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Supermarket consumers think cheap and basic when it comes to HBC spa merchandise — even those who frequent both grocery and high-end specialty channels. This has caused many retailers to struggle with developing the right product mix.
When shopping The Body Shop or Bath & Body Works, consumers rank self-indulgence above price. In supermarkets, they often have a set budget. Hence, when a supermarket tries selling scented massage oils or other specialty categories featured by chains like The Body Shop or Bath & Body Works, it winds up with slow turns and dusty bottles.
“Shoppers have different expectations for different channels,” says Dan Graham, vice president at San Juan Capistrano, Calif.-based retail consultancy Dechert-Hampe Co. “In supermarkets, the focus is on impulse-driven basics that are used every day.”
Margins on spa merchandise are attractive. But outside of a few high-end grocery chains, prices cannot exceed $10 to $15. “Depending on the category, once you go over $9.99, you limit sales,” says Deirdre Williams, director of skincare for Stamford, Conn.-based Lornamead, maker of Yardley scented soaps. “While a specialty consumer may spend more, she is earmarking how much she plans to spend during a grocery trip.”
According to Nielsen Company data, supermarket sales of specialty soap alone grew by 3.8 percent to $319 million for the 52 weeks ended March 21, 2009. Sales of grooming sponges, another basic, increased by 5.3 percent to $25 million.
Other common bath items also perform well. One supermarket buyer says bubble bath is one of his highest volume subsegments.
Maria Brous, director of media and community relations for Florida-based Publix, cites high volumes in body washes and bath salts. Publix, along with H-E-B and Wegmans, is considered one of the more successful supermarket spa retailers.
Quality, appeal and pricing on basics should be a notch above that of in-line merchandise. One buyer pegs margins in the 40-point range — 5 percent to 10 percent higher than general HBC.
Back to Nature
Spa products’ added cachet can be a special scent or ingredient. In candles, another important category, attributes can move pricing from $8 (in-line) to $12 (spa display). But expectations must be realistic. “I’m not saying we can go to $30,” says Bryan Olson, VP of marketing and sales for Soy Basics. The Minneapolis-based company has offered a food, drug and mass line for four years. Candles retail for $3.49 to $14.
Nature-inspired scents and ingredients, in particular, work well in certain stores. The anonymous supermarket buyer, for one, divides spa products into three subcategories. His first tier contains “such items” as Calgon bath beads and bubble bath. Tier two involves a wider selection of higher-priced basics and specialty products. The third, most upscale segment, emphasizes natural HBC.
“This involves a very different item selection and a largely different supplier list,” he adds. “The key is not to go outside the comfort level of the given retailer. You have to go back to demographics.”
Publix also micromarkets nature-inspired spa products. Its three Publix GreenWise Markets focus entirely on natural and organic merchandise. The spa section, located in the center of these prototypes, uses special lighting and shelving. Brous says Publix’s other stores are “more traditional” in their spa approach.
In the Northeast, A&P is taking a natural approach in some of its remodeled stores. In a New Jersey location, an 8-foot spa section includes Ecco Bella’s herbal body lotion, Avalon Organics’ Bath & Shower Gel, and body lotions from Nature’s Gate and Earth’s Best. Ingredients include rosemary, peppermint, lavender, sea moss and mango.
On the manufacturers’ end, bar soaps in Lornamead’s Yardley brand contain 98 percent plant-derived ingredients in a vegetable base. Lornamead also has a botanical line. Its top scent/formulation is English Lavender, followed by Oatmeal and Almond. Prices range from $1.49 (botanical soap) to $7 for Lemon Verbena, a new soap inspired by a French boutique.
Soy Basics taps into consumers’ growing awareness of soy. Its tapers burn cooler and longer than petroleum-based candles, and scents last longer. SuperValu, Jewel and Harris Teeter are among those offering Soy Basics.
In skin cream, derma e features an antioxidant, five-SKU assortment of Fruit Smoothee moisturizers, facial cleansers and other products. Trendy ingredients include vitamin E, Ester-C, acai berry, pomegranate and cranberry.
But trendy natural ingredients have a downside in that they can limit a product’s lifecycle. “Aloe can quickly become yesterday’s flavor,” says Dechert-Hampe’s Graham.
Mall specialty retailers frequently merchandise spa items around themes like scent, color, season or subsegment (feet, suncare, juvenile, etc). Their higher margin structure also lets them augment consumables with items like back scratchers and massagers.
While supermarkets want variety, they have constraints. Hence, some of these strategies have been disastrous. According to Nielsen, supermarket sales of body massagers declined 22.3 percent to $3 million during the 52 weeks ending March 21, 2009.
“‘Appliances’ like massage rollers, back brushes and other nonconsumables are a push in grocery,” says Don Stuart, president and CEO of Darien, Conn.-based Cannondale Associates. “Deep segmentation can also be an issue. While specialty stores may do well with a foot-care subsection, supermarkets must cater to the masses.”
Some supermarkets try to spice up basics with irrelevant merchandise. Others look to hit certain price points with private label. The New Jersey A&P mixes picture frames with bath items. Another retailer offers potholders in its spa section.
“Specialty bath can easily become a catch-all,” says Lornamead’s Williams. “Retailers sometimes say, ‘Let’s put it there for lack of a better place.’” Most items on A&P’s free-standing aisle fixture, though, hit appropriate prices of $7 to $10.
Private label products made from quality ingredients can work; cheap knockoffs with a chemical after-smell or poor consistency do not.
“There’s a difference between bargain bin and store brand,” says Jeff Rehling, principal at Parsippany, N.J.-based Edgewood Consulting Group. “The question is which brands offer the uniqueness, equity and quality shoppers of a particular retailer are looking for in this category.”
Consumers are also concerned about lead and other unhealthy ingredients sometimes found in inexpensive China-made HBC products. “Given consumers’ growing desire to monitor ingredients, retailers want to ensure that suppliers are thoroughly tested,” says Lornamead’s Williams. “If it’s made in China and has no brand name, people hesitate. They also want a consistent scent and performance.”
Publix and Food Lion sell private label in their children’s spa areas. And H-E-B is making its mark with exclusive brands. But both Publix and H-E-B have well-established HBC reputations.
“H-E-B has a whole section that is a destination for beauty,” says Taya Tomasello, senior beauty analyst at Chicago-based Mintel. “It is a store-within-a-store. In other grocery stores, it’s just a section.”
Some retailers create temporary spa sections. Schnucks, a regional St. Louis chain, devotes an aisle to “special” merchandise, says Tomasello. While some offerings are a bit odd — like televisions — consumers expect surprises.
Most likely, spa items are the fruits of small-lot, opportunistic buys. While spa products have worked well in this section, Schnucks services a small store base. The strategy would be harder for a large chain to implement.
Despite some success, experts question the long-term potential of supermarket spa sections. For starters, there is no real category management template. “Few grocery retailers seem to understand the role and strategy these types of products play with their shoppers,” says Edgewood’s Rehling. “From one retailer to the next, it’s a very fragmented and inconsistently merchandised category.”
Many sections involve niche suppliers. Products from CPG giants are too generic; those from specialty vendors are too expensive. But niche vendors’ items can have low brand awareness and create SKU-management headaches.
“I don’t think spa will ever be the biggest part of HBC, particularly in grocery,” says Rehling. “The whole area is very experimental. It probably will never be a trip-driver. With a targeted strategy, it does have the potential to be a profitable, complementary category that can boost transactions.”