Big 3's sharp H&BA prices lure shoppers

Discount Store News, Dec 14, 1987

Big 3's Sharp H&BA Prices Lure Shoppers

A consumer might buy a jug of antifreeze twice a year, a new basketball every five years and a vacuum cleaner every 10 years, but health & beauty aids is a monthly, if not weekly purchase, a shopping frequency chains want to encourage.

The shopper probably knows the price she pays for her tube of toothpaste, deodorant and shampoo as well as she knows the ages of her own children due to the high usage rate of these items. The hope is, of course, that barebones margins on H&BA commodities will lead her to assume the store is low-priced on everything, and visit other departments before leaving.

The Big Three discounters are sharp on pricing, nearly to a fault, according to sales and marketing executives with the leading H&BA manufacturers.

"Everyday pricing at Wal-Mart cannot be beat," is the consensus among vendors who do business with each of the three top chains. Target's promotional pricing outshines Wal-Mart's, they said, while K mart pricing was considered least price aggressive of these retailers on an everyday basis. K mart was said to be nearly on par with Target during ad weeks, however.

"When Wal-Mart and K mart have a promotional sale, they use their cubes and tables, which Target doesn't have. But Target can put the same merchandise on an end-cap to create a wall of product that you just can't miss," one vendor noted.

Regardless of vendor impressions, a DSN price study conducted in October in four markets where each of the three chains operate stores indicated that K mart had the lowest prices on a small sampling of H&BA merchandise.

Adding the prices on six items that each chain offered in all of the markets studied, the K mart market basket totalled $51.55 compared with $53.16 at Target and $53.32 at Wal-Mart.

The six items (Ivory and Agree conditioners, Mennen and Secret deodorants, Colgate toothpaste and Vicks Nyquil) are not a large enough sampling to make any definitive conclusions about chain pricing, but can suggest that store price impressions hinge on the type of H&BA products the individual customer buys.

None of the chains have a glaring problem when it comes to pricing, but there are deficiencies when it comes to keeping adequately stocked and offering a sufficient selection, vendors said.

A number of manufacturers said that Wal-Mart does not have the selection in H&BA that K mart and Target offer customers, but at least Wal-Mart is always well-stocked.

One vendor termed K mart's H&BA department as a "chronic catastrophy" as far as keeping in stock is concerned. Another believes the chain does not see out-of-stocks as much of a shortcoming.

"I'm not sure they see it as a problem. They think they have a wide enough selection. They assume a consumer will just pick up something else- . . . being out of stock doesn't really matter in H&BA."

While Target's H&BA stock situation was considered to be good, there was some concern as to whether the chain's stores will soon resemble K mart's.

"Target's new JIT--Just In Time system--means promotional goods won't be warehoused but will be sent directly to stores, and could cause out-of-stock problems," one vendor noted. None of the manufacturers said they have had any problem with JIT to date.

Heavy Traffic

While purchases made in almost any other discounter department would generate greater total revenue for the retailer, H&BA was cited by as much as 21 percent of customers recently surveyed as the category they spent most of their discounter dollars on during the past year.

A telephone survey of 1,800 heads of households across the country by Leo J. Shapiro & Associates indicated that, in general, the lower the population density of a particular market, the greater the percentage of dollars spent at the Big Three's H&BA departments.

As might be expected, K mart's H&BA category claimed the most dollars in metropolitan areas, with 11 percent of shoppers citing H&BA as the category in which they mainly spent their money at K mart during the past year. Wal-Mart edged out Target in non-metro/rural areas--20 percent of Wal-Mart shoppers said they mainly spent their Wal-Mart dollars on H&BA products during the past year vs. 19 percent of Target's shoppers.

In small metro areas, cities of 50,000 to 1 million people, Target outdistanced the other two chains: 21 percent of Target shoppers mainly spent their money in the H&BA department, compared with 15 percent at Wal-Mart and 13 percent at K mart.

Table: Target: Strong H&BA Source

Percent of shoppers who mainly spent their money on H&BA at the store during the past year

Table: MARKET BASKET: Health & Beauty Aids

Prices on selected H&BA products sold at all three chains

Photo: With sharp promotional prices in its health & beauty aids department, Targethopes to attract consumers to other, higher-margin departments within the store.

Photo: On everyday prices, K mart tended to be higher than Wal-Mart and Target in H&BA. But its promotional activity, like this Crest/ Teddy Ruxpin sweepstakes offer, is unparalleled.