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Of all the issues keeping food retailers up at night, I can't think of one more complex than the issue of store assortment, especially when you couple it with channel blurring.
At this point no one can really say what a "food store" is or isn't, and no one really understands which nonfood categories a "full-service supermarket" should be stocking, and which ones it should be stocking in greater depth.
A unique place
In my consulting practice I spend lots of time developing rational, analytical, statistical models to address such issues. A short time ago I was working on a model for assortment when I wandered into Ricky's, a small but unique and quite successful chain based in New York. It operates 20 stores, 17 in Manhattan, two in the Hamptons, and one in Miami Beach. Each is approximately 5,000 square feet.
What was so unusual in this store was the mix of categories I found: beauty care, Halloween costumes, and sex toys. Suddenly my assortment rationales fell apart. I asked myself: What do these three categories have to do with each other, how did these stores develop, and, most importantly, why does it all work so well?
Ricky's proved to be a new model, one showing how an outside-the-box approach to assortment could work.
Inside a Ricky's store, the first element is beauty care. Not health and beauty care, but beauty care -- this is no drug store. Ricky's stocks about five SKUs of analgesics and about eight SKUs of toothpaste; yet it offers about 100 brands and 500 SKUs of shampoo. And Ricky's version of hair care isn't just shampoo and conditioner. It carries every kind of mousse, gel, pomade, spray, foam, and other styling aid you can think of, plus hundreds of shades of hair color, including 50 different blondes and four shades of blue (yes, blue).
This hair assortment is rivaled, however, by Ricky's range of skin care products. The store stocks dozens of brands, hundreds of formulations, and many scents and flavors of skin cream.
But Ricky's doesn't offer health products. Instead the chain stocks sex toys and other products. A connection starts with the wigs and hair ornaments, which segue into mainstream stockings, which segue into racy stockings, and then full outfits such as a French maid costume. And if you've got the French maid costume, you really should stock all of the things that go with it. Indeed, Ricky's stores feature a private area (you must pass through a curtain) that merchandises the more extreme lotions, creams, toys, and games.
What begins as a tenuous relationship between beauty care and sex toys is further cemented via the chain's third category, Halloween costumes. Ricky's only stocks Halloween costumes for about six weeks, but for those six weeks the store is a madhouse. On Oct. 30 and Oct. 31, lines usually snake around the corner, day and night.
On or about Oct. 15, a truck full of costumes parks out front, and every few hours a clerk goes to the truck for more merchandise to restock the costume area.
How did Ricky's become costume central? In a word, organically. In the 1980s, the place people used to go to get costumes, Woolworths, went out of business. Also, Halloween was transitioning into a cool holiday for young, hip adults who had the inclination to buy costumes, and the willingness to pay $30, not $3.99, for them. Those hip young partiers who were already buying hair mousse at Ricky's started buying Ricky's wigs (and, yes, its French maid outfits, too) as costumes. So Ricky's started carrying lots of costumes.
Ricky's eventually adopted the slogan "Looking Good, Feeling Good," which is now emblazoned all over its stores. This also permeates the attitude of the staff. When one goes shopping at Ricky's, one can always find the staff reliably tattooed and pierced -- and also cheerful and knowledgeable. In short, Ricky's listened to its customers and evolved from being a hair products superstore into a store serving a specific consumer set -- young, upscale, urban partiers -- with a specific set of needs.
What lessons can supermarkets learn from Ricky's? There are some practical takeaways applicable to any form of retailing, as long as your goal is to become a destination:
-- Don't just add items that everyone else has -- add what no one else has. Woolworths couldn't stay in business selling Halloween costumes, but once it went out of business, there was a gap, which Ricky's leapt into.
-- Don't add sections because you saw something at the FMI show. Listen to your shoppers. Find out who they are and what they need; then make it available to them.
-- While you're listening, find out what makes your customers tick. Ricky's understands its customers and thinks hard about what other items and categories would interest them. Even though everybody knows that if you stock beauty care you should stock health care, the common wisdom isn't enough for Ricky's; it understands that its core customers care passionately about hair and skin products, but are uninterested in health products.