How General Merchandise and Health and Beauty Care can drive growth in grocery retail
July 31, 2018
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This post is sponsored by Acosta.

Grocery retailers are facing mounting obstacles to growth as competition from other channels increases, especially for items sold in the center of the store. However, General Merchandise and Health and Beauty items can create opportunities to win shoppers when merchandised with the right strategy. In this interview, Managing Director of Acosta Strategic Advisors John Clevenger discusses the findings of a study completed by Acosta and the Food Marketing Institute on how these categories can lead to growth in grocery.

Clevenger
Clevenger

Grocery stores are challenged for growth -- particularly in the center of the store. How can General Merchandise (GM) and Health and Beauty Care (HBC) items be growth drivers for grocery retailers?

Channel growth is projected to remain soft in the future, so retailers are looking for other sources of growth. GM and HBC are attractive because they are very underdeveloped departments in grocery. While shoppers give a lot of their total spend to grocery, the share of their GM and HBC spend in the channel is disproportionately low. Yet at the same time, these shoppers are in grocery stores more than other channels and want to buy these products, so we just need to convert them. Capturing fair share of HBC sales is worth $29 billion to grocers, while the same metric for GM is $15 billion -- so we’re talking real money.

What are some key strategies for retailers looking to win shoppers in these categories?

The simplest answer is to treat these products the same way you do food items: Merchandise attractively and prominently, advertise their existence, carry a wide assortment in key categories and price them competitively. Most importantly, you must communicate to shoppers that you are a destination for these departments -- just like you are for dairy, produce or other core grocery items. Beyond that, there are some differences in how to treat each department. HBC categories are usually contiguous to each other, so the strategy is to turn the department into a destination --  through tactics like end caps, easily accessible locations and promotions. Said another way, you must bring the shopper to the category.

Unlike HBC, GM categories tend to be spread across the store. We need to bring the category to the shopper via effective cross merchandising. One highly successful example is to merchandise cooking tools or cookware with the food items they complement.

Among retailers that have seen success in the GM and HBC categories, what are some of the top-selling products?  

The Power of GM and HBC in Grocery” study from Acosta and FMI identifies “winning retailers” that are out performing their peers. Top products they focus on include health and wellness related items, especially more immediate need categories like cough/cold or GI care, in addition to natural and organic items, like hair and skin care. In GM, retailers have great success with food related categories like kitchen gadgets, tabletop, small appliances and cookware. These all appeal to a millennial shopper just starting to stock their kitchen or in need of a special gadget to recreate that restaurant meal.

How do consumers' e-commerce habits affect the approach retailers should take when attempting to drive GM and HBC sales?

First, we must understand what prompts shoppers to go to a store vs. shop online. The key online drivers in these departments are free shipping, convenience (i.e. no driving) and product reviews. Conversely, in-store shopping is driven by convenience (i.e. already in the store), deals and to check out new products. The ability to browse, handle and perhaps even sample before buying, is a key benefit that retailers will always have over online. This is critical to exploring beauty items in particular.

According to an Acosta shopper survey, millennials report higher buying rates of GM and HBC in grocery than other demographics. Why do you think that is, and what can retailers do to take advantage of this opportunity for in-store purchases?

Partly, they are in the stage of life where they are raising families. They have less free time to shop at multiple stores. Convenience is an attribute that is not limited to online shopping. They go shop in stores for milk and eggs, why not kill two birds -- buy some batteries or nutritional supplements at the same time. Also, the in-store experience gives shoppers the opportunity to discover new products and get a feel for it before they make the purchase. Successful tactics include creating solution-based display, endcaps featuring multiple products for a certain need or merchandising to interrupt the shopper’s path with attractive and interesting displays of new items.

What led Acosta to partner with FMI to produce this report, and how has the partnership shaped the content of the report?

Acosta has been a partner with FMI for many years, and because we count a wide cross-section of manufacturers and retailers as our clients, FMI knew we would provide an unbiased industry level point-of-view. Acosta's Strategic Advisors has access to virtually all retail information sources and has its own custom research capability, so we can pick the right tools to answer complex questions like this topic. Our companies share a mandate to provide education, insights and advice to help grow grocery business. We have been partners on this initiative for three years. Each year, our goal is to dive deeper and give more real-world examples of winning retailers.

John Clevenger is the managing director for Strategic Advisors at Acosta. He brings 30 years of experience, including Pepsi Marketing and Sales, Managing Director at Meridian Consulting Group and Client Insights Executive at IRI Worldwide. He has broad experience helping manufacturers discover and capture retail growth opportunities.

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