From Soup to Toys : Grocers Now Take Stock of Holidays
It was a typical holiday shopping scene.
Near a poinsettia forest and rows of once neatly folded Christmas guest towels, Diane Klayman, in full shop-til-you-drop holiday buying mode, browsed through a crowded display of gift items. She added a basket filled with a bottle of champagne and nuts to her other purchases and headed for the check-out stand at the grocery store--that’s right, the grocery store.
Klayman is one of a growing number of consumers who are doing at least part of their holiday shopping in supermarkets. It wasn’t enough to corner the market on turkey and cranberry sauce. Now, more and more supermarkets are stocking extensive lines of merchandise suitable for gift wrapping.
“Supermarkets and drug stores are a lot like banks and savings and loans,” said Jack H. Brown, chairman of the Stater Bros. grocery store chain. “It’s getting harder to tell them apart.”
‘Get Customer Counts Up’
The holiday season is more important to Lucky Stores than ever, said Dick Fredericksen, vice president of marketing for Lucky’s southern food division. “Especially in Los Angeles, which is a very competitive market, everyone is really trying very hard to get their customer counts up.
“We’re very anxious to increase sales. We have Christmas trees, we have gift items and tree trimming items and wrapping paper,” he said. “We spend a whole lot of time and effort trying to figure out what the customer wants at this time of year.”
And while a standing rib roast might not be a very sentimental gift, a watch or a teddy bear might do the trick. Analysts say non-food merchandise is more profitable for supermarkets but could make the traditionally non-seasonal industry more dependent on the fourth quarter for sales and profits.
“I didn’t purposefully come to the market to buy this,” Klayman said as she stood in line at the Westside Vons Pavilion. “But I have to come to the market anyway, so as long as I’m here, why not?”
Doing Work for Shoppers
Imaginative shoppers have always made use of the grocery store for gift buying--perhaps assembling a selection of gourmet food or an assortment of teas or coffees. But many supermarkets are now doing the work for shoppers, compiling gift baskets, fruit packs, cookie trays, cracker and cheese assortments. And as several chains have adopted large “superstore” formats in the last few years that carry an abundance of non-food merchandise, gift opportunities have multiplied. This year more stores are carrying more items for holiday giving.
“A lot of grocery stores and drug stores are trying to (provide), to the extent that they can, one-stop shopping for the household consumers,” said Ken Johnson, a Los Angeles consultant who follows the supermarket industry for the Price Waterhouse accounting firm. “There definitely has been a trend toward higher-priced, higher-margin non-food merchandise.”
Many stores are filling aisles with seasonal merchandise that “in the summer will be beach balls and in the winter will be stuffed snowman dolls,” he said. In-store delis, bakeries and video sections also are becoming more common.
But the real gold mine for holiday shopping can be the general merchandise that stays on the shelves year round: cookware, from the mundane to the gourmet; glassware; toys; decorative place mats, and various gadgets. Many of these items are not heavily advertised because the mix and quantity of general merchandise often varies from store to store.
Range of Items
Nowadays, supermarkets carry everything from the $3.79 rubber duckie found at Hughes in Northeast Los Angeles to a $99.99 espresso maker stocked by Gelson’s in Century City.
They also have cameras (Mayfair in Silverlake), children’s Cabbage Patch slippers (Ralphs at 3rd and Vermont) or L.A. Raiders T-shirts (Alpha Beta in Century City). At a Safeway in Glendale, you could put together a woman’s outfit with an $6.98 acrylic knit sweater and $17.98 corduroy pants--not exactly high fashion, but inexpensive.
Gelson’s even goes so far as to offer free gift wrapping at the Encino-based company’s seven upscale stores throughout the Southland. And 19 Lucky food stores in the Bay Area took the unusual step of featuring Santas in the markets over the Thanksgiving weekend. Gift certificates also are being promoted by several chains.
This year Lucky stocked some of the merchandise that had been ordered by its Gemco division, which is being closed as part of a restructuring of Lucky Stores of Dublin, Calif. Microwave ovens, television sets and coffee pots, displayed prominently to catch the eye of last-minute shoppers, have been moving well, said Lucky’s Fredericksen.
Promoting Items
Safeway has been adding to its Christmas promotions and advertising every year, said John Rodgers, marketing operations manager for Southern California. Safeway, which has been telling Southland shoppers to “make Safeway your Christmas store,” has been promoting such holiday gift items as teddy bears, luggage, Disney books and Christmas dishes.
“In the past we had some (promotional items) in specific stores where we had some really large stores,” but now such merchandise is appearing in more locations, Rodgers said. “Looking at the ads and things, we’re probably more aggressive than before.”
At Gelson’s, “we always felt we were a food store,” President Allan Scharn said. Six years ago the chain somewhat reluctantly launched a gourmet cookware center to take advantage of the higher profit potential in such merchandise and has since expanded that section, he said.
“There certainly are opportunities for gift giving that we are trying to provide,” Scharn said. For instance, Gelson’s has always made custom gift baskets for customers since it was founded in 1951, but began displaying completed baskets only about five years ago, the company said.
Brown of Colton-based Stater Bros. said that this year “we are featuring it (holiday promotional items and general merchandise) more predominantly in our advertising.”
“Like anything in the store you have to advertise it, feature it, put a sign on it and sell it at a bargain price,” Brown said. The 95-store chain is carry more toys than usual as well as holiday decorative items and plants, he said.
“If it’s the right item and someone is pushing the cart down the aisle, it’s just too much trouble to go somewhere else,” said Sarah Stack, a retail analyst with the Los Angeles securities firm of Bateman Eichler, Hill Richards.
‘More Emotional, Less Rational’
“At this time of year, shopping becomes more emotional and less rational than usual,” she said. “People are running out of time. Convenience overwhelms the rational sense that maybe I can get it for $10 less somewhere else.”
Marie Thompson, shopping recently at the Ralphs store at 3rd and Vermont, noted: “I wouldn’t come here to do my Christmas shopping, but I do pick up little things.
“It’s impulse,” she said, pointing to the prominent displays of toys and candy assortments near the check-out counters. “You see all this stuff they’ve got around the front? They know what they’re doing.”
What supermarkets are doing is trying to boost profits because grocers make more money on general merchandise than they do on food.
Supermarkets’ gross profit margin on general merchandise was 35.7% in 1985, compared to an overall gross profit margin on all sales of 24.1%, according to Progressive Grocer, a trade publication. Gross profit margin is how much a supermarket makes before expenses, which shrink overall profits to slightly more than 1%.
Promotion Drawbacks
“The nature of our business is such that it’s always a very competitive and low (profit) margin business and a lot of the operators have put a greater emphasis on non-food items because they felt they offer higher margins,” said Scharn of Gelson’s.
But the proliferation of non-food merchandise and special holiday promotions can have its drawbacks.
“By and large the industry is becoming more fourth quarter oriented because of this,” said John Kosekoff, a retail analyst with the First Manhattan investment firm in New York. “But I think you’ll see supermarket retailers becoming more sophisticated about marketing year round.”
Scharn agreed that it is “probably true” that supermarkets are becoming more dependent on the last three months of the year, already a big food-buying period. “But certainly no way near the dependence of department stores,” he added, which can garner as much as one-third of sales and half of profits during the holiday season.
Year-Round Promotions
Safeway’s Rodgers disputed a growing year-end reliance. “It’s important to us, of course, but we’re trying to plan our promotional activities all year round,” he said, noting as an example that the chain pushes beach towels and picnic coolers during the summer.
As for the effect on nearby competitors in shopping malls, “to some degree there would be some impact,” said Don Rolfe of Sav-on/Osco Drug stores. “As to what extent it affects our business, I don’t think we track that,” he said, noting that supermarkets’ move to stock more seasonal and general merchandise has been gradual.
