NEW YORK —The health and beauty care and general merchandise categories represent significant growth opportunities for grocery retailers, according to a new report. Shoppers at brick-and-mortar stores spend $80 billion a year across the HBC and GM departments, but the majority of that spending is going to retailers in nonfood channels, according to the second annual “The Power of GM and HBC in Grocery” report from the Food Marketing Institute and marketing agency Acosta Strategic Advisors.
“While shoppers give a lot of their total spend to grocery, the share of their [general merchandise] and HBC spend in the channel is disproportionately low,” said John Clevenger, managing director and senior vice president of Acosta. “Yet at the same time, these shoppers are in grocery stores more than other channels and want to buy these products, so we just need to convert them.”
The grocery channel stands to gain $1 billion in sales by gaining just one share point of the HBC category, according to the report.
The top categories for increased HBC sales were: cold/allergy/sinus tablets (11%), vitamins (9.8%) and toothpaste (5.8%). Top categories for increased GM sales were: culinary (32.3%), office products (14.2%) and foil pans (12.5%).
“The HBC category is complex from a purchasing perspective since most shoppers fulfill their HBC needs at a wide range of retailers and/or channels, including e-commerce,” said Kim Adoerre, senior research manager of Acosta’s Center for Shared Business Intelligence (CSBI).
The report identified consistencies among retailers with the fastest growth in the categories. It also detailed strategies that lead to increased revenue and offered tips for growth in these categories.
Key strategies identified in the report for boosting health and beauty sales in grocery include:
- Compete on price: There are many factors that shoppers consider when deciding which health and beauty items to buy and where to buy them, but price is a top consideration. In fact, 62% of shoppers who don’t buy HBC items at grocery stores said pricing was the key reason, and 91% of shoppers surveyed by Acosta said they agreed to some extent that competitive pricing could encourage purchases. Grocery retailers can compete with other channels by matching prices with drug stores and online merchants and offering lower prices than other grocery retailers.
- Expand assortment, focus on attributes: Millennials, in particular, rate assortment as a key factor when shopping the HBC category. Shoppers value assortment most in the cosmetics, facial skin care, fragrance and hair care categories, so retailers would do well to offer a wider selection of those items.
Emphasizing product attributes can attract shoppers looking for products with a certain pedigree. More than 70% of shoppers said they view cruelty-free, natural and hypoallergenic attributes to be “somewhat to extremely important.” Paraben-free products are also in demand, with 64% of shoppers identifying that attribute as important.
- Drive awareness with promotions: Reminding consumers that their grocery shopping trips can also be an opportunity to stock up on health and beauty items emphasizes the convenience aspect, which is a key factor when deciding where to shop.
With HBC grouped together in one location, focus on driving traffic to the department by promoting frequently for awareness, instituting prominent “consumer solution” end-cap displays and offering front-page feature support.
With GM products dispersed throughout the store, focus on bringing the department to the traffic by cross-merchandising with complementary products, creating secondary locations and capitalizing on seasonal themes.
“To be successful in increasing GM/HBC revenue, retailers need to create disruption in-store — more than 50% of shoppers shop the perimeter of the store weekly, compared to about 20% who shop HBC and GM each week,” Clevenger said.