Categories: What Are They Buying?
By Retail Forward, Industry Outlook, Mass Channel, July 2007
The mass channel is a favorite destination for many shoppers across a variety of categories. Leading players are adding more brands, reevaluating their assortments and launching innovative initiatives to capture even more share of wallet.
Category Snapshot: Food/Consumables
Depending on the category, about 20% to more than 40% of shoppers do most of their grocery category spending at mass channel retailers. Supercenters are the format of choice due to its full grocery offer vs. the limited selection found in discount department stores.
According to TNS Retail Forward’s ShopperScapeä, four out of 10 households do most of their spending on household cleaning products in the mass channel. About a third chooses a supercenter or discount department store for their paper products, candy/gum and pet food/supplies needs. Other popular categories in which the mass channel garners more than a 25% share of preference: snacks and beverages. Approximately 20% of households do most of their spending on dry/canned groceries, frozen foods and fresh foods (including dairy, meats and produce) at a supercenter.
- From 2001-2006, the Wal-Mart Stores division’s grocery sales grew at an average annual rate of 18% a year, outpacing food-at-home spending (+5.2%) by a wide margin. One in five households (20%) now call Wal-Mart Supercenter their primary grocery store, up from 16% in 2004. U.S. households now buy, on average, 26% of their groceries at Wal-Mart, up from 20% in 2004.
- At year-end 2006, 75% of all Target stores (including SuperTargets) offered an expanded food assortment. In 2007, all non-supercenter units will feature an expanded food offer. The company plans to open its first company-owned perishables food distribution center in summer 2008 to support its growing food operations.
- Organic food options are becoming more accessible in the mass channel. In spring 2006, Wal-Mart began expanding its organic assortment in certain stores. Last fall, Target added organics to its premium private brand line, Archer Farms. In March 2007, Meijer announced the launch of Meijer Organics, a private brand line consisting of more than 200 organic food items.
Category Snapshot: Health and Beauty Care
More than 30% of shoppers do most of their spending at the mass channel for most health and beauty care categories. More than one out of every 10 shoppers spends the most on prescription drugs at the mass channel.
- Last September, Wal-Mart set off a flurry of activity in pharmacy with the announcement of a $4 generic offer. Initially kicked off in Tampa Bay, Fla., the program was rolled out nationwide in November. Target matched Wal-Mart’s expansion of the program each step of the way and in fact beat Wal-Mart to a national rollout by one week. Kmart reminded shoppers of its existing plan that offers a 90-day supply of selected generic drugs for $15 (or $5 a month). Meijer responded to the $4 generic flood with a program to fill antibiotic prescriptions for free. (For more details, please see TNS Retail Forward’s Wal-Mart’s $4 Generic Drug Impact, September 2006.)
- In March 2007, Target rolled out the Boots cosmetics line chain-wide, which was previously only available at select Target stores. Boots beauty consultants have been added to approximately 260 stores during high-traffic hours. In a unique collaboration, Target also partnered with L’oreal earlier this year to create L’oreal Paris Colour Riche lipstick in “Target Red.”
Category Snapshot: Homegoods
More than 30% of shoppers do most of their homegoods spending in the mass channel. Share of preference for storage containers/organization and other small households is particularly high. Despite a sold share of preference, homegoods has been a weak spot for most mass players. Some new initiatives are underway to boost performance.
- During Target’s 2006 fourth quarter conference call, the company reported that performance in home décor and domestics is improving after various adjustments, i.e., focusing on the right space allocation, lifestyle merchandising, color impact and merchandise mix while improving the good, better, best balance. Target commented during the call that these businesses are gaining traction and expects continued momentum in 2007.
Target has reported that it is very pleased with January’s Global Bazaar performance after focusing primarily on greater affordability, stronger color impact and greater classification dominance. Those factors combined contributed to stronger sales and profitability compared with the prior year. Target indicated it will focus on those same factors again for Global Bazaar’s appearance in 2008, while also slightly increasing the level of promotional activity compared to this year.
- Kmart announced in June it will upgrade the quality and add new colors and materials to its Martha Stewart Everyday soft home collection.
Category Snapshot: Consumer Electronics and Entertainment
More than 30% of shoppers do most of their consumer electronics (CE) spending in the mass channel. Players have aggressively been ramping up their CE departments to take advantage of the rising popularity of items such as high-definition televisions and MP3 players.
- Wal-Mart is backing its everyday low prices in CE with better selection by adding brands such as Phillips, Samsung, Skype and Vizio. Wal-Mart also is focusing on delivering better customer service and signage that simplifies the buying process and helps customers understand new technologies. It is testing the presence of trained HDTV “specialists” from third-party Anderson Merchandisers in approximately 100 supercenters.
- Target is enhancing its electronics offer by improving its balance of good, better, best options. Target is also expanding the in-store television display by 12 feet to a 44-foot presentation. About three-fourths of the space is now devoted to flat panel televisions.
Category Snapshot: Home Improvement and Lawn Care
More shoppers turn to the mass channel for their lawn care needs compared to home improvement items like hand tools, hardware and power tools.
- After testing in select stores, Sears added Craftsman tools in Kmart locations nationwide last fall. Approximately 180 Kmart stores also sell an assortment of appliances, including Kenmore-branded products.
Category Snapshot: Baby Supplies
Almost half of shoppers (45%) spend the most on baby food/supplies in the mass channel, with supercenters capturing 30% of shopper preference. Almost 40% of shoppers do most of their spending on baby furnishings in the mass channel. Infant/toddler clothing also is a popular category.
- Target has introduced organic skin care products for baby from California Baby and Burt’s Bees. Target also offers Erba Organics, featuring organic skin care products for both mom and baby.
Category Snapshot: Home Office/School Supplies
More than half of shoppers (53%) report that they do most of their school supplies spending in the mass channel vs. a quarter for home office supplies. Share of preference for computers in the mass channel could see a boost with a recent distribution deal between Wal-Mart and Dell.
· In June, Wal-Mart began selling Dell computers. This reflects a change in Dell’s strategy, which has always relied on direct sales, i.e., mail, phone and the Internet, to drive its business (with the exception of some mall kiosks and the sale of a few models in limited quantities through retailers like Costco). Dell will sell two new desktop models at Wal-Mart and SAM’S Club, both in a package bundle priced less than $700.
