Using extra selling space to hawk knickknacks and tchotchkes may be a long-term staple of the retail sector. In recent months, however, it's being taken to a whole new level and resulting in unusual sights as retailers expand the breadth of their merchandise in seemingly unorthodox directions.
For example, soon you can walk into a Best Buy and expect to see musical instruments. Some drugstores are now carrying extended lines of apparel. And seemingly everyone has gotten into the business of selling music.
In late July, Richfield, Minn.-based Best Buy announced plans to dedicate 2,500 square feet within 85 of its stores to sell guitars, bass, drums, keyboards and recording equipment. “Consumers have always looked to us as a resource for music in a variety of formats,” said Steve Hehir, senior vice president of musical instruments for Best Buy in a statement. “ Now they'll be able to rely on us for help with musical performance and creation too.”
Add-on merchandise can bring in hefty returns for chains, especially those with low-profit margin core products, like Barnes & Noble, says George Whalin, founder of Retail Management Consultants, a Carlsbad, Calif.-based firm. Barnes & Noble uses its extra space to sell low-cost pens, notebooks, board games — the kinds of items customers buy without long-term planning, notes Whalin. Barnes & Noble has also had success with inexpensive impulse purchases such as canvas bags and coffee mugs.
“The thing with both Starbucks and Barnes & Noble is that all of that merchandise is impulse merchandise because customers spend an enormous amount of time in those stores,” Whalin says. “Buying a $300 guitar at a Best Buy is not necessarily on impulse.”
Moreover, Guitar Center is a formidable competitor in the musical instrument space, Whalin notes. In the 1990s, a venture called Mars Music backed by former Office Depot president Mark Begelman emerged and grew to 50 stores. But the company had to liquidate in 2002, after only six years in operation, partly because it couldn't compete with the Guitar Center.
Overall, however, the venture into musical instruments is unlikely to make or break Best Buy, which commands a strong balance sheet and healthy sales figures overall.
You have to be innovative, especially today when consumers have to bear the high cost of gasoline and want to get the most out of the places they go to buy things, says Emanuel Weintraub, president and CEO of Emanuel Weintraub Associates Inc., an Englewood Cliff, N.J.-based management consulting firm. “The point is for the [extra] merchandise to be successful, it has to be well managed.
Retail consultants view more favorably the move by Walgreen Co., a Deerfield, Ill.-based drugstore chain, to sell moderately priced apparel. In April, the chain announced it was rolling out Casual Gear label clothing at 6,000 of its U.S. stores. The clothing, priced from $2.99 to $15 includes cotton capri pants, sweatpants, T-shirts and socks. “Why do drugstores have socks?” Weintraub asks.“Because the consumer is [already] in the store.”
One of the most important things retailers have to keep in mind when they consider adding non-core merchandise to their stores is that while it may help earn some extra dollars for a thriving chain, it won't help a struggling one, according to Weintraub.
Starbucks serves as an example. The Seattle-based coffeeshop chain proved successful in selling CDs produced by its Hear Music division, but now that it's experiencing difficulties, the number of CDs sold at its stores had to be reduced to just four.
“Extra merchandise is the icing on the cake,” says Weintraub. “When you have companies that don't have a strong balance sheet, that's another story. If the core business of Starbucks is coffee, selling CDs is not going to pull them out” of trouble.
Simon Property Group has teamed up with Coca-Cola and Visa U.S.A. to offer an Olympics themed gift card. “The Gift That Takes Gold” will be accepted at Simon malls throughout the United States. Only 100,000 of the gift cards were produced and will be sold exclusively at Simon's 185 centers and is also available online. They are available in denominations ranging from $20 to $500. A dollar from each card sold will go to the U.S. Olympic Committee to help American athletes train and compete in the Olympic games. Attached to the card will be a unique Coca-Cola Amazing Moments interactive CD.
Lighting the Way
Lightstone Property Group is using PropertyTract, an Internet-based document tracking database, to manage its 902 properties in the United States and Canada. The system, developed by a division of Tractmanager Inc., enables Lightstone to track, contracts and other documents in real time. Previously, the company was using a database of scanned documents, but that made it difficult to search and challenging to track details of different leases. PropertyTract enables users to access documents digitally through a table of contents and searches. The system can also notify users when leases are expiring.
Kohl's Solar Push
Kohl's Department Stores will expand its solar program to a sixth state — Oregon. Last month it began solar panel installation at its first store in the state located in Hillsboro. It plans to convert four of its nine stores there. Kohl's already has solar projects under way in, Connecticut, Maryland, New Jersey and Wisconsin. In total, Kohl's has converted 43 locations with plans to activate 85 additional sites within the six states. On average, solar panels provide about 25 percent of each store's energy. Upon completion, collectively, the four stores in Oregon will provide 900 kilowatts of power and are expected to produce up to one million kilowatt-hours of energy annually. Over the 20-year life of the program, the solar energy produced is expected to offset 12.9 million pounds of carbon dioxide, enough energy to power 1,682 homes in Oregon.
Somerset North, in Troy, Mich., rolled out a PGA-sanctioned putting green last month at its mall's Grand Court. It coincided with the 90th PGA Championship that took place at the nearby Oakland Hills Country Club. At the mall, for $5, each golfer received three putts on turf grown by the Horticulture Department at Michigan State University. For every hole-in-one, the golfer received a $5 gift card redeemable at any shopping center within the Somerset Collection. All the proceeds from the $5 putting fee went to the PGA Foundation to help fund its philanthropic endeavors. Also, each player received an official PGA Championship golf ball. The Michigan State Regional Council of Carpenters donated their labor to complete the assembly of the mall's green and a gazebo.