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NONFOODS: Critical Issues: A plan for all seasons

The power of seasonal selling has matured in the decade since GMDC released its first Seasonal Best Practices report. Retailers have been able to substantially boost seasonal merchandising activity, along with its rewards. And according to this Progressive Grocer-edited excerpt from the latest version of the GMDC report, those rewards can keep growing if retailers are willing to devote even more space and effort to the opportunity through ongoing seasonal programs.

Seven out of 10 retailers surveyed for this project say that they're selling products with much higher price points than they were only five years ago. Examples of these high-ticket/high-margin items include:

--Patio sets and grills priced at $199 to $500 plus

--Air conditioners during the summer selling season for $199 plus.

--Christmas trees at $99 to $399, and a wide range of Christmas decorations for over $100.

These high-ticket items create a great deal of excitement in-store, but typically require special handling/merchandising at store level. Three keys to effectively selling high-price items are:

--These products must offer a strong value for the consumer.

--Shoppers must be able to see and touch the product.

--"Powered" items with movement -- or inflated items -- must be set up in a "live" demo so consumers can see what they would look like in their own homes.

The large-scale direct importing by retailers can increase their options for providing customers with greater variety and better price points.

While seasonal events have always featured a wide variety of imported goods, these products have traditionally been sourced through domestic import companies. However, today many retailers and distributors travel to Asia, India, and other locations to find appealing products -- at the right price points -- and then import them back to the United States in full-container loads for the retailers' own use. This allows retailers to profitably sell seasonal merchandise at aggressive price points that wouldn't have been possible in the past.

While China is the primary source for seasonal products sold in the United States, many retailers, following product suppliers who are moving manufacturing plants to lower-cost locations, have begun to look to other countries, such as India, Pakistan, and Vietnam.

Some retailers identify desired products based on what's being sold by their competitors, and then travel to Asia to find manufacturers that can produce similar items according to the retailers' own specifications.

Retailers that see the advantages of direct importing -- but are constrained by the large manufacturing and shipping volumes required to do so -- are forming buying syndicates that enable them to pool their purchases and enjoy the efficiencies, savings, and control associated with direct importing of full containers. As minimum production/order quantities continue to rise, buying syndicates will become even more important for small and medium-size retailers that want to take advantage of direct importing opportunities.

While retailers are focusing more on importing than in the past, they also report that importing alone can't sustain a successful seasonal program -- there's still a critically important role for domestic goods in their seasonal plans.

Technology helps

Advances in technology have significantly enhanced retailers' ability to procure seasonal products, communicate seasonal merchandising direction to store-level management, fine-tune inventory allocation, and analyze seasonal performance.

In terms of procurement, Web technology now allows buyers to efficiently assess a wide variety of seasonal product options and even attend virtual seasonal product shows -- often without having to leave their offices.

With regard to store communication, digital photography gives retailers the ability to provide store-level personnel with visual examples of creative merchandising concepts, and helps category managers validate that seasonal displays are built or ready.

Technology offers quicker and easier access to POS sales data than in the past, so that retailers can:

--Micro-merchandise seasonal offerings: Build special assortments of seasonal products in stores with special customer needs, such as expanded sun care offerings, toys, and beach towels in stores located near a beach, and dorm room furnishings and school logo gear in stores near a college campus.

--Optimize inventory: Determine optimal inventory levels by store, and identify immediate opportunities to transfer seasonal product from stores in which inventory is high to stores in which the product is selling exceptionally well and that require more product.

--Assess performance during and after the season.

A permanent home

Retailers are dedicating significant merchandising space, compared with 10 years ago, to seasonal events. This allows them to create more excitement with fun, interesting displays highlighting new products.

It also allows the retailer to more effectively position the store as a seasonal solution center by showing consumers that they can fill their seasonal needs at that store, such as immediate needs like cough and cold remedies when a family member is sick, as well as stock-up needs such as sun care items when summer is approaching.

Most retailers are allocating permanent space for seasonal events, with top retailers dedicating as much as 60 to 120 linear feet. They're also allocating flexible, temporary display space for seasonal products to complement their seasonal aisles. Temporary displays include pallet programs, floor displays, and clip strips that are merchandised throughout the store to generate impulse sales. Retailers with both small and large stores are leveraging the power of clip strips as a way to drive incremental seasonal impulse purchases.

Retailers and their supplier partners are also discovering that standing out in the marketplace and filling shopper needs require them to start seasonal events much earlier than in the past -- as much as a full month earlier, in some cases.

It's now common to see summer products such as sun care, barbeque grills, and accessories advertised/merchandised in March, and Christmas items displayed in September. One successful retail tactic involves running seasonal ads -- featuring "hot" prices -- further ahead of the actual season, to establish the store as a leading destination for the season's needs and prevent consumers from shopping for these seasonal items elsewhere.

There also appears to be a stronger concentration of sales during the last three to seven days of key holidays. It's particularly important to keep all holiday displays neat, well stocked, and organized during the last days and hours of the holiday, to reinforce capture of these last-minute sales.

"We don't like it, but we're selling a higher percentage of our products closer to the holiday," says one retail executive. "Sales are good, but just in a more compressed time. Fortunately we've learned to be patient, and not panic."

Since each seasonal event is starting earlier, it's also more important than ever to aggressively mark down product at the end, to turn remaining inventory and get the store ready for the next seasonal event.

Seasonal events at retail have traditionally featured general merchandise products. In fact, the 1996 GMDC Seasonal Best Practices report focused on the GM opportunity. However, over the past decade, retailers have recognized the power of HBC categories to complement their seasonal offerings and generate incremental sales by highlighting health remedies and personal care items tailored to specific times of the year, such as during annual seasonal events:

--Christmas events: Bath products, cosmetics, and fragrances make great gifts during the Christmas season.

--New Year's resolution/January events: Anti-smoking products, vitamins, and weight control appeal to consumers who have committed to a New Year's resolution.

--Winter/cold-weather events: Cough and cold products, lip balm, nasal products, and personal thermometers fill shoppers' winter/cold-weather needs.

--Summer events: Sun care products, depilatories, ear care products, and first-aid treatments complement summer merchandising events and appeal to consumers who spend their summers outdoors.

--Back to-school events: Beauty products are now a standard component of back-to-school promotions.

Seasonal merchandising represents a fresh approach to retailing that differs significantly from regular, day-to-business. It's a power sales-building vehicle if done well, and begins with planning and executing the seasonal business with the same disciplines that retailers apply to their traditional categories. The time is right for mass retailers, including supermarkets and chain drug stores, to adopt an innovative, thoughtful, and progressive approach to the seasonal business.
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