Drug chains feast year-round on back-to-school-stationery-home office volume

Drug Store News, Feb 6, 1989

Drug chains feast year-round on back-to-school--stationery--home office volume

School-stationery-home office appears to be a rich feast for drug stores. Merchants see back-to-school as a filling course in August, and home office as a year-round banquet yet to be fully exploited.

With lots of harvesting left, drug chains sold $1.6 billion worth of the category in 1987, up 10.1 percent. That's on top of a 10-percent gain the prior year.

Home office, especially, is challenging the ingenuity of retailers and vendors to realize its potential. Specialty office supply megastores like Office Depot offer product in bulk for small-office consumers, so vendors are helping drug stores compete by offering downsized bulk packs and special displays tailored to their limited space allotments.

Stuart Hall, for example, is introducing "office packs," such as six-pack legal pads, four-pack steno pads, three-pack executive business pads, and packs of 50 clasp envelopes. "For drug stores, it provides a `happy medium' between single items and the 12-packs that warehouse clubs want, and it tells customers that drug stores are in the home office business," said a company spokesman.

And Esselte Pendaflex is packing its Colour Collection products in dump displays designed for drug store endcaps.

While many drug chains continue to expand home office space and selection, some retailers are also considering other ways to attract the office supply customer.

For example, Mark Griffin, president of South Dakota-based Lewis Drug Stores, said he's considering delivering supplies to local office customers. "We have prescription and nursing home delivery service; delivering office supplies could be a natural progression. It's a new niche." The chain already offers in-store accounts and credit card charge services for office supply customers.

"The [home office] market is strong to expand," Griffin continued. "We offer many products offered at office supply stores for considerably less money and are looking to improve our breadth of assortment. We're studying space allocations and getting into bulk--trying to determine how far to go in home office."

Phar-Mor, apparently attempting to compete head-on with the specialty office supply chains, has significantly expanded the home office section in many of its new stores. A Phar-Mor that opened recently in the Tampa, Fla., area, for instance, devotes a full valley--about 108 feet--to office supplies and targets the office customer with flats of bulk items such as legal pads, pens and pencils and computer paper. A blitz of print advertising, including full-pagers of office supplies, heralded the opening.

One competitor in the Orlando market said of a new Phar-Mor there, "The home office section was really impressive. I especially liked their use of clear plastic strips hanging down the front of wire baskets, with a sample of the item stapled to it. It really draws your attention, and customers can see what's in the bin."

Whether such all-out efforts will pay off for Phar-Mor or other drug chains remains to be seen. One executive at a specialty office supply chain said that although operations like his are watching Phar-Mor's progress, "we don't consider them any kind of major competition. We don't even consider price clubs our competition; they have some bulk quantities, but the assortment and variety isn't there and, because they buy on deal, sometimes they have an item and sometimes they don't. Offices want consistency."

Many drug chains seem to see convenience as their strong suit in home office, and a random sample of consumers who have home offices also have that perception. [See pp. 12, 21.] Mathew Kirk, director of merchandising at Maxi-drug, noting that the chain's West Springfield, Mass., store is near a Staples office supply unit, said, "We know they're there and that everybody goes there. We don't go in for the case purchase. I see convenience as our main draw in home office."

Chains also strive to offer as broad a mix as possible. "We've expanded home office and will continue to do so," said Mark Blandford, K&B's school and stationery buyer. "We'll probably add more room and items such as the storage type products this year. Home office in general is good year-'round."

While some chains are still hesitant about offering computer supplies, K&B carries floppy disks ("They do well," said Blandford) and computer paper. "Computer paper hasn't become a factor in the department yet. Based on the numbers, we probably would drop it, but we're hoping the business will evolve. We're keeping computer paper to add to the completeness of our selection," Blandford said.

Rusty Cowart, who operates the Drug Emporium franchise in the Orlando, Fla., market, switched to using a local distributor for the school-home office department before Drug Emporium moved to distributors chainwide.

"I went with a distributor for selection and assortment. We have no back stock, and the department is serviced once a week," said Cowart. "Prices are a bit higher, but we're very competitive in the marketplace, and it's been acceptable to customers."