GHQ: Solving the GM Puzzle
By Craig Levitt
Through a special arrangement, what follows is an excerpt of
a current article from Grocery Headquarters magazine, presented here
To paraphrase Winston Churchill, the general merchandise category
in the grocery channel is a riddle, wrapped in a mystery, inside an enigma.
Current general merchandise trends may not be quite as confusing as World War
II politics, but for GM manufacturers it can be just as frustrating.
With a fluctuating economy, rising gas prices and personal time at a premium, consumers are limiting their shopping trips. Industry observers suggest that these trends present grocery stores – more than any other retail channel – with a tremendous opportunity to capture GM dollars simply because of the frequency of consumer visits. Yet supermarkets continue to lose GM market share to mass merchants and even dollar stores.
Perhaps most perplexing to manufacturers is not the languishing sales, but the indifference of many food retailers when it comes to the category. GM products at grocers often include items such as greeting cards, candles, batteries, pet accessories, back-to-school items and cookware. While space is always at a premium, too often, GM manufacturers say, when new categories arise or gain favor with consumers – organics or naturals for example – extra space is provided, usually at the expense of the potentially more profitable GM category.
“Many supermarkets have not focused a great deal of time or effort on the GM business and therefore shoppers often overlook traditional GM aisles,” says Jon Hauptman, partner with Willard Bishop. “Too often consumers don’t even think of the supermarket as a place to buy general merchandise.”
Industry observers say retailers that simply accept that consumers are going to shop for general merchandise products at alternate channels are doing themselves a disservice, citing the fact that general merchandise products often provide some of the highest profit margins in the store. Supermarkets that neglect GM are also inviting customers to shop at dollar stores or mass merchants, thus running the risk of losing the more traditional supermarket purchases to those outlets. Industry observers further suggest that consumers want to make GM purchases at the supermarket.
“If you look at the retailers that have committed themselves to GM, there is a very strong case to be made that those retailers that have made the commitment have the results to support the fact that the commitment was well founded and the investment had a high return,” says Mark Deuschle, president of Gartner Companies, which includes Gartner Greetings and Gartner Studios. “GM is underleveraged. It has the potential to grow significantly, in some cases with more space, but in more cases with greater attention and greater focus.
“For grocery it becomes a balancing act. I look at the retailers that I think have the best balance, an H-E-B or Safeway. Also what Kroger is doing with a lot of its new stores [demonstrates] that they all get it. Sure, they are going to provide organics and meet the needs of that customer, but they aren’t trying to be a Whole Foods.”
Discussion Questions: Do you think grocers should be reducing or increasing their commitment to general merchandise categories? How can supermarkets do a better job selling GM products? Which GM categories do you think offers the most revenue potential for grocers?