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Today's Gift Retailer 2004

Gifts & Decorative Accessories' fifth annual look at how specialty retailers are running their businesses. Part 1

Research by Judi Fulbright -- Gifts and Dec, 6/1/2004 12:00:00 AM

Gifts and decorative accessories specialty retailers, who continue to wrestle with a struggling economy and keen competition from an ever-expanding marketplace, are keeping a vigilant eye on their merchandise mix to attract customers and boost sales. The results of Gifts & Decorative Accessories' fifth annual survey of the operations of gift specialty retailers show a hold-the-line stance being taken on merchandise mix and price points. Even so, retailers are constantly looking for new products, attending markets, reading trade publications, and, increasingly, surfing the Internet for ideas and sources.

Of the 29 specific product categories that retailers were queried about in 2003, only two experienced a substantial gain in the percentage of retailers offering the products: tabletop and housewares. Another six product categories posted slight gains. Four product categories stayed about the same, while the remaining 18, or a majority of the categories, experienced a downturn. Five of those categories declined 10 percentage points or more between 2002 and 2003, with collectibles and CDs/music showing the greatest declines. The other products losing out in terms of the number of retailers carrying them were plush, licensed products, and giftware/partyware.

Although the best-selling price points rose modestly in 2003, price points also reflected retailers' hold-the-line attitude, with more than three-quarters of the 29 product categories registering price increases of well under $5. Only three product categories — gift baskets, handcrafted products, and writing instruments — experienced a gain of more than $5 in their best-selling prices.

Highlights

Gifts and decorative accessories retailers continue to offer consumers an extensive selection of products; over half carry 13 or more different product categories. A fifth carry 27 different categories.
Prices between $10 and $20 continue to be the best-selling price points for the majority of product categories. The average best-selling price point for all categories is $18.
Gift baskets, gourmet foods, and greeting cards share the limelight with the highest average stock turns — a median of four per year.
Payments for purchases are about equally divided between payments made by cash/check/check card and those made by credit cards. However, credit card purchases averaged $10 more than cash purchases in 2003.

Merchandise mix

Because gifts and decorative accessories stores offer such a wide array of product categories, retailers are able to spread the risk across a number of product categories that define their sales. But such diversity also makes it difficult to pinpoint particular product categories as sure bets to capture sales. This year, as last, only one product category — holiday products — captured more than 10 percent of the stores' total sales volume, on average. That's a change from two years ago, when both stationery/greeting cards and collectibles each racked up 10 percent or more of sales volume, with holiday accounting for only 8 percent.

Candles/candle accessories, jewelry, greeting cards, and collectibles each account for between 5 and 10 percent of sales, and continue to be among the top products in terms of sales, a position they've held for the last three years.

Like illusionists who devise new tricks to thrill their audiences, gift and decorative accessories retailers are continually experimenting with the magic of their merchandise mix — adding new lines to engage and excite sales while ruthlessly dropping or shifting other lines to titillate the jaded sensibilities of the consumer. Reflecting the wide diversity of product offerings available for gifts and decorative accessories retailers, at least a fifth carried no fewer than 27 different product categories this year, representing no change from the 2002 survey.

For 2003, gift retailers are holding the line on the number of product categories they carry. At least half the retailers added only one line to the 12 different pro-duct categories offered in 2002. Meanwhile, a newcomer to the most-carried list in 2002, CDs/music, dropped off in 2003, to be replaced by glassware/crystal and tabletop products.

Fashion accents, new to the product list in 2002 as a separate category, maintained its strong initial showing with nearly two-fifths of the retailers carrying the category in 2003.

Among the five most frequently carried products for each of the past five years are candles and candle accessories, holiday products, and greeting cards. Photo frames joined plush on the top five most-carried list in 2002. Jewelry supplanted plush to join photo frames on this year's list. Writing instruments and memory products continue as the only two products carried by fewer than a fifth of the retailers polled.

The most profitable categories among gift and decorative accessories retailers are gift baskets, gourmet foods, and greeting cards, all posting a median of four stock turns per year — one of the most frequently used measures to define profitability. Only greeting cards are carried by more than three-quarters of the retailers, gourmet foods by slightly less than one-half, and gift baskets by only a quarter of retailers.

Product pricing

For most retailers, the average markup is calculated by multiplying the product cost by two, or two and a half. Almost half of the retailers surveyed use two times the product cost, while the other half uses two-and-a-half times as their markup.

Best-selling price points experienced increases during 2003, but for the most part seem to be holding the line. More than three-quarters of the 29 product categories registered modest price increases of less than $5. Of the 29 product categories in this year's survey, only three — as compared with 13 product categories in 2002 — showed a slight decrease in best-selling price points; another four categories stayed at the same level as in 2002.

All four product categories at the high end of the pricing spectrum (best-selling price points of $25 or more) had price increases in 2003, along with two of the six in the next highest price group ($21–$25). At the bottom end of the pricing spectrum (best-selling price points under $10), two of the three categories increased slightly while one stayed the same.

For more than half of the product categories, the best-selling price points continue to fall between $10 and $20, with an average price point of $18 for all the product categories. Only three product categories — gift baskets, handcrafted products, and writing instruments — had a gain of more than $5 in their best-selling prices.

Product sourcing

In order to offer such a wide variety of product, gift and decorative accessories retailers source product from a plethora of vendors. More than 90 percent of retailers rely on trade shows, trade publications, vendor catalogs, and sales reps to source new products.

Trade shows and trade publications rack up the points as the most important sources for new products.

Paying "virtual visits" is also an increasingly popular pursuit, as retailers continue to use the Internet to visit manufacturers' websites and the websites of other retailers. For those retailers who use manufacturers' websites, the frequency of those visits ranges widely. More than a third visit less than once a month, while nearly another third visit four or more times a month.

Trade show attendance, the most highly valued way to research new products and vendors, keeps most retailers busy. More than three-quarters (77 percent) of the retailers surveyed attend between two and five shows a year.

Visits from sales reps also have their place in the search for new products although the retailers valued these visits below trade shows, trade publications, and vendor catalogs. Two-fifths say they work with fewer than ten reps each year.

Retailers may be reducing slightly the number of vendors they buy from. In 2003, about 42 percent bought from 60 or more vendors; in 2002 more than half the retailers bought from that many. On the other hand, 49 percent are now buying from between 20 to 60 vendors, up from 43 percent in 2002

As for the number of lines carried in any particular product category, the median number ranges from a low of one to a high of six, with the average standing at four. The median number of lines carried for almost half the product categories is either two or three. Holiday products registered the highest number of lines carried with a median of six, but this was far fewer than the ten lines reported for 2002. Fashion accents, gourmet foods, handcrafted items, housewares, tabletop, and toys/games/puzzles are all sourced from a median of five vendors each.

Judi Fulbright was lead researcher for the survey conducted by Gifts & Decorative Accessories' market research department. If you are an independent gift and decorative accessories retailer and would like to take part in any future retail surveys, please contact Judi Fulbright, Reed Business Information, at (336) 605-1092.

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