Fashion-forward goods key to stationery sales - Discount Industry Annual Report, part 2

Discount Store News, July 20, 1992

Aided by the explosive growth of office supplies and the large infusion of fashion-forward merchandise, back-to-school/home office stationery sales should total $3.2 billion this year at full-line discount department stores.

Although sales have been fairly flat during the recession, basic school items are projected to remain strong again this year so avenues of opportunity may be opening up for retailers as early as Back-To-School 1992.

In children's arts & crafts, an explosion of new products are being offered from such companies as Crayola, Merigold, a Western Publishing company, and Rose Art, among others.

Also, typically mundane areas like pens and pencils have been jolted by new ideas, including entries by Pentech, Empire Berol, and FaberCastell, which emphasize design and innovation in pencil barrels. Advances in pen technology, via such companies as Zebra, Parker, Sanford, Pentel and Plus Corp. of America, plus increasing use of multipacks and upscale school supplies - which appeal to a discerning customer and which return greater profits to sellers - are cropping up in greater numbers.

To make the highly competitive and profitable stationery department hum like well-oiled machine, retailers also are inclined to cut back on sku growth and concentrate more heavily on high volume, fast turning items, particularly in office supplies, to help them better compete with the office superstores. Concentrating on up-to-the-minute designs. packaging, pricing and displays play heavily on retailers minds.

Apart from basic stationery products like writing tablets, memo books, copy paper, etc., consistently strong performers in the stationery category continue to be fashionable designs and licensed products, which provide added value to many tried-and-true items.

What hasn't caught on yet despite valiant efforts by both manufacturers and retailers are recycled goods.

Consumers still appear unwilling to purchase recycled paper products that they perceive to be lower in quality and higher in price than virgin paper.

As the technology advances, however, a greater acceptance of recycled goods is likely, said Mike Sherb, marketing manager at Union Camp, school supplies and stationary division.

Noted Sherb: "The retailer wants to commit to this but the sell-through isn't there."

However, new products continue to hit the market in a relentless effort to bring consumers along the conservation path. Each of the major paper producers have recycled lines and are extending their programs. One such program, Save The Pond by Mead, is a line of recycled school supplies that feature the lovable Muppets offering environmental tips.

According to The Licensing Letter, retail sales of licensed merchandise based on characters totaled $12.4 billion in 1991, down slightly from 1990, but still 20% of the industry's $63.5 billion total.

Further, 10% of publishing/stationery sales at retail is linked to licensed merchandise, greater than for sporting goods, health & beauty care, food/beverages and electronics/software, and just a hair smaller than toys/games (12%) and home furnishings/housewares (11%), according to TLL.

In some categories, however, publishing/stationery is a leading avenue for licensed products. Among them are: * Products based on television properties, 25% of the $1.5 billion in sales last year; * Licensed merchandise based on film properties, 17%, based on $2.1 billion in sales; * Stationery based on sports properties 16% of $11.1 billion.

Licensed goods are just one way that sellers offer higher value items. Others include exclusive art (Lisa Frank), coordinated design programs stretched over a variety of products, and innovative design, among others.

For example, Mead's Five Star First Gear line of school supplies and accessories includes such items as backpacks and three-ring binders with storage pockets. Another of its lines, Vision Point, matches its holographic cover designs on notebooks with cases by W.T. Rogers.

This year's back-to-school season will be full psychedelic designs (Stuart Hall's Fractals and mirror chrome covers by US Kids) and bright neons in items as diverse as clipboards (Saunders, S&W Products and Decorator House) fax and copy paper (Royal Lace).

Melding office supplies to meet specific consumer needs has begun to appear in the form of Stuart Hall's new Executive Suit. This is a line of office supplies designed for the professional woman with soft pastel covers on such items as address books, memo pads, personal notebooks and quad rule notebooks.

Overall, DSN estimates that stationery products continue to be among a store's most profitable departments.

With gross margins at 41.2%, stationery - including office supplies and greeting cards - earns the highest margins in a discount department store except for jewelry (43.9%).

While many individual retailers may claim turns above four per year, on the whole DSN estimates discounters in general get 3.4 turns each year in the stationery department, and annual sales per sq. ft. of $181.82. On the surface, the sales per sq. ft. number may not sound impressive - but individual items often sell for less than $1.