Discounters charge led by trailblazers in home goods categories - Annual Productivity Report on Full-Line Discount Stores

Discount Store News, August 7, 1995

NATIONWIDE DSN REPORT -- Relatively new categories continued to supply the bulk of full-line discounters' growth in 1994, as home items like furniture, crafts, lawn & garden and consumer electronics led the way. Four categories posted growth of 20% or better, and nine of the top 10 categories grew by more than 10%.

TOP 10 GAINERS(*)

Furniture            24.54%
Food                 23.66
Household cleaners   21.27
Lawn & garden        20.91
Crafts               17.07
Sporting goods       13.44
CE                   12.06
Pharmacy             11.06
Hardware             10.98
Stationery            8.98

(*)Percentage departmental sales gain vs. '93

Source: DSN Research

For the second year in a row, furniture, mostly ready-to-assemble, was the most explosive category, paced by increased-quality goods, specialty items, all-wood constructions and new finishes like cherry and distressed-look white washes. Higherend office goods appeared to be a major growth area (and one that helped push price points past the magic $100 mark), but better-quality living room and dining room goods also made a contribution.

Target, Bradlees and Caldor, in particular, have grown their departments significantly (Target has shifted almost entirely to all-wood constructions and high-quality kitchen and living room pieces), but conventional regionals like Ames have also moved more aggressively into furniture as a competitive differentiation from Wal-Mart, which has stuck to the lower end.

With 41 million workers now doing at least part of their business at home, home office furniture is projected to explode as a category. To date, most of the growth has come from the office superstore and CE chain segments, but mass merchants saw strong performance in office furniture, a trend that should be even more pronounced in coming years.

The food category, spurred by fresh dairy, low-fat snacks and cold drinks departments, grew almost as quickly as furniture, at 23.66%. Note that this figure excludes supercenters' grocery department sales results.

Food has become a major convenience category for discounters, building traffic and the average ticket simultaneously. Discounters can cherry-pick the category, offering only products that are consumed immediately or ones, like breakfast cereals, where a discounter can offer a significant savings over a grocery store. The greatest growth in the category came under the subheading of "other," indicating that discounters are diversifying considerably, building businesses other than the traditional candy, beverages and snacks. Condiments like salsa and specialty mustards are booming, and private label goods in all categories are blowing off the shelves. Wal-Mart has been a leader in this growth, but with few exceptions, most of the industry has jumped on the bandwagon.

Household cleaners, a normally stable category, jumped a surprising 21% last year. New "ultra" formulations in laundry and general cleaners, as well as aggressive pricing on jumbo packs of paper goods, probably stimulated the growth, as did condensed versions of popular products, which reduced weight and bulk considerably, allowing for more inventory on less shelf space, as well as convenience for the consumer (and a bit of ecological cachet as well, which is supplemented by promotion of recycled packaging).

Last year's spring and summer weather over most of the nation stimulated lawn & garden sales, as did the Baby Boom generation's fascination with gardening, now the nation's leading hobby. Live nursery, in particular, saw significant growth, as did outdoor furniture.

The crafts boom has slowed somewhat in the past year, but discounters still rang up a 17% increase over last year. The key here is more advanced crafts products, like dollhouse kits, which command higher price points.

Sporting goods, after years of so-so growth, turned in a strong performance this year, led by outdoor products like camping equipment. Target moved into that category aggressively, with in-store "campgrounds" with fully assembled tents, cookfires and other camping necessities. The continuing RV boom probably contributed to sales as well.

Consumer electronics, paced by music and computer software, jumped 12%. The lower cost of compact discs, which are now retailed in the $12.99 range, compared to $14.99 or more a year ago, coupled with strong releases from most labels and increased household penetration of CD players to jump-start the category. Most mass merchants increased their selections and paid attention to categories, like new age and country, that appeal to older shoppers, as well as alternative and rap artists, which drew increased traffic from younger consumers. The 16-bit video game business slowed noticeably, and retailers reacted by paring their software selections and preparing for the coming CD-ROM based systems. Wal-Mart added 3DO multiplayers and Sega's Saturn in 1995, and will probably support Sony's PlayStation as well.

Computer software is still a young category at most discounters, and barely registered overall. However, it was clearly a major component of Wal-Mart's CE growth, which moved to 10% of overall sales from about 8% a year ago.