The grocery channel is undoubtedly challenged for growth as online shopping continues to rise. The health and beauty care (HBC) and general merchandise (GM) departments could be the key for grocery retailers to enhance their businesses, promising development opportunities, attractive shopper demographics and high-ticket value visits, according to the second annual The Power of GM and HBC in Grocery report by Acosta Inc. and the Food Marketing Institute (FMI).
The HBC and GM departments combined rake in $89 billion annually in brick-and-mortar stores and are growing 1.5% compared to a year ago, according to Acosta and FMI data. Yet shoppers are spending most of their money on HBC and GM in other channels, including drugstores and online. Grocers have an opportunity to re-harness the HBC/GM consumer by employing competitive pricing, expanded and targeted product assortments and more frequent promotions.
“In an industry that’s rapidly changing, we want to consider how GM/HBC categories will transform to create new experiences for customers and a profit center for food retailers,” says Peter Collins, director of industry relations and development for FMI, based in Arlington, Va. “Fundamentally, Acosta is helping us take the mystery out of what’s hindering the success of GM/HBC products in traditional grocery.”
While it should certainly come as no surprise that the rise of e-commerce is a major challenge for traditional retailers, The Power of GM and HBC in Grocery report highlights additional, generational challenges retailers ought to consider.
“Millennials represent a larger opportunity for in-store purchases, with higher reported buying rates in grocery stores than any other generation,” says John Clevenger, managing director and SVP of strategic advisors for Acosta, based in Jacksonville, Fla. “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.”
Unlike with most grocery categories, shoppers tend to fulfill their HBC needs at a variety of retailers versus one retailer, and reasons for where to purchase vary by generational group and category. Of the 15 HBC categories surveyed, the report found that price, assortment and convenience are key when choosing where to buy. What’s more, millennials value assortment much more than the average shopper, particularly when shopping for cosmetics, facial skin care, fragrances, hair care, hand and body care, and hand soap.
The report also says that 43% of shoppers repeatedly purchase the same trusted HBC items, especially male millennials, and 1 in 3 shoppers actively seek out new HBC items, especially female and Gen Xers, with new items most valued in drugstores, online and local grocery stores.
Analyzing consistencies among top retailers in category growth, the report found that, overall, the top categories for increased HBC sales were cold/allergy/sinus tablets (11%), vitamins (9.8%) and toothpaste (5.8%). With HBC products grouped in one location of the store, retailers ought to focus on driving traffic to the department by promoting frequently for awareness, instituting prominent “consumer solution” endcap displays and offering front-page feature support, the report says.
In addition, the top categories for increased GM sales were culinary (32.3%), office products (14.2%) and foil pans (12.5%). With GM products dispersed throughout the store, retailers can alternatively focus on bringing the department to the traffic by cross-merchandising with complementary products, creating secondary locations and capitalizing on seasonal themes.
Grocery Channel Recommendations
With the majority of consumers’ dollars going to other channels, Acosta and FMI share three key strategies retailers can employ to boost HBC and GM sales in-store:
Compete: Price may not be the only factor shoppers care about, but it is a foundational way to reach them. Acosta cautions retailers to be competitive by matching prices with other channels, including online, and offering lower prices than other grocery retailers.
Expand: To appeal to target consumers, retailers ought to implement thoughtful assortment expansion, emphasizing natural and organic, cruelty-free and other attributes to attract a specific shopper base—especially millennials.
Promote: Retailers might consider promoting more often, though not necessarily at deeper discounts. Instead, focus on building awareness with regimen-based or thematic promotions such as oral care, flu season or self-care.