As customers walk toward the checkout registers at Lowe’s in Holmdel, N.J., they are confronted with small items of all kinds. There are scented candles, Maglite flashlights and Eveready batteries on one side of a register, and caulk, Gorilla glue and extension cords on the other. There’s a wide selection of magazines on one endcap next to a refrigerator full of bottled water and Gatorade. Most items are $3 to $10, but there are a few more expensive options, like an Energizer Quick Charge battery pack for $32.57 and a Black & Decker 205-piece tool set for $59.THE SCIENCE OF IMPULSE SELLING
Kit Yarrow, Ph.D., a consumer psychologist and chair of the Department of Psychology at Golden Gate University in San Francisco, gave Home Channel News her take on the psychology behind impulse sales. The following are some of Yarrow’s major points:
An impulse purchase is usually one of three things: an add-on to complement something a shopper has already decided to buy; something they buy quickly because they’re afraid it either won’t be there later or it will cost more later (limited time sales, special promotions or clearance items); or something that elevates their mood in the moment (a treat at the checkout, a special item that delights or inspires them in the moment).
Almost anything can be an impulse purchase if it’s opportunity-based—again, this usually means a sales promotion. For non-promotion items, obviously the higher the price, the lower the chance it will be impulsively purchased. It has to be below the threshold of conscious evaluation.
Emotion-laden products work best—the ones that have the power to soothe, delight or inspire, that are tactile or eye-catching, or that are engaging and interesting. The concept is that it catches someone in the moment with enough impact to inspire a purchase without a lot of thought.
The longer people are in a store, the greater the likelihood they’ll make an impulsive purchase.
Impulse items generally have to be in the path of a shopper. People don’t go looking for them—they have to run across them.
Shoppers are more susceptible to impulse purchases after they’ve decided to purchase something in a given store. Once they’ve made a commitment to take their wallets out, they’re more open to additional purchases.
During the holidays, people are more open to impulse purchases because they’re not just task shopping, they’re actively looking at new and different things for gift inspiration.
All these products fall under the category, “impulse items.” They are displayed primarily at or near the checkout area and are meant to catch the shopper’s eye just before he reaches the cash register. They are items most people have no intention of buying when they enter the store, but that they might add to their shopping cart at the last minute—on “impulse.”
From a retailer’s point of view, impulse items bring in high margins—50 percent or better on some skus—and have a quick turn over rate. And in a recessionary economy, they are looking for any and every edge to make consumers take out their wallets and spend. In the case of home improvement retailers, the down housing market has made this even more crucial in recent months.
Lowe’s declined to comment for this article.
Independent hardware stores also promote impulse items as a way to increase overall sales. Orgill’s product catalog contains more than 500 skus of clip strip, dump bin and endcap merchandise and bucket displays, while True Value offers more than 200 planograms with 800-plus impulse items under its Visual Merchandising program. In addition, Ace Hardware stores can choose from 400 to 500 impulse items in such categories as candy/snacks, soft drinks, ice cream, front-end general merchandise, clip strips, tool table items and service counter items.
According to Rick Suptic, True Value’s planogram manager, industry studies have shown that items merchandised on endcaps can show a 25 percent increase in sales; items stationed at well-maintained checkouts can show an increase of more than 30 percent; and items placed in dump bins can produce a sales increase of more than 400 percent.
Lauren Wagner, supervisor, category management for Do it Best, said impulse items are extremely important and can account for anywhere from 7 percent to 8 percent of a store’s sales. She said hardware retailers should consider a few things when deciding what types of impulse items to display and where to display them: How applicable is the item to your customer base? Is the price reasonable? Will the product catch the customer’s eye because of its uniqueness? Does it solve a problem that they have? Is that item needed to complete a project?
“You always want to show these products where they will meet with the greatest number of shoppers who will have the opportunity to interact with the items,” Wagner said. “That’s why the checkout lanes in grocery stores are merchandised with candy, soda and magazines, why clip strips add value throughout your store and why key accessories are merchandised near the key-cutting machine.”
In terms of popular impulse products, the market is seeing a stronger focus on the following: paper products and cleaners; health, safety, and security items like hand sanitizers, dust masks, batteries, hand warmers and padlocks; and organizers and hooks. Grocery items including water, soft drinks, candy and ice cream have also become very popular impulse products.
According to research firm Euromonitor International, food items offer retailers a “considerable premium” because of their “on-the-go convenience,” and are being marketed by an increasing number of retailers. In one study, the company wrote: “Hershey, for example, has invested heavily in strengthening its distribution through forecourt retailers, foodservice and ‘non-traditional’ outlets (such as Home Depot), while its highly successful limited edition brand extensions have often made their first appearances through impulse channels.”
In a recent interview with HCN, Craig Menear, executive vp-merchandising for Home Depot, mentioned cross merchandising and impulse as important priorities for the company. “When you’re in a more difficult economic environment as we are today, you’re always trying to grow that basket that’s actually moving through your register,” he said. “We probably didn’t do as good a job as we could in the past with opening price points, and so by really working that angle, we’re actually seeing in some categories that it’s incremental business to us.”
Menear also pointed out that while impulse items are often displayed near checkout, they can be found in other areas of the store as well. In otherwords, sometimes it’s most affective to put lubricant in the tool department and paint brushes near paint cans. The goal, he said, is to make it easier on the customer from a shopping standpoint and to do suggestive selling by putting the right product in the right place from a cross merchandising standpoint.
While candy and other food items may be popular year-round, there are also many impulse items that are seasonal. In spring, a retailer might put garden gloves and glass cleaner in a prime spot, while mosquito repellent is more in demand in the summer and lawn and leaf bags in the fall. Dollar items are popular throughout the year and can be marketed as “10 for $ 10,” which has proven to be a good customer draw for many retailers.
“You can never go wrong with best-selling dollar products, lead by paper products, cleaners and health and beauty products,” Wagner said. “They have been flying off shelves, especially at sharp multiple price points. Pet products, particularly treats and toys, are easy sales.”
However, according to consumer psychologist Kit Yarrow, the poor economy has made consumers more careful when they shop, an obvious challenge for the impulse category.
“Consumers today are thinking more about what they’re buying and are, therefore, less susceptible to impulse purchases,” she said. “Impulsive purchases are generally just that—not planned and made on impulse, and therefore more emotional and less logical. In other words, if consumers had more time or awareness they might not make the purchase.”
According to Ace Hardware’s POS numbers for October, sales of “everyday” traditional impulse items are trending the same as overall retail sales for Ace retailers, said Rob Savage, Ace’s open space manager. Batteries, soft drinks, reading glasses and candy/snacks were all down in October compared to the same month last year, while the “front-end checkout miscellaneous” category increased almost 10 percent for the month, which appears to be the result of new items added to the category.
New and unique items—merchandised at a store’s front-end checkout area or “open space”—have done well in recent months, particularly those that retail under the $5-to-$6 range. One example would be flashing holiday necklaces, which have done well both for Hall oween and Christmas. “The new and unique items create a sense of urgency with the consumer that if they don’t pick up the item ‘then and there,’ they may not have another chance to buy it,” Savage said.
Ace’s fastest growing impulse category, however, is “As Seen on TV” products, which are being merchandised in the store’s open space on endcaps. “The retails are generally higher than other impulse categories, but consumers are intrigued by the items as a result of the unique tie to the TV commercials,” he said.
Suptic said that if a store is merchandised properly with a strong impulse program, add on sales are generated on items such as candy, magazines and batteries—in spite of a down economy.
“It’s essential to our retailers’ bottom line to capture add-on sales through a good impulse program,” he said. “In an up or down economy, True Value continuously updates the impulse program to provide stores with the best opportunity to gain additional sales.”