General Merchandise: Competition Impacting Novelty

General merchandise rounded out the top 10 in-store categories by gross profit contribution, according to the National Association of Convenience Store’s (NACS) State of the Industry (SOI) report. Finishing 10th, just behind cold dispensed beverages, on a per-store, per-month basis, stores averaged $2,373 in merchandise sales with a gross profit contribution of $873. The bad news is that sales dollars slipped 18.6% and gross profit contribution dropped 17%.

Novelty Inc., BIC Corp. and Lil’ Drug Store Products were among the top three best-performing general merchandise providers in 2007, retailers report, many of whom remain optimistic that summer promotions could spur stronger sales.

Novelty Inc. President Todd Green said his company is making some serious merchandising changes that should make cash registers ring even more frequently.

Successfully marketing novelties in convenience stores has a lot in common with successfully marketing real estate—it’s about location and branding. "Before, it was about selling stuff," Green said. "Now, it’s about selling branded stuff using timely promotions and good physical positioning."

As summer kicks off, so will novelty merchandise for the Jack Black and Angelina Jolie movie Kung Fu Panda, expected to be a box office blockbuster. "With the Beijing Olympics giving even more emphasis, this merchandise should really be hot," Green said.

Novelty companies are also expanding their lines of tobacco-related novelties to include cigarette cases and lighters. Green said that NBA and motorcycle novelties continue to do well, as does "anything NASCAR. "About 80% of the NASCAR novelties we sell are about Dale Earnhardt, Jr.," Green said. "And since Earnhardt’s changed his race number, his fans will all want to buy the new stuff."

To drive sales year-round, Novelty Inc. will jump start the holiday season with novelties for the World Series of Poker in November, followed by rock’n roll merchandise for Christmas that features Arrowsmith, AC/DC, Pink Floyd and other nostalgic bands.

Even given the combined appeal of the above lines, Green said the most popular licensed products involve Cage Fighter, the mixed martial arts sport that also appeals heavily to adult males.


Competition Mounts

Though there appears to still be a continuing decline in overall general merchandise category sales in the c-store channel, it’s probably due more to price competition from hypermarkets than anything else. But before c-store owners give up on the category, they should make every effort to improve timing, positioning and space share for the general merchandise they carry.

Take advantage of the fact that analysts estimate that c-stores sell more than 60% of all lighters sold and display lighters prominently, especially those from BIC, which holds seven of the top 10 lighter SKUs.

Anticipating seasonally changing store traffic is a key to selling the higher margin general merchandise items. Keeping picnic supplies, sunblock and a rack of those top-selling sunglasses prominently displayed and in close proximity to each other during the summer months will boost sales of all three. The same principle applies to notebooks, pencils and other small school supplies in the fall.

Launching holiday promotions early on and placing gift items close to related merchandise such as holiday beer mugs near the beer cooler and corkscrews near the wine could also help boost sales and ensure general merchandising success.


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