery stores than any other generation, according to data from Jacksonville, Fla.-based Acosta.
General merchandise categories hit both targets. Given GM’s higher margins, opportunity to spark impulse purchases that build baskets, and power to help build experiential departments that define stores, retailers can’t afford to ignore those categories.
- Given its higher margins, opportunity to spark impulse purchases, and power to help build experiential departments, retailers can’t afford to ignore general merchandise categories.
- Wegmans and Kroger are among the retailers that have been successful at creating nonfood destinations by focusing on assortment differentiators for a more targeted approach.
- To make a significant impact on customers, retailers must invest in GM and consider merchandising based on solution rather than by category.
According to Mark Mechelse, VP of insights and communications with Colorado Springs, Colo.-based GMDC/Retail Tomorrow, strong GM departments are critical to retailers’ overall performance.
“Nonfood products yield high-margin opportunities across the center store and perimeter,” Mechelse says. “The right GM assortment also allows brick-and-mortar retailers to fulfill shoppers’ trip missions and meet the consumer’s evolving expectations for speed and convenience.”
Colin Stewart, EVP, business intelligence at Acosta, sees general merchandise as a way to capture a bigger portion of shoppers’ spend.
“Diversifying and strengthening offerings in departments beyond food help create a one-stop-shopping experience that mirrors the convenience of shopping online,” Stewart notes. “Our research shows shoppers are willing to buy more GM products in grocery stores, and shoppers with GM products in their baskets typically spend more.” He observes that top categories for increased GM sales include culinary items, office products and foil pans.
As important as general merchandise categories can be, though, they’re often overlooked in the grocery channel. “In many supermarkets, nonfood departments contain the same old assortment year-round of private label products at entry-level price points,” says Amanda Lai, senior consultant at McMillan Doolittle, a Chicago-based consulting firm. “There’s not much excitement.”
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When retailers invest in general merchandise, they can create sections that have a huge impact. Kings Food Markets, the Parsippany, N.J.-based chain that also operates Balducci’s, creates significant seasonal sections in its stores, including premium-priced soaps, candles, home décor items and housewares, in departments adjacent to floral.
A number of specialty food retailers have carved out space for high-end housewares and gift sections. Lai points to Metropolitan Market, a seven-unit chain based in Seattle, which has created boutiques within its stores that showcase high-end barware, cookware and housewares.
Gelson’s Markets, a 27-unit chain based in Encino, Calif., has created a destination upscale toy department in some locations. In its Del Mar, Calif., store, one end cap is permanently devoted to premium toys from manufacturer Melissa & Doug. In early fall, the store expanded its selection of wooden cooking-themed toys and puzzles to an additional end cap for a special promotion with the manufacturer, and plans to expand its selection further during the holiday season to include an island display, in addition to the two end caps.
Acosta’s Stewart notes that retailers are offering “store-within-a-store” destinations with themes ranging from baby care to sun care to grilling. South Korean chain PK Market has gone even further with its housewares sections, merchandising products in a section modeled on an upscale kitchen. “The setting is aspirational, with cookware hanging over a stone-topped sink,” Lai says. “It’s a break from the typical gondola approach.”
According to experts, retailers are also making the most of logical adjacencies to create in-store experiences that appeal to their highest-value shoppers.
Pairing food-related GM products with food items — like cedar planks with salmon — gives shoppers new ideas and can drive impulse purchases. “Retailers should consider merchandising based on solution rather than just category,” says Lai. When retailers merchandise coffee makers, grinders and filters next to the coffee, they create experiences that set their stores apart from other options.
“Retailers are creating permanent rotating displays in perimeter departments, such as barbecue supplies in the produce or meat department,” notes Stewart. “We are seeing supermarkets tie in perimeter products with other categories by cross promoting in feature ads and promoting for awareness — not at deep discounts.”
According to Lai, using promotional events to tie nonfood items to grocery is another way to provide full solutions that address all aspects of consumers’ cooking needs. “When they are sampling a food product," she says, "retailers have an opportunity to showcase the cooking appliance used to make it, or the cooking tools and the cookbook used.”