'Tis the season for chapped skin, runny noses, spiked temperatures and compromised immune systems. What better time for convenience retailers to give a boost to their health and beauty care (HBC) program and optimize an oft-overlooked category that’s begging to be stuffed like a Christmas stocking over the fireplace?
“Not only can c-stores provide a hot cup of coffee from the beverage station, they can also offer appealing cold and flu remedies and preventive products that will keep their customers healthy,” says Jon Hauptman, partner with Willard Bishop LLC, Barrington, Ill.
Tim Powell, principal with Think Marketing, Columbus, Ohio, sees HBC as a neat niche for the colder season. “It may not drive people into the store, but consumers expect a good variety of products, particularly during winter,” he says. “These should also be priced reasonably and have names consumers trust.”
Retailers may not be especially motivated to beef up HBC offerings in any season, considering the category supplied only 1.3% of in-store sales in 2013 (same as the year prior), according to the NACS State of the Industry Report of 2013 Data. However, the HBC category can be a significant profit generator for c-stores, with typical gross margins of 50% to 65%, Powell says. In fact, per NACS data, HBC ranked 10th in gross-margin contribution in 2013.
Filling a Niche
While c-stores are not a “go to” source for HBC needs, they are well positioned as immediate-consumption destinations for time-strapped consumers. This is where an HBC strategy, notably in the winter season, makes sense. Think about OTC medications, hand sanitizers, lip balm, skin moisturizers and eye drops.
“These can serve as incremental, add-on sales to patrons as they enter the store for an immediate-consumption need during the winter,” Hauptman says.
Beth Noteman, senior director of category management for Lil’ Drug Store Products Inc., Cedar Rapids, Iowa, concurs: “Customers often come in with a headache, bellyache or sniffles, and you want to meet their needs and prevent them from going to the drugstore across the street.”
Also, consider what high-margin items are likely to draw strong attention during the year’s driest months. “Approximately 40% of lip balms are sold between November and February, and c-store shoppers often pick that up when purchasing soda or candy,” Noteman says.
CONTINUED: Realistic Expectations
Don’t get too enthralled with markups. Steve Montgomery, president of b2b Solutions LLC, Lake Forest, Ill., cautions that while HBC winter offerings represent an opportunity, excessive markups may turn off customers who can pursue other outlets such as drug and dollar stores for many of the same items.
“One of the things that has hurt c-stores with HBC is pricing. We are a high cost-to-serve channel, and when we add our markup, we often find ourselves with what has been referred to as ‘insult pricing,’ ” says Montgomery. “Providing seasonal items is a chance to make the customer aware of the entire HBC offering and create a positive perception. But if the items are priced too high, then the retailer taints the customers’ perception of not just HBC but the entire store.”
Oasis in the Desert
Ray Johnson, operations manager for the 20-store Speedee Mart in Las Vegas, has done his best to milk the HBC convenience factor during the winter season.
“Our customers are in a hurry and often this is not their normal stop, so we have to ... make a good first impression on a shopper who may have a need for one or more of these items right now,” says Johnson, who points out that his No. 1 HBC seller in winter is eye drops, followed by lip balm. He also stocks up extra on multipack vitamins, tissues and hand sanitizers.
“As long as you’re not trying to sell the big $15-dollar bottles of stuff and you keep your (HBC winter) retail to where the customer’s expectations are reasonable, you can compete ... not just remedies, but preventives like vitamin C,” says Johnson. “This way you ensure that even if the customer isn’t sick, you’ve got something to sell them in this category that will make them feel healthier and more immune.”
CONTINUED: 10 Tips to Help Grow HBC
10 Tips to Help Grow HBC By At Least 10%
Employ Secondary Placements: Stock the top winter sellers: cold/flu meds, lip balm, travel-size hand sanitizers. Consider the checkout for smaller impulse items.
- Johnson of Speedee Mart suggests using plastic square shelf stackers and/or power wings near the front of the store.
- Powell advises having a mini-display rack at checkout that reinforces to customers the importance of stocking up on health and wellness products.
- Ask suppliers and manufacturers to provide racks, cases and other specialized display solutions.
Make Brands Count: “Small secondary displays of the bestselling name brand cold/flu and allergy/sinus OTC medications in the wintertime season will help maximize sales,” says Tom LaManna, vice president of merchandising services for Convenience Valet, Melrose Park, Ill.
- Brand names appeal to an important demographic: the female shopper. “In a drug store … the female is likely purchasing the medication for the family, which is a big threat to c-stores,” says Powell. Counter by offering single-serve major brand names. This will fetch you the highest margin while capitalizing on impulse sales.
- Be sure to choose products that provide clearly understandable packaging. “Consumers want to read exactly what they’re buying and know how to dose properly,” Powell says.
Take Turns vs. Margin: “Even if you sell just a few of them at a lower margin, you’re making more money than if you don’t sell any,” says Montgomery.
Don’t Overstock: “This is an 80/20 category, so be sure you have the right products and that you are careful not to run out of the 20% of items that create 80% of your sales,” says Rob Razowsky, president and CEO of Rmarts LLC, Deerfield, Ill., which operates five c-stores in the Chicago area market. “With the right set at the right time, you can certainly grow your HBC category by 10% to 20% annually.”
Employ Trade-Ups: Consider offering at least two sizes of certain products to incent customers to choose a higher-priced item with greater perceived value than a small size. “Think of it like the king-size candy bar next to the regular-size candy bar,” says Noteman. “If you offer a midsize package of acetaminophen, say 20 pills for $3.99, vs. four pills for $1.99, that’s a smart retail price-laddering tactic that is more likely to get the consumer to trade up to the next largest size.”
Increase Visibility: Position HBC winter offerings near the counter and not past the first aisle, and avoid placing any of these products behind the counter. “Most customers don’t know what they want, and they’re not going to ask the cashier to see a box they might notice behind the counter,” Johnson says.
Bundle Products for Convenience: Johnson got one of his suppliers to create a special package for an effervescent pain-reliever tablet that allowed the item to be hung over the top of a 12-ounce bottle of Speedee Mart-branded water. He merchandised the product on the counter and offered a bundled discount that resulted in strong sales. “This was great hangover medicine to have around New Year’s. It promoted my brand and increased the average register ticket,” Johnson says.
Use Consumer Research to Optimize Plan-o-grams: Enlist a research firm to scrutinize what is being purchased and develop strategies for where to best place HBC winter items. “You really need expert number crunching instead of hunches and store sales data that doesn’t give detailed information,” says Powell.
Stock HBC Winter Products Early: And promote, promote, promote. Razowsky recommends displaying items such as lip balms and hand sanitizers as early as October, when seasonal flu activity often begins. “Hand sanitizer sells year-round, as colds are not seasonal, but impulse sales are especially strong during the peak flu season months of November through February,” LaManna says.
Provide Point-of-Purchase Reminders: Let customers know you’re in the HBC game and that you carry the most important products.
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