For discounters in 1995, growth was 'home'-grown - home products - Discount Store News Productivity Report

Discount Store News, August 5, 1996

In an attempt to boost profitability during the course of a difficult retailing climate in 1995, many chains adopted similar strategies. This year's Discount Store News Productivity Report reflects an industry that is intent on building traffic through consumables while at the same time boosting margins, particularly in home fashions categories.

Food, home goods and core categories like H&BC and hardware were all strong gainers in sales, with furniture, food and lawn & garden all growing at better that 33% over last year.

In 1994, there was a dramatic shift to home products, a move that had been in the making for several years. That shift accelerated markedly in 1995, with furniture, lawn & garden, consumer electronics and stationery all showing explosive growth.

Domestics, crafts and other decorative products were the major gainers in the past. The emphasis has now moved to household hard goods like tables, lawn tools, big-screen televisions, music, video and other nondecorative products. Discount store shoppers appear to be investing in products with more utility, like ride-on mowers, solid-wood RTA products, big-screen televisions and cedar lawn furniture.

The near $18 billion net jump in sales at discount stores may have obscured slower growth in some categories. Only the categories of toys, pharmacy, jewelry, photo and crafts actually showed a drop in sales from year to year, and those decreases were by and large negligible.

For the second consecutive year, furniture sales at discount stores soared, this year by more than 40% on top of a store-leading 25% increase last year. Furniture's strong showing is attibutable almost solely to a huge jump in juvenile furniture to $1.19 billion from $310 million, with supporting increases in living room and office furniture.

Food improved on even last year's strong showing with a 38% increase in gross sales to $13.05 billion. That makes food, only a few years ago a very minor part of a discount store's merchandise mix, the second-largest single category after apparel and slightly ahead of consumer electronics and housewares.

Food numbers in this year's report include sales from tobacco and pet food. In years past, those two areas, worth about $3 billion in annual sales at discount stores, had been reported as part of miscellaneous by many retailers, fragmenting the reported totals.

A closer look at the category breakouts reveals some interesting trends. For instance, automotives turned around years of decline with a strong showing in 1995, thanks in large measure to a surge in sales of chemicals and additives, with parts and auto paints continuing their decline.

Consumer electronics had another strong year. However, it appears that discounters are missing an opportunity to pick up music sales, with only Wal-Mart and Target making significant attempts to increase assortment and adjust pricing to the new $11.99 to $13.99 level predominant at the mass market level.

Together, prerecorded audio and video accounts for about $3.5 billion in annual sales, and those numbers should continue to rise as the music business recovers from two down years and more studios adopt low-price sell-through strategies for blockbuster hits. DVD, while still mired in controversy because of the quality of copies possible with the digital technology, will eventually introduce a new window of sell-through titles, with massive hits like "Twister" scheduled to be available for $23 or so on-shelf at the same time that the video appears at $100 or so for the rental market. That should add sales to the category.

Video games bounced back somewhat last year, in large part because of the massive success of Sony's PlayStation, introduced last Labor Day. Hardware and software both sold out almost entirely by the time the Christmas holiday ended. And the industry has Nintendo's Ultra 64 to look forward to for this year's fourth quarter.

Apparel sales, not surprisingly, just barely remained flat, rising a mere $600 million over 1994, to $37.94 billion. Without substantial increases in men's and girls', the category might actually have declined, as did sales of women's accessories and footwear.

H&BC sales rose across the board, as discounters establish themselves as the spot to stock up despite attempts by drug and grocery chains to usurp that position. Hair care led the way, with a relatively huge jump.

Hardware also grew across the board, but only hand tools, possibly underreported in 1994, grew substantially. Other subcategories were essentially flat, and paint/supplies actually dipped from 1994.

Lawn & garden sales were driven by lawn care products and yard tools, since gardening and landscaping continued to grow as hobbies among the now-aging Baby Boomers.

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