GM business demonstrates there's strength in diversity

MMR, May 28, 2007

NEW YORK -- General merchandise is a vast business for all mass market retailers, encompassing a huge variety of products ranging from such commodity categories as disposable diapers and paper goods to high-tech items, including digital cameras and accessories.

Because of the range and diversity of products that fall under the general merchandise umbrella, it is difficult to generalize about the field. However, it is possible to identify some overall sales trends. According to a recent study by the General Merchandise Distributors Council (GMDC), total general merchandise sales in food/drug/discount outlets over a recent 5-year period declined 3.8%, while health and beauty aids eked out a 1.2% increase.

The one bright spot in that picture was seasonal GM, which registered a 10.1% rise in sales over the same period. There are a number of reasons for seasonal GM's performance, but certainly among the most important are the fact that such items provide a "treasure hunt" experience that most mass-market departments do not, plus the fact that seasonal assortments provide focused solutions to specific, time-sensitive consumer needs.

The data provided in this section by Information Resources Inc. includes sales through food, drug and discount stores (excluding Wal-Mart Stores Inc.) on 18 categories for the 52 weeks ended March 25. It reveals that there are GM segments that are generating solid, if unspectacular, growth apart from any seasonal impetus they might enjoy.

For example, sales of baby nursing and feeding accessories rose a robust 9% during the 52 weeks ended March 25. The largest category tracked here, toilet tissue, managed to grow nearly 5%, while the No. 2 category, liquid laundry detergent, saw sales expand 6%.

Three categories even turned in double-digit growth during the period: aluminum foil (up nearly 11%), dog/ cat needs (up nearly 16%) and garbage/trash/lawn and leaf bags (10% higher). The three largest categories, toilet tissue, liquid laundry detergent and paper towels, all recorded solid increases of nearly 5%, 6% and 3.7%, respectively.

At the same time, only two categories included revealed negative sales trends: Paper napkins slipped 1.2%, while light bulbs dipped nearly 2%. Two categories not included for space reasons showed more severe declines: Panty hose/nylons fell 7.3%, while disposable cameras continued to plummet, losing nearly 26% year over year to $380 million, following a 16% drop to $505.4 million during the 52 weeks ended April 16, 2006.

The reason for the decline of disposable cameras is a simple one: the explosive growth of digital imaging and digital cameras. Some mass market outlets do not even stock roll film any more, and their offerings of disposable cameras have been pared back sharply.

For retailers wishing to maintain a competitive presence in the consumer-imaging business, the digital revolution has meant investing in new digital-processing equipment. For some, replacing the traditional film and processing business has been a challenge, and their investments in digital labs have yet to generate positive returns. Nonetheless, it is the cost of entry.