Unlocking the Potential of HBC
Case outlines how to make most of profitable but overlooked category
GLENDALE, Ariz. -- Is four feet enough for 51% margin generators? That was the title question of the health and beauty care (HBC) Convenience Retailing University (CRU) course this week led by Advantage Sales & Marketing's David Case; however, the business development manager for convenience HQ quickly warned retailers that "you have to get that first four feet right before you even think of expanding."
There are plenty of reasons retailers shy away from what Case dubbed "one of the most overlooked areas" in convenience stores. While a very small factor in overall c-store sales and profits, the category faces a bevy of challenges ranging from Food & Drug Administration (FDA) regulations, state-by-state regulations, reformations, a high rate of theft and a higher rate of recall than most any other segment.
"You have to transform your thinking," Case said of the segment, noting that--despite all the obstacles---HBC also offers many benefits to retailers. For example, an impressive 75% of all HBC purchases results in a secondary sale. The category is also growing, up 5.5% in 2011 with the number two growth margin percentage (behind ice) and number one growth margin growth.
So what to retailers need to do in order to create a successful HBC set?
"You have to give the section a 'physical' each year," said Case.
Many stores only revamp their HBC set every three to four years--or just put in Tylenol and call it a day; however, Case pointed out that it is crucial to look at which subcategories are growing year to year: the top 11 subcategories drove 87% of HBC volume in 2011. While there were predictable power players, like internal analgesics, there were also surprises: Case described condoms as having a "great year" in c-stores, with an 11% share of the HBC volume and up 13.4% in dollar sales compared to the year before.
Case also shared his emerging subcategories for retailers to watch in 2013: smoking cessation, foot care, calming and/or hangover relief and healthy protein shots.
With more than 100 SKUs and 30 manufacturers to deal with, approaching the HBC category is no easy task; however, Case strongly believes "a 50-plus percent margin generator should be worth it."