High Margins Propel General Merchandise

The general merchandise/novelty category provides retailers with a unique opportunity to capture customers’ personal interests in a high-margin item.

Novelty has evolved into a core category because retailers can anticipate 30-60% margins on novelty products. With such strong profit potential, chains in major markets can earn about $35,000 a year per store from the novelty category.

In 2008, general merchandise ranked 11th in terms of in-store sales, according to NACS’ 2009 State of the Industry report.

On a per store basis, the category accounted for 1.4% of in-store sales, but 2.3% of gross margin contribution.

To achieve the rings to capitalize on these high margins, novelty items need to be strategically placed at interruption points throughout the store. While other categories are competing for endcap space, trendy products are more likely to grab the attention of customers.

Most retailers turn to novelty suppliers to brief them on the current trends and provide them with a suggested product mix for the upcoming season. More importantly, suppliers can offer retailers product insurance not typically seen in other categories. Because of the popularity factors associated with most novelty products, suppliers focus on turning the product and inventory awnd will relieve retailers of the inventory that is not selling.

As a result, suppliers make sure their products are moving within the appropriate time frame, or else they will pull them from the shelves. Items typically rotate every two to four weeks. The typical c-store customer shops about three to five times a week. The high turnover allows customers to see a new product every time they enter the store.

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