With the grocery channel challenged for growth, the health & beauty care (HBC) and general merchandise (GM) categories offer high development opportunities, attractive shopper demographics and high-ticket value visits, according to the second annual “The Power of GM and HBC in Grocery” report released yesterday by Acosta and the Food Marketing Institute (FMI).
Combined, more than $80 billion is spent each year on HBC and general merchandise in brick-and-mortar stores, yet shoppers are spending the majority of their money on those categories in other channels.
According to the report, “Eighty percent of U.S. households shop for HBC in grocery stores, yet 77% of their HBC spend happens in other channels. The same metrics for GM are 71% and 88%. Add it up and the opportunity is large: If the grocery channel was to capture its fair share of HBC sales, it would represent an incremental $29 billion, while the same size of prize for GM would equal $15 billion.”
While the potential is high, recent results have been mixed. In 2017, general merchandise sales in grocery declined, with only batteries & accessories and home/school/office supply gaining sales. HBC was essentially flat, with growth in health care products offsetting declines in beauty and personal care products.
Source: Nielsen e-commerce measurement, 52 weeks ending July 1, 2017
The report further notes that the growth of e-commerce is one of the leading causes of these declines. “According to Nielsen,” the report says, “today 43% of GM sales occur in e-commerce portals, the highest share among tracked departments. Beauty, health and personal care shares are less, but all still rank in the top five. Many factors influence the shift of sales to the web, including impulsivity, perishability, frequency of purchase and price. As you would expect, these factors affect some categories more than others: in GM, for instance, the shift to online has been greatest in categories that are predictable and/or stock-up — such as food storage or light bulbs — but much lower in categories that are impulsive (batteries) or where being able to touch or smell the product (candles) is important.”
“It may come as no surprise that e-commerce continues to be a major challenge for traditional retailers, but the other key trend we are seeing is not as predictable — Millennials represent a larger opportunity for in-store purchases, with higher reported buying rates in grocery stores than any other generation,” said John Clevenger, managing director and senior vice president, strategic advisors at Acosta. “To be successful in increasing GM/HBC revenue, retailers need to create disruption in-store — more than 50% of shoppers shop the perimeter of the store weekly, compared to about 20% who shop HBC and GM each week.”
The report revealed consistencies among top retailers in category growth, strategies employed to increase revenue and tips for growth in these categories:
- Top categories for increased HBC sales were: cold/allergy/sinus tablets (11%), vitamins (9.8%) and toothpaste (5.8%).
- Top categories for increased GM sales were: culinary (32.3%), office products (14.2%) and foil pans (12.5%).
To successfully drive GM/HBC growth, winning grocery retailers:
- Promote more often, but not necessarily at deeper discounts — utilize promotions to drive awareness.
- Remain competitive with pricing, matching other channels and beating other grocers.
- With HBC grouped together in one location, focus on driving traffic to the department by promoting frequently for awareness, instituting prominent “consumer solution” endcap displays and offering front-page feature support.
- With GM products dispersed throughout the store, focus on bringing the department to the traffic by cross-merchandising with complementary products, creating secondary locations and capitalizing on seasonal themes.
The 2nd edition of “The Power of GM and HBC in Grocery” was completed using analysis and custom research conducted by Acosta, a full-service sales and marketing agency in the consumer packaged goods (CPG) industry, in partnership with FMI.