Price and location drive impulse sales

Chain Drug Review, Sept 7, 1992

CDR Roundup - As long as a product is small, priced to sell and has a profit margin from 20% to 50% or higher, it has all of the qualities to generate strong impulse purchases at the front end.

Still, a number of vendors believe that chain drug store managers can increase their turns by adhering to three simple rules: * "Evaluate the movement of products, then display the top-movers," says Gary Baker, who is vice president of trade development at Eveready Battery Co. * Remove clutter from the counter so that consumers will focus on just a few exceptionally profitable low-ticket, high-margin items. "You just want to pick the top-selling SKUs," says Louise Foerster, a group product manager for Bic Corp.'s lighter and shaving business. * Be more aggressive. "Retailers should offer the same kinds of promotions at checkstands that they do in other parts of the store," says Tom Fitzgerald, a spokesman for Brown & Williamson Tobacco Corp., maker of Kool, Capri, Barclay, Raleigh and Viceroy cigarettes.

"The idea is to have recognizable products that address the personal needs of customers at a particular moment and are priced to sell," says Gary Hirschman of Health-Tech Inc., maker of Sweet Breath breath fresheners, dental floss, and other oral hygiene products.

Two major factors drive impulse sales: price and location.

Vendors, of course, want their products at the checkstand, preferably in choice locations, and many of them (most notably cigarette manufacturers) are willing to pay for the privilege with retail display allowances (RDAs).

Philip Morris USA, however, has devised a new type of RDA, "Masters in Retail Excellence," which pays for sales performance rather than for space. The manufacturer advises retailers to reduce the overall number of items at checkstands and have only the top-selling brands on display in the hottest positions.

"The Masters in Retail Excellence program will increase retail category profits and, of course, we'd like to increase our profitability as well," says Lillian Johnson, manager of carton outlet programs at Philip Morris, which makes Marlboro, the nation's biggest-selling cigarette brand (which has about a 25% share),

"We feel that, if you follow basic merchandising principles, you'll increase your volume on our brands. Put over five displays on the counter and your message gets lost."

A sampling of chain drug operators reveals that they are more than willing to accept RDAs when they are offered. In some instances, retailers will actively seek RDAs. But, as a general rule, retailers are more interested in low-ticket, high-margin products that turn a profit than in RDA money.

Some items that meet the criteria as good checkstand items are: cigarettes, with 20% to 33% profit margins; lighters, with margins sometimes running higher than 50%; and razors, with margins of 25% to 30%.

Nevertheless, front-end space can often be hard to come by unless vendors are prepared to offer something more. "We are up against a very small amount of space, and we want it to work very, very hard for retailers," says Foerster. "The no-clutter look increases the pressure on vendors to compete for space."

To meet that challenge, Bic is always coming up with products and promotions - such as its Limited Edition designer lighters targeted to both men and women, and a new Bic lighter with a child guard. "New lighters are distributed several times a year so that merchants always have something fresh to offer," says Foerster.

Bic's answer to the no-clutter look includes displays that take up minimal space: its 7-inch by 7-inch, two-tier counter display holds 100 lighters, while its three-tier counter display hold 150 lighters.

Batteries, which have 40% profit margins, are common front-end products. Eveready has created a space-saving display pack designed specifically for the checkout area. On it, the batteries are shrink-wrapped instead of carded.

"Not only does it save space, but it's environmentally conscious," says Baker. "Retailers are having a hard time moving away from carded merchandise, and those who do it now will be ahead of the game."

Another battery company, Rayovac Corp., attempts to solve the space problem with plastic strips with clips on top that can display multipacks of batteries. The firm also offers cardboard containers holding flashlights or batteries that can sit on the shelves and be discarded when empty.

For his part, Hirschman says that Sweet Breath fresheners can be displayed in a special dispenser that holds 48 pieces and occupies only 6 inches by 3 inches of counter space. That's not bad, he claims, for a $1 product with a 40% profit margin.