Looking for the Next Big Thing

By Sarah Hamaker
Usually, general merchandise’s potpourri of products is varied enough for the category to post positive sales. But lately, general merchandise has been more miss than hit for convenience stores.The category rose slightly (1.07%) in industry gross margin percentage from 2010 to 2011, according to NACS State of the Industry (SOI) data. But its average gross margin amount dipped 1.24% from 2010 to 2011, while the gross margin contribution rose a mere 0.20% in the same time period.

However, it’s not all doom and gloom, as general merchandise snagged the last spot in the top 10 in-store category sales (excluding cigarettes), despite the 0.27% drop in percentage of in-store sales from 2010 to 2011, according to NACS SOI data.

Retailers attest to the category’s slow sales. "We’ve seen small increases overall in our sales but general merchandise remains pretty flat," said Vicki Jackson, marketing manager for Russell’s Convenience, a 23-location chain headquartered in Lakewood, Colorado. "It’s a category we do okay with but not great."

Lon Audet, marketing and merchandising director for Stinker Stores based in Boise, Idaho, concurred. "Sales in general merchandise really has been flat," he said.

The good news is that some retailers have experienced a bump in general merchandise sales. For example, sales are up 11% in the category for Handy Mart, a 20-unit chain in Winchester, Virginia. "We attribute that bump to an increase in our overall business fiscal year July 2011 to June 2012," said Kevin LaFollette, vice president of operations. "We had double-digit growth in just about every category."

Despite the ups and downs of the category, retailers and suppliers still believe general merchandise has enough potential to warrant floor and counter space in their stores.

Terrific Telecommunications
One bright spot in general merchandise is in telecommunications hardware, which has experienced a 1.57% sales hike from 2010 to 2011, according to NACS SOI data. Average store sales of telecommunications hardware jumped from $1,231 in 2010 to $1,551 in 2011, a healthy increase.

"Our sales in convenience stores are definitely up," said Gary Rep, vice president of sales and marketing for FIFO Wireless Inc. Retailers support his experience. For instance, Handy Mart added telecommunications hardware less than a year ago and saw immediate results. "It’s been a nice boost to the category," said LaFollette.

Convenience stores can also be a great place for impulse buys in tech accessories. "Smartphones and iPads, for example, take a lot more battery power to operate," explained Rep, which translates into more shoppers who are looking for products like car chargers.

Retailers see the benefit of stocking car chargers and ear buds, but some are more deliberate about importing the products into their stores. "We’re in the process of adding back a slimmed down line of telecommunications items," said Stan Mills, president and CEO of Mills Squeegee Fill Stations in Lincoln, Nebraska. The four locations used to carry many varieties of chargers, adapters and cases, but "for some reason, they didn’t move," he said. Mills is banking on fewer items doing better business in this segment.

Stinker Stores is exploring tech accessories, too. "We’ve recognized this segment as an opportunity for sales," said Audet. "The quality of the tech accessories merchandise has gotten a lot better, and the pricing is reasonable for convenience stores."

Sensational Seasonal
In addition to telecommunications hardware, seasonal general merchandise products usually sell fairly well. NACS SOI data shows a tiny gain (0.3%) in seasonal general merchandise’s percentage of sales from 2010 (3.25%) to 2011 (3.56%). Seasonal products also registered miniscule upticks in average store sales and gross profit margin amounts.

Russell’s Convenience capitalizes on seasonal merchandise by stocking an assortment of hats and gloves. "We do very well with the hats and gloves in the winter months," said Jackson, who added that the company keeps up with the fashion trends in those accessories to ensure more impulse buys.

"We do take advantage of seasonal deals to stock items customers are looking for," said LaFollette. In the summer, Handy Mart brings in picnic items such as charcoal, lighter fluid and other products geared toward outdoor activities. In the winter, the stores offer a selection of ice scrapers, shovels, sleds and deicers. "We pick up ancillary sales that maybe we wouldn’t catch without offering those items," he said.

At Mills Squeegee Fill Stations, seasonal items occupy a bit less space than in previous years, but the stores still make room for those products. "We took out a winter program that had stocking caps, gloves, bandanas and skull caps because it was taking up prime real estate and not having enough action to justify the floor space," said Mills. He is bringing back a smaller amount of hats and gloves this winter.

Awesome Apparel
While NACS SOI data indicates a decline in wearable and apparel, some retailers have seen positive sales in this general merchandise segment. Stinker Stores recently expanded its selection of store-branded apparel, such as t-shirts and hats, to cater to tourists and locals.

"It started out with different shirts for our employees to wear to work, and then we parlayed that into shirts for customers," said Audet. "Sales of our own apparel continue to grow."

Captivating Headgear also has seen growth in convenience stores. "Our sales have grown greatly over the last couple of years because convenience stores are becoming one-stop shops," which means customers are more likely to expect apparel and wearable products in the stores, said sales representative Mike DeGiusti.

The company offers seasonal products as well as all-season baseball caps. "We feel the future is bright for apparel in convenience stores because it seems people now more than ever are trying to get most everything they need in one spot," said DeGiusti.

In the wearable/apparel segment, sunglasses have been the workhorse, consistently boosting sales. "We’ve always been very active in sunglasses, and that area does very well for us," said Jackson of Russell’s Convenience.

Recently, Stinker Stores brought in a line of sunglasses tailored toward women, along with some styles for children. "We’ve found that the bigger selection has been paying off," said Audet.

Stupendous Smoking Accessories
Even though smoking accessories has declined incrementally, this segment continues to pull in customers, albeit at a slower pace. Smoking accessories fell 0.38% from 2010 (20.82%) to 2011 (20.49%), according to NACS SOI data. Average store sales dropped, as did gross profit margin sales, but the gross margin percentage actually increased from 2010 (26.07%) to 2011 (27.86%) —a bump of 1.79%.

"The pocket lighter category has grown 6% year-to-date ending July 1, 2012, according to IRI," said Mark Funderburk, brand manager, lighters for BIC Consumer Products USA. The company sparks interest in their products by featuring popular designs, including sports and celebrity licensed items. "We try to meet consumer needs by launching designs that appeal to both men and women," he said.

While Stinker Stores stock lighters, Audet sees demand decreasing. "I think the perception is that we sell a lot more than we think we do. Next year, we’re going to cut back on the lighter space a little bit because we’re not selling as many lighters as the space warrants," he said.

Nifty Novelty
The right, hot novelty item can send sales soaring in general merchandise. While the gross margin percentage rose from 2010 (38.01%) to 2011 (39.37%), novelty items fell 2.91% as a percentage of sales from 2010 (25.41%) to 2011 (22.50%), according to NACS SOI data.

Mills Squeegee Fill Stations believes that it’s good business to keep novelty items, such as key chains and specialty coffee mugs, on hand. "For novelty items, you’ve got to be able to adjust fast to take advantage of what’s hot," said Mills. "You should have a strategy and a long-term plan for novelty, and realize that sometimes you’ll hit big with a trendy novelty and sometimes you won’t."

Stinker Stores prefers a proactive approach to novelty items. Store personnel fill out online request forms for specific merchandise, such as novelty products, and management works to get those hot items on shelves quickly. "That’s our best resource for being one of the first to market when an item like Silly Bandz hits the street," said Audet.

Fantastic Future?
Part of general merchandise’s appeal to convenience stores revolves around its decent gross profit margin. "General merchandise remains a very important category for convenience store retailers due to the higher-than-average margins generated," said BIC’s Funderburk.

With more convenience stores striving to meet the needs of all customers, general merchandise will continue to be an important part of the mix. "It will always be part of the store because there is a customer segment looking for it," said LaFollette.

"Convenience stores are uniquely positioned to capitalize on the consumer fill-in purchase due to the vast number of locations and quick purchase options," added Funderburk.

And with some TLC, some retailers and suppliers believe general merchandise will move out of the shadows and onto the stage. "I could see general merchandise becoming an up-andcomer but it needs a lot of freshening up for that to happen," said Mills.

Sarah Hamaker is a NACS Magazine and NACS Daily contributing writer. Visit her online at sarahhamaker.com.