Higher-end goods to push sales - stationery products - Discount Industry Annual Report: Part 2: Merchandising & Productivity

Discount Store News, July 17, 1989

Higher-End Goods to Push Sales

Stationery Will Gain from High-Margin Quality Home Office and Fashion School Products

The good news at discount department stores is that higher-margin products, such as quality home office supplies and fashionable school merchandise, will account for most of the sales growth in the stationery department this year.

Commodity stationery products will continue to be a cutthroat business, offering slim margins to discounters as competition intensifies from the growing office supply megastore chains. Through office supply chains, membership warehouse clubs and some discount department stores like Wal-Mart that are targeting this business, sales of multi-pack and higher-count packages should grow in 1989.

With about 13 million businesses being operated out of homes, the home office category has become far and away the fastest growing segment of stationery department sales. And, sales of office products should continue to grow well into the 1990s, as the number of at-home businesses grows by about 1 million per year.

Many discount chains have only begun to reap the benefits of this growing business. Secaucus, N.J.-based Jamesway, for instance, recently added home office shops to its stores in urban markets, like Philadelphia, while its rural stores maintain only a basic stationery offering.

To combat the increased competition from warehouse clubs, chains like Jamesway are adding more "sizzle and color" to the department, said Larry Fine, divisional merchandise manager, at a seminar earlier this year.

New, uniform packaging programs being introduced by many vendors will help draw traffic to the department and stimulate impulse sales. Many manufacturers are putting a more consumer look on the product packaging.

Similarly, prices on writing instruments are expected to climb as fashion becomes a stronger factor in this area. Where multi-pack pencils and pens, and cheap imported markers were the mainstays of the category in the past, new higher quality, high-fashion markers and highlighters are making an impact in this area.

Scarce supplies and soaring prices are causing problems in the paper area, forcing chains to "eat margins."

The flat office category, formerly dominated by items in the $1 and $2 range--such as typing paper and legal pads--is achieving its greatest gains from goods like file folder systems.

Similarly, the flat school category is no longer dominated by commodities. Filler paper and theme books will continue to be top-selling items, especially at back-to-school time. But, out-of-season sales are being collected by discount stores in upgraded products, such as higher priced, more profitable wireless notebooks.

Additionally, the school business is not as dependent on risky--and often short-lived--licensed themes, such as Willow and Roger Rabbit, as in the recent past. Exciting new designs are dominating departments, creating more of a boutique look when merchandised with associated fashion goods. One distributor predicts that the hot covers of 1989 will be "Super Shades" and "Rad Dog" from Mead, "Neon Brites" and "Pearlites" from Plymouth, and Lisa Franks' designs marketed by Stuart Hall.

Upgraded quality and price points are also affecting the files and boxes category. Fire-resistant features are becoming the norm as typical price points rise from the $20 to $60 range, to as high as $120.

Full-liners will see approximately $2.8 billion in sales through their stationery and greeting cards department. Turns at full-liners will be 4 annually, while gross margins, on average, will be 41.7 percent.