By Sarah Hamaker
By giving consumers exactly what they want, the small but growing general merchandise category proves that a wide variety of products can be a profitable mix for convenience retailers. Powered by smoking accessories, this category garnered significant gains in sales and gross profit dollars in 2007. For example, sales rose 27.07 percent, compared to 2006, according to NACS State of the Industry data for 2007. Also that year, general merchandise posted a 26.51 percent jump in profit dollars.
Companies with products in the general merchandise category find that convenience stores deliver the right customers and solid profits. “Heatworks is having a great year,” said Steven Ilg, vice president of marketing for Ammex Corporation in Kent, Washington (the company sells air-activated warmers to outdoor sportsmen). “We are still growing by simplifying our line-up and offering unbeatable pricing so convenience stores can focus on bestsellers.”
Doug Butdorf, director of national accounts for the Reading, Pennsylvania-based Movies U Buy, also reported that sales are up. “We’ve seen double-digit growth over the past several years, including in 2008. Importantly, consumers have come to expect the availability of home entertainment at convenience stores,” he said.
Thus far in 2008, Nice N Easy Grocery Shoppes has seen double-digit growth over its 2007 sales in the general merchandise category. “We are actively trying to recover some of the sales we lost after we reduced the category’s presence in our stores a few years ago,” said Jared Sturtevant, director of category management for the Canastota, New York-based chain.
General merchandise products cover a variety of interests, which can cater to a diverse group of customers. For example, Movies U Buy sells previously viewed DVDs of the latest box office hits, Heatworks offers air-activated warmers in various styles, and DGC Prepaid sells prepaid cards that allow users access to adult Internet sites, such as Hustler and Vivid.
“We are always looking for new products and categories to add to our mix,” said Heidi Rembecki, associate category manager for Wilson Farms Inc., in Buffalo, New York. At its more than 190 locations, Wilson Farms Neighborhood Food Stores offers a wide variety of general merchandise: magazines and newspapers; greeting cards; seasonal items, such as toys, fishing supplies and sports apparel; household products, such as Ocedar and Bradshaw Good Cook items; DVD sales and rentals; sunglasses; cell phone accessories; school supplies; and prepaid phone and gift cards.
Nice N Easy stocks DVDs, trading cards, and seasonal products such as Christmas wrap, Halloween makeup and masks. The retailer also sells toys such as Beanie Babies and Webkinz, licensed NFL and MLB merchandise, and small hunting and fishing items. “We used to sell more clothing — T-shirts, hoodies and leather jackets,” said Sturtevant, “But now we have pared the offering down to top movers and trendy items.”
These kinds of basic products work well in a convenience store environment and can help capture a loyal customer base. “Ammex has worked to consolidate our Heatworks product line down to only core products to make buying easier,” said Ilg. “Fewer SKUs to stock provides for a simplified product lineup. We have found that a simple business is a more profitable business.”
DGC Prepaid’s cards are a new product, and a “true extension of the enormously successful prepaid category [in convenience stores],” said CEO Steve Simmons. “The only area of growth for adult entertainment companies is through their Web sites. With the well-documented growth of the prepaid category and the fact that there is no other branded, point-of-sale activated secure and anonymous payment alternative for adult entertainment viewers, there is every reason to expect explosive growth for this segment of prepaid.”
Movies U Buy provides the convenience channel with “a constantly changing title mix based on the biggest Hollywood hits. In the past decade, we’ve moved to an exclusively DVD title mix,” said Butdorf.
Because convenience stores cater to a variety of demographics, retailers take advantage of the general merchandise category to focus on a particular niche, such as technology or entertainment.
“We have started to micro market to specific customer and location needs,” said Rembecki, noting that customers are responding well to technology-related products such as flash drives, rewriteable CDs and DVDs and phone and music prepaid cards.
Movies U Buy has discovered that convenience stores are a good fit for its products, even when times are tough. “We know that during economic downturns, home entertainment performs well and, in most cases, increases,” said Butdorf. “As economic pressures occur, non-essential ancillary items become non-sellable items. However, under the same economic conditions, home entertainment sees higher demand.”
For Ammex, convenience stores bring consumers to their product like no other retailer. “We’ve been working with mass market retailers, but found that the closer we get to our customers’ day-to-day routines, the better. Convenience stores offer unparalleled exposure to outdoorsmen and sportsmen en route to their destinations,” said Ilg.
Combining point-of-purchase materials with cross-promotional campaigns obviously helps convenience retailers boost in-store sales. Specifically, Movies U Buy partners with retailers to offer promotions such as pizza and a movie night, popcorn discounts, loyalty program discounts, carbonated beverage programs and other promotions based on consumable goods. Nice N Easy recently started a seasonal promotion with Movies U Buy, offering Halloween- and Christmas-themed DVDs at a special price.
Seasonality is also a great way to stay ahead of customer needs, particularly in colder climates. But make sure products are in stock during these high-selling periods. Ammex sells Heatworks in boxes that fold into point-of-purchase self-displays with the individually wrapped products inside. A recent Heatworks in-store marketing campaign that worked well in convenience stores during the last quarter of 2008 was its “buy six cases, get one free” promotion. “Our products are point-of-purchase oriented and have strong margin potential,” said Ilg.
But not every company finds on-site promotions necessary. DGC Prepaid uses a Web-based retail locator to drive traffic from the adult Web site to the retailer for a card purchase, instead of advertising extensively at the store level. “Given the nature of our products, we are very conservative with our materials,” explained Simmons. “In-store marketing will most likely be limited to a simple sign with a conservative image of the cards along with a brief description.”
With the right products and promotional materials in front of the customer, general merchandise can be a profitable category for convenience stores.
“It is important to provide core general merchandise products that customers need and want,” said Butdorf, adding that home entertainment products will continue to drive steady financial growth “through massive consumer confidence and product desire.”
Ammex’s Ilg expects that retailers who offer a unique mix of general merchandise products will continue to meet consumer demand. “Convenience is one thing that customers cannot get enough of,” he said.
Giving shoppers multiple reasons to come inside the store, the general merchandise category builds profit for convenience stores with high margin products. “The future of general merchandise in convenience stores is limited only by space concerns,” said Sturtevant. “There will always be a place for high-margin fast-moving impulse items.”
But why stop at DVDs, sunglasses, gloves and prepaid cell phone minutes? The sky is the limit when it comes to this category, which one day may see convenience stores as a premier destination for iPods, cell phones, GPS systems and DVD players.
Sarah Hamaker is a freelance writer based in Fairfax, Virginia.