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GMDC, A.T. Kearney Find General Merchandise Retailers Are Overlooking a Powerful Weapon in Battle Against Industry Disruption

July 12, 2018

Research Report Highlights Opportunities for Retailers to Thrive in the Face of New Competition

 

COLORADO SPRINGS, Colo. – Rather than concede general merchandise sales to new and disruptive competition, brick-and-mortar retailers are seeking creative ways to maintain their share of this critical and high-margin category.

This is one of the conclusions contained in the General Merchandise Benchmarking Report, an annual industry report recently released by leading retail industry trade association Global Market Development Center (GMDC) and A.T. Kearney. The study surveyed 100 general merchandise retailers and identified five key strategies that food, drug, and mass retailers can leverage to both stem the loss of short-term sales and set themselves up for longer-term success.

Recently released at GMDC’s 2018 General Merchandise Conference, the report describes the GM category as a potentially overlooked weapon in the arsenal of traditional retailers fighting for survival on multiple fronts. The research indicates that although GM sales in the traditional Food/Drug/Mass (FDM) channel dropped by 3.5 percent last year—largely because of a decline in units sold (not counting online retailers)—opportunities still exist for traditional retailers to leverage GM. 

The study found that not all general merchandise categories are created equal, suggesting retailers stop thinking about GM as a monolithic category and instead focus on the potential of specific general merchandise categories and subcategories on an individual basis viewed through the filter of broader trends impacting consumers and retailing.

“Retailers who are on-trend, online, localized, promote, and personalize will succeed in GM,” affirms Charisse Jacques, principal, A.T. Kearney.

The research revealed pockets of growth that relate to several trends currently impacting GM. Five characteristics stand out among the retailers that are succeeding at driving growth in GM:

  • Being on-trend: Successful retailers of GM are tapping into current consumer tastes. The kitchen category, for example, is heavily impacted by urbanization and the new “foodie” lifestyle, resulting in growing sales of storage and baking products, just as the household category is being impacted by growing consumer awareness of sustainability, resulting in the growth of LED lights.
  • Offering a broad and deep online GM assortment: Retailers with positive GM sales growth are three times as likely to have an endless aisle assortment, GMDC discovered. 
  • Localizing merchandise: The research indicates that a store’s community role should shape its category choices, whether it’s a rural general store with a broad GM assortment or an urban convenience store focused on immediate consumer needs featuring select GM items. However, nearly a quarter of retailers report still making GM decisions as a single, chain-wide assortment—a less effective approach than tailoring assortments to the store level. 
  • Maintaining traditional promotions while conducting more digital promotions: Retailers decreasing their use of traditional promotions such as temporary price reductions (TPRs) in GM are three times more likely to have negative year-over-year GM sales, whereas retailers that increase their use of digital offers are four times more likely to enjoy positive GM sales growth. All but about 10 percent of retailers surveyed are increasing their investment in personalized offers across all of non-food. 
  • Knocking down departmental silos: This final key to success in retail GM sales engages the consumer with cohesive, solution-oriented stories that feature GM alongside other core products—a growing strategy among 52 percent of retail leaders surveyed. Integrating GM into the store creates an experience for the consumer, rather than separating GM into its own aisle in the store.

While at the highest level it may appear that GM isn’t doing well in the FDM channel – due in large part to ever-increasing competition from digital merchants – research has found that pockets of growth exist and retailers can adopt some of these lessons learned to fuel sales across their GM business.

“Interestingly, several of the products selected as the Top 10 at our General Merchandise Conference in June advanced in part because they align with trends noted in this report, or because they could help retailers tap into these trends,” said Patrick Spear, president and CEO of GMDC. “For example, seven of the Top 10 products represent kitchenware or gadgets, aligning with the “foodie lifestyle” as one of retail’s current and predominant trends.”

For more on the General Merchandise Benchmarking Report, see video of GMDC’s live session that A.T. Kearney hosted as the recent GMDC General Merchandise Conference. For more details on the 2018 GM Conference, see Innovations Magazine. GMDC’s Health Beauty Wellness Conference, considered the go-to event for retail success in these categories, will be held Sept. 13-17. For more information, please visit: https://www.gmdc.org/conferences/2018-hbw-conference.