Stationery

Drug Store News, May 20, 1996

School supplies and home/office held steady with sales up slightly against 1994, according to industry estimates. Back-to-school 1995 was solid at many chains -- one buyer called it "a moderate growth year" -- with mail supplies performing well for drug in 1995, according to the School and Home Office Products Association. In fact, mail supplies was the only SHOPA segment where the drug channel achieved increased market share.

In this category, the second glance gives the best news:

* In the overall school, home/office supplies category, the drug channel holds an estimated 28 percent share among the three mass channels -- down slightly in share from the previous year, according to SHOPA, which recently began publishing mass channel figures for some segments.

* Significantly, that channel market share drop for drug stores did not translate into a drop in sales. For example, dollars rose slightly for the drug channel during fourth quarter 1995 in several segments besides mailing supplies, including drawing, coloring, art sup and software; writing instruments; as well as in the general school and home office supply category.

One reason for the dollar rise yet share decline is the growth of the overall category, along with the expansion of mass merchants like Wal-Mart and specialty discounters, who are absorbing much of the growth.

Drivers of that growth include a rise in school-age children (up around 1 percent per year after declining in the 1970s and early 1980s), and also an increase in home offices, telecommuting and home computers. Home office and home computer expansion generate sales of products ranging from personal planners and desk organizers to fax paper. Often the consumer wants these in convenience rather than in wholesale club sizes, and this fits the drug channel's convenience "I-need-it-now" niche. Drug chains have won much of the business that once went to now-defunct neighborhood stationery stores.

The trend in back-to-school is toward a merchandise mix shift as retailers sell more value-added products and trade up the consumer. This trend continued again in 1990 in upgraded school supplies with more features, and in popular BTS licensed lines like Mead's Nike products and Stuart Hall's Looney Tunes Blues line.

More drug chains are looking at school supplies as a nine-month season, starting with the second semester in January, selling through May, then again from August to December. The value-added and licensed products especially fit this pattern, as these make good holiday and birthday gifts.

Value-added lines continue to be helped by consumers trading up from commodity goods. The latter took a materials-costs price jump in 1994 (this gave the category an overall larger boost last year). In 1995, although some manufacturers lowered commodity net prices, not all retailers brought their prices down. The smaller price gap between commodity and value-added products (those with more features and fashion) generally causes consumers to trade up.

The changing home/office environment means a sales increase in products to support these activities. The driver is trends like more staff workers in home offices, more small businesses operated from home, and a growing installed base of home personal computers for education, budget organizing and entertainment.

Besides office supplies, upgraded day planners in the $20-plus area continue to be strong in drug chains, and stationery products are more than-utility when they appeal to consumers as a blend of personal expressions and gifts -- like writing instruments and practical impulse items like Mead's new line of Fat Little Notebooks.

Home office growth poSitively impacts drug chains in the mail supplies (and for some, in mail service centers) as more consumers need packing and/or shipping supplies and services, from stamps and tape to UPS and FedEx.

Another consumer trend is ordering from catalogs and home shopping channels, and this means occasional returns. New items are helping the mail category, like 3M's new Scotch brand Hand Tearable Tape, Sure Start mail tape and Satin Tape for invisible taping on metallic finish gift wrap and art/craft projects.

The drawing, coloring and art supplies segment (in drug chains, this is about twice the size of the mailing supplies segment) is also showing growth, reflecting trends like baby boomer parents wanting their kids to engage in educational creative play. New products like those from Binney & Smith, including Crayola Magic Scent crayons and Crayola Watercolor Pencils, are helping grow the segment.

Back-to-school remains the biggest stationery segment, although as mass merchants continue to open new doors, it challenges drug chains to find ways to compete against the big box stores. One way is to promote BTS more heavily and to take advantage of second semester (and tax time) to make school supplies a stronger year-round category. Another is to look for segments to promote and cross merchandise, like stationery as gifts, and mail supply and service centers.