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					Leveraging Housewares Categories
         in Supermarkets



          IHA White Paper



             Published by




            Developed by




                     2010




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Dear Housewares Executive,

Across the retail spectrum, food retailers are in enviable positions to weather any storm the
economy can create. With the average household making about 60 trips each year to their local
supermarkets, grocers know full well that their survival in a down economy is possible, but
certainly not a given.

For decades, housewares manufacturers have supported their supermarket trading partners in joint
efforts to enhance retail profitability, while adding a little more merchandising excitement to the
shopping experience.

However, as many supermarket operators wrestle with recurring decisions about space allocation,
they often give only casual consideration to housewares products, even though they recognize the
profit potential available from these high-margin home goods.

The supermarkets we work with recognize that they have the unique opportunity to influence the
consumer at the point of purchase and to save her a trip to another retailer, if they have the
housewares products she needs for food preparation, cleaning and storage, to name just a few.

Many of our brightest supermarket operators shared with us their best ideas and merchandising
practices. This industry white paper is the result.

We developed it to highlight “bright ideas” in supermarket housewares retailing. Certainly, you
will recognize some of these ideas as something you currently do, or may have done in the past.
But, just as certainly, the economic climate is very different – and more challenging – than it was
just a few short years ago.

We offer this to the housewares industry – retailers and manufacturers alike – with the hope that it
sparks a few ideas of your own which drive high-margin sales increases in supermarket housewares.


Sincerely,



Philip J. Brandl
President
International Housewares Association
6400 Shafer Court, Suite 650
Rosemont, IL 60018

phone: 847.292.4200
email: pbrandl@housewares.org
website: www.housewares.org

P.S. Be sure to check out the “Rate Your Program” section for a concise list of actions you can
begin today.


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Table of Contents


Merchandising........................................................................................................ .................................4
     –     Bringing Shoppers into Center Store Aisles............................................................................. .......4
     –     Impulse vs. Planned Purchases ......................................................................................................5
     –     Housewares Category Management ................................................................................................6
     –     Flex Space ........................................................................................................................................6
     –     Big Box Competition .........................................................................................................................7

Metrics ……….…………….. ......................................................................................................................7
     –     Category Performance......................................................................................................................7
     –     Vendor Performance.........................................................................................................................8
     –     Promotional Pricing ..........................................................................................................................8

Operations ................................................................................................................................9
     –     New Items ........................................................................................................................................9
     –     Open Stock ......................................................................................................................................9
     –     Store Housekeeping ........................................................................................................................9
     –     Shipping ..........................................................................................................................................10
Rate Your Program ................................................................................................................. 11

Contributors .......................................................................................................................... 12

Additional Resources.............................................................................................................. 13

Shaping the Future of Housewares Merchandising in Supermarkets ................................. 14




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                   Leveraging Housewares Categories in Supermarkets
                                    IHA White Paper


As part of its mission to support the buyers and sellers in the housewares and home goods industry,
IHA launched an investigation into how supermarket operators successfully leverage housewares
categories in their stores. Since the strength of profit contributions from housewares has long been
known by buyers and category managers, the underlying question is not why should, but rather,
how can a food retailer capture a larger share of the more profitable housewares business?

IHA engaged Raftery Resource Network (R2N), a consultancy with experience in both food and
housewares industries to develop answers to that question. A panel of housewares company
executives were convened to guide the investigation and to recommend retailers for the interviews.

R2N conducted confidential interviews with supermarket executives responsible for their individual
company’s housewares program. The goal of the interviews was to identify “best practices” –
called Bright Ideas here – at these companies which could be useful for other supermarket operators
interested in increasing sales of housewares products.

This white paper contains the results of those confidential interviews. Since several interviewees
requested anonymity, no companies or individuals are identified. However, the sample includes the
following types of operations: large national retail chain, large regional retail chain, medium-sized
regional retail chain, large supercenter operator and wholesaler.

The findings from this project cover three general subjects as they relate to housewares:
merchandising, metrics and operations. Bright Ideas are shown as bullet points.


                                        Merchandising
Bringing Shoppers into Center Store Aisles
In general, stores with enough room merchandise housewares categories in a separate part of the
store and use this department or store-within-a-store, as a destination draw for shoppers. Regardless
of the store size, the value of housewares integration and cross-merchandising is recognized by
supermarket operators. Product and dairy departments are favorites for cross-merchandising.

Bright Ideas
     A national chain retailer cross-merchandises housewares in appropriate food categories and
        uses dual placements in several store formats. Shoppers are drawn into the aisle with
        separate ads and in-store demonstrations that tie food products in with food preparation.
     A chain retailer is investigating email messages and Internet advertising to bring shoppers
      into center store aisles.
     A large format operator integrates more housewares with food than other GM categories
      because of the direct connection between food and housewares.




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     Category coupons and target ads are used by one operator to make sure food shoppers are
      aware of their housewares offerings.
     One wholesaler uses special wire fixtures to highlight housewares products which are
      integrated next to related food categories.
     Another uses overhead signs and blade signs to draw attention to a “Kitchen Shop” section
      which also uses “Metro wire” shelving.
     A regional chain retailer integrates promotions such as coffee and mugs. “Food storage
      items offer several synergies with food categories.”

Weekly ads and promotional pricing continue their traditional role in bringing shoppers into
housewares categories.

Impulse vs. Planned Purchases
Supermarket retail executives generally consider housewares purchases to be strongly impulse-
driven. However, for some categories, with higher retails, consumers plan the purchase when the
need arises and will consider their supermarket as a source – but only if they are aware of this
option.

Bright Ideas
    A wholesaler uses j-hooks and power panels to capture sales of “breakage replacement”
       items such as kitchen utensils. While this is a planned purchase – “it’s probably on the
       shopping list for the mass retailer” – this approach leverages the fact that people go to their
       supermarkets more often than they go to mass merchants.
      A regional chain retailer says “Consumers are more focused on need-to-have items and less
       focused on nice-to-have.” This operator uses floor stands, tie-ins and end caps to drive nice-
       to-have purchase decisions.
      During the fourth quarter holiday season, one wholesaler adds eight feet of small appliances
       and pallet programs for gadgets, dishes and glassware.
      A national retail chain has opening price point items in every housewares categories and
       uses a good-better-best assortment strategy in larger stores, many of which have a 400-ft.
       section for housewares. “At one point, housewares sales were 90% impulse; now they are
       75% impulse, due to this strategy and sales are up significantly.”

One retailer observes “the grocery channel has a huge advantage over other channels to drive
impulse sales because of the frequency and the tie-in with meals and meal preparation.” Another
believes impulsivity is strongest below $10 retail.




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Housewares Category Management
With space tight for housewares categories, “category managers must have a good eye” for products
and layouts. In general, planogram strategies for housewares are the same as those for food
categories (e.g., position high impulse, high margin items at eye-level).

Bright Ideas
    One wholesaler and a regional chain developed new private label housewares lines which
       improved the visual appeal of the categories.
      One wholesaler notes that “a good-better-best strategy can end up being a brand-blocked
       planogram,” resulting in the additional benefit of enhanced visual appeal.
      One wholesaler adds merchandising space for $1 merchandise promotions that “go after the
       dollar store business.”
      A regional chain works with manufacturers on package colors to improve visual appeal.
       Another does the same thing with seasonal products.
      A regional chain retailer decreased space for upscale kitchen items and added space to other
       housewares categories including food storage, school and office supplies.
      A retailer’s optimal allocations for housewares (600 feet in large stores; 100-150 feet in
       smaller stores) are being expanded to support “the core belief that housewares and food
       preparation go together.”

Housewares manufacturers can be a source of valuable intelligence for category managers.
“Grocery is as big as it needs to be. More space would only add facings, not sales. We look to
housewares space to give us incremental sales.”

Flex Space
The use of sales floor space for cyclical or changing merchandise themes varies widely across
retailers.

Bright Ideas
    For smaller stores, with limited or no flex space, one wholesaler finds self-contained
       displays work well.
      A large national chain has gradually increased space in their seasonal aisles, which often
       contain housewares items.
      A regional chain rotates themed promotional programs thorough their seasonal aisles every
       6-8 weeks.

The repetitive success of cyclical programs can be at least partly driven by consumers’ expectations,
based on their past experiences. When they remember what they saw last year, they could expect to
see similar merchandise this year.




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Big Box Competition
Competing with mass merchants has taken on a new sense of urgency for supermarket companies as
the economic climate encourages consumers to change buying habits. One tactic involves targeting
housewares category growth. Supermarket executives report wide-ranging successes.

Bright Ideas
    One regional chain who “only dabbled in this before,” developed an aggressive promotional
       program including housewares for the spring planting season.
      Another adds housewares items that are selling well in their market in other stores.
      Several companies use in-and-out promotions involving housewares products to create
       excitement in their stores.

One retailer believes “we should have as high an ACV with housewares as we have with food.”

                                               Metrics
Category Performance
Performance metrics for housewares categories are generally similar to what retailers use for food
categories, with one exception. Syndicated data are not available for all housewares categories, as
they are for food categories.

Bright Ideas
Internal measures:
     GMROII, inventory turns and sales to space measures are used by several retailers.
      Gross margin dollars and percents and market share trends over three years are used by a
       regional chain operator. Category, sub-category and aisle trends are compared.
      Sales per store door is used by a regional chain retailer to account for store size variations.
      Benchmarks used by retailers include plan (budget) sales, last year sales, market share,
       dollars/square food, case volume/number of stores carrying, price vs. competition.
      A regional chain uses base category sales dollars versus promotional dollars and the
       percentage of each to total sales.
      A national chain evaluates category “contribution percentage gross profit” which takes into
       account internal costs such as transportation, labor and inventory shrink, plus more.
      A regional chain uses direct product profit percent of sales to rank the items that they carry.

External measures:
    AC Nielsen market-level data are used by several retailers. Items-not-carried and market-
       sales-data are favorite reports.
      One chain retailer looks at similar items when the exact product cannot be found on external
       reports.




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      Housewares publications and NPD Group category data are used by some retailers to fill in
       for incomplete syndicated sales data reports.
      A regional chain segments their housewares assortment by price strategy: Everyday, sale
       and price drop. Their goal is to be in-line with their major competitions’ best price for the
       everyday-priced items.

Supermarket retailers often look at what items are carried by competitors in food, drug and mass
retail for categories that are not reported by syndicated data providers.

Vendor Performance
Supermarket operators have long applied “score cards” to evaluate services from their trading
partners in the food and drug portions of their businesses. While many retailers try to apply similar
metrics to their housewares suppliers, they find that this side of their business is more complex, less
predictable and in turn, not as easily modeled.

Bright Ideas
    Supermarket operators focus on in-stock position, order fill rate, competitive price and sales
       as the main metrics for housewares manufacturers.
      One retailer uses “CPG scorecards” with housewares manufacturers that have over $5
       million in annual sales.
      One regional chain evaluates smaller vendor sales versus plan after four weeks – larger
       manufacturers are weekly.
      One regional chain uses the same vendor scorecard for all categories.

One issue reported by supermarket operators involves training for housewares buyers and category
managers. “Most of our buyers were trained in food categories. Housewares has a much longer
supply chain and is generally more complex.”

Promotional Pricing
Most supermarket operators apply two pricing “rules” to housewares categories when promotional
funds are available:

Bright Ideas
    The sale price “must be right” with competition’s price.
      Promotional allowances are “passed-through” to reduce retail by the same amount.

A few operators also try to preserve category gross margin, but with the caveat that retail needs to
be in line with competition.




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                                           Operations
New Items
Speed-to-shelf for new items is generally recognized as requiring more time for housewares
products versus high-turn grocery consumables. Retailers involved in Direct Importing housewares
do not report much quicker results. However, some retailers report success in planning for new
item placements by using routine planning cycles for housewares categories.

Bright Ideas
    By publishing their planogram update cycle a year in advance, one company is able to
       increase update frequency to a 6 month cycle. Before adopting this calendar, the retailer
       was on a 1-2 year cycle.
      Another retailer targets new planograms for completion two months after the IHA Home +
       Housewares Show, where buyers see new products.

Housewares category managers follow this methodical process, except in situations where
consumer promotions are intense. In general, incumbent suppliers’ new items require less system
set-up time and replacement items can reach the shelf very rapidly as they flow through distribution.

Open Stock
The economic slow-down has had an effect on the amount of housewares inventory held by
supermarkets. Several report “being more selective” and “not going out on a limb” with
housewares open stock. While this conservative approach with these categories is not new to many,
everyday volume can be steady and strong.

Bright Ideas
    One retailer has increased their “in-and-out” program in housewares.
      Another retailer uses POS-driven computer re-orders to manage their “turn budget,” which
       has increased their budget for “investment buying.”

While the effects vary by category, buyers report higher inventory turns driven by strong sales and
their efforts to tightly manage inventory levels.

Store Housekeeping
Most retailers dedicate similar labor to housewares and food categories for routine straightening and
facing functions. They also generally report “an increased emphasis on load day.”

Bright Ideas
    One wholesaler offers a special service for stocking, ordering and cleaning general
       merchandise, including housewares. The service agent is also authorized to replace slow-
       moving items with new products. The service was developed to help independent retailers
       with limited in-store labor. Results: housewares sales in serviced stores are about double
       what non-serviced stores generate.




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      A large national chain retailer uses the same labor standard for in-store housekeeping,
       regardless of the category. The standard is based on in-bound volume.

The wholesaler notes that when a store decides to cancel this service “the trend is predictable.”
In the short term, they take care of the department, but eventually volume craters. Slow movers
accumulate on the shelves and planogram compliance deteriorates.

Shipping
Since most housewares are delivered in LTL shipments, freight is usually pre-paid, although FOB is
not uncommon. Those retailers with multiple warehouses often slot housewares in a pick/pack
facility.

Bright Ideas
    Some retailers report success with flow-through (cross-dock) warehouses, especially for pre-
       assembled displays, power pallets, etc.
      Backhaul programs are reported by retailers with fleet capacity.




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                                     Rate Your Program

The following checklist can be used by any supermarket operator – regardless of store size or
current breadth of housewares variety – to improve sales from high-margin housewares categories.

Rate your current program for each of these recommendations, which are based on the Bright Ideas
in this white paper.

    1.    Compare your variety to what your main competitors carry. What are you missing?
    2.    Analyze sales data, looking for very slow-movers. Move the dogs out, especially items
           not carried by your competition.
    3.     Partner with housewares manufacturers to develop a compelling merchandising story
           for those categories that make sense for your shopper demographics. Pick
           manufacturers that can provide consumer insights and data, not just products.
    4.    Find more ways to cross-merchandise housewares items with logical tie-ins to food and
           cleaning categories.
    5.    Add complimentary housewares items to seasonal promotion programs. Include them
           in the ads too.
    6.    Review signage and shelf fixtures used in your housewares categories. Do they draw
           attention to the products?
    7.    Develop a long-term communication strategy that regularly reminds shoppers about the
           housewares categories that you carry. Consider rewarding top-tier shoppers with
           category coupons for housewares.
    8.    Review your pricing structure for housewares and compare it to your major
           competitors. Does your strategy send a compelling and consistent message?
    9.    Add new in-and-out housewares promotions to your annual cycle to increase
           excitement and shopper appeal. Work with housewares manufacturers to merchandise
           promotions in self-contained displays if flex-space is limited.
    10. Experiment with some of the category performance metrics mentioned in this paper.
         Which ones work better for helping you increase sales and profits from housewares?
    11. Consider timing your planogram update cycle for housewares categories to coincide
         with the annual International Home + Housewares Show. Do your buyers scour the
         exhibit floor looking for new vendors and exciting new products?
    12. Evaluate in-store housekeeping practices for housewares categories. From the
         shopper’s perspective, does the presentation look organized and appealing or jumbled
         and confusing?




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Attachment 1

                                           Contributors

International Housewares Association wishes to thank the following individuals for their
contributions of time and intelligence during this project.

Rob Atteberry, Meijer, Inc.
Todd Boerema, Rubbermaid, A Newell Rubbermaid Co.
Gerry Buckles, Associated Grocers, Inc., Baton Rouge
Mickey Cassidy, World Kitchen, LLC
Terry Frey, The Kroger Co.
Steve Henig, Wakefern Food Corporation
John Jansen, Winn-Dixie Stores, Inc.
Steve Johnson, M.E. Heuck Co.
Bruce Ronner, Arrow Plastic Manufacturing Company
Jim Zimring, Kane Industries Corp.

Participating companies requesting to remain anonymous are not shown on this list.




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Attachment 2

                                     Additional Resources

“Tough Times for GM,” MMR, May 17, 2010 (www.massmarketretailer.com)
Article discussing how innovation is driving growth in general merchandise.

“Home is Where the Housewares Are,” Grocery Headquarters, May, 2010
(www.groceryheadquarters.com)
Article discussing how supermarket retailers are building awareness and profits from housewares.

“Pockets of Profitability,” Grocery Headquarters, May, 2010 (www.groceryheadquarters.com)
Article focusing on several growing GM categories.

“Housewares Added to the Grocery List,” HFN, July 2009 (www.hfnmag.com)
Article describing how some housewares manufacturers work with supermarket retailers to
highlight housewares.

“Supermarket Regionals Expand Housewares Mix,” HomeWorld Business, August 17-30, 2009
(www.homeworldbusiness.com)
Article describing merchandising practices of Wegmans’, HEB, Publix and Giant Eagle.

“Building Up Nonfoods,” Grocery Headquarters, February 2010 (www.groceryheadquarters.com)
Article describing the challenges facing supermarket operators from reduced space for housewares.

“Nonfood Crossover,” SN, September 29, 2009 (www.supermarketnews.com)
Article describing how several retailers are using interactive media to promote general merchandise
categories.

GMDC Studies are available to members at www.gmdc.org. Several reports focus on housewares,
including, but not limited to the following:

      “Consumer Shopping Habits for Wellness and Environmentally Conscious Lifestyles”
      “Seasonal Best Practices – A Plan for Seasonal Merchandise”
      “Jump Starting Top-line Growth”
      “Women’s Well-Being Marketing Strategies”
      “Helping Consumers Make Healthy Choices Through a Fully Connected Store”
      “Jump Starting Top-line Growth II”
      “1 Will Get You 5” (1984 Analytical Model)




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          Shaping the Future of Housewares Merchandising in Supermarkets

Do you have a “Bright Idea” of your own for increasing sales and profits from housewares
categories? Maybe you picked up something in this white paper – or came up with one of your
own. Either way, IHA wants to hear from you.

IHA is launching a new platform for supermarket executives interested in shaping the future of
housewares merchandising in their stores. Following the methodology used for this white paper –
individuals are confidentially interviewed by our independent consultant and industry expert – we
invite you to be part of the next wave.

If you have a success story that you want to share, please send an email or call Dan Raftery, the
consultant who interviewed the retailers for this white paper. He will schedule a brief telephone
interview at a time that works for you.

And be sure to look for the new Bright Ideas in the near future.

Dan Raftery
President
Raftery Resource Network
800 North Main
Antioch, IL 60002
847-838-1177
Dan@RafteryNet.com




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