Gifts In Strange Places

Gifts: They’re not just for gift stores anymore. Well…at least not in the traditional sense. During this latest gift market evolution, it’s apparent major change is occurring in the industry’s distribution channels. And while “everyone knows” pure gift shops have been closing at an alarming rate, it’s not clear whether there are truly fewer shelves, racks and spinners than there were, say, 10 years ago. But even though no one is yet tracking total SKUs sold through “alternative” stores, the anecdotal data is overwhelming: Gifts are everywhere!

Of course, retailers such as florists, bookstores, drug stores and department stores have a long history of merchandising gifts. But now other, more unusual venues are getting in on the act. From car washes, hardware and convenience stores to posh salons and spas, this new breed of gift retailers presents new challenges, not the least of which faces the specialty gift retailer trying to identify competition. Is it the big box store anchoring a mini-mall, the pharmacy anchoring a suburban strip mall or the dog groomer a few doors away? Likely, it’s all three.

For the gift manufacturer there is a whole different set of challenges, beginning with just trying to identify new buyers. The new breed of “and gifts” stores may not be shopping the shows; at least not at first. Since these retailers are primarily members of other industries, they’re often unfamiliar with gift industry resources and buying strategies. Costs that are a bargain spread out across 5,000 SKUs can be prohibitively expensive for 20.

Such small inventories also make it difficult to identify these new buyers (and competitors). We know, anecdotally, that more doors are selling gifts. But there are no systems in place to discover exactly who the buyers are and what they’re selling.

Eric Dean, president of Whereoware.com, says, “I’ve heard great things about pharmacies, the independent hardware store, spas, pet, baby… I hear a big buzz about hospitality. There’s huge hope in nontraditional people getting into the channel. But how do you reach them and help them buy smart?”

While we don’t know how just yet, we might know it soon. The Gift & Home Trade Association is planning a data collection project that includes buyer statistics. Pilot results are expected in early 2007. The American Booksellers Association also plans to undertake a study of booksellers that carry gifts.

In the meantime, Gifts & Decorative Accessories spoke with several retailers outside the gift mainstream, as well as several manufacturers and industry experts about how to court these alternative customers.

Since the gift industry has more than its share of trade shows and markets, just the mere mention of attending yet another might make even the most stalwart, dizzy. But a sure way to break into a new market is to attend its events. The automotive industry’s Mega Show in Ocean City, MD, for example, draws 2,500 attendees from service stations, convenience stores, repair shops, car washes and tire dealers. Many of these buyers don’t attend gift shows. Vendors who visit these buyers on their home turf will face less competition and reach more potential customers.

Attending events also serves as research. “We’ve gone to some car wash expos to focus and target them,” says Amy Dawes, sales and marketing specialist of Willowbrook Fragrance Co., Spartanburg, SC. “You have to go and get into their mode of thinking, because sometimes they havea different lingo.”

For companies that can’t afford another show, there are other ways to reach alternative buyers where they live. In addition to trade advertising, Willowbrook mails sachet samples with regional associations’ quarterly newsletters. The American Bookseller’s Association offers a Booksellers Resource Directory (vendors can add a free listing at www.bookweb.org). The International Car Wash Association maintains an online vendor marketplace at www.carcarecentral.com where impulse items suppliers are listed alongside brake pads and floor mats. And don’t forget Search Engine Optimization: these days, a buyer’s first stop is likely to be Google.

According to Dawes, some car washes are so successful with gift products that they’re hiring merchandising managers for the category. However, many of the businesses that dabble in gifts start out with a buyer who knows little about the product.

“They’re not going to go to trade shows,” says Dean. “These new stores are not necessarily the best people to cherry pick the line. Their job is to bring foot traffic through the doors with money in their pockets; our job is to give them attractive product at a price point that sells as an impulse. If we pull that off and make it easy for them to do business with us, I know that this stuff works.”

Assortments are key to making buying gifts easy. “If you come up with pre-packs or starter sets, someone can just open it up, put it out and have a nice presentation,” says Pat Shaw, owner of Pat Campbell Shaw Associates, Woodstock, IL. However, she says, some vendors need to redesign their assortments. “They have too many pieces in them, so you’ve got a lot of inventory but you don’t have much selection. If I just have a little corner I don’t want to have a lot of inventory and only four items to show.”

One selling tool mentioned by both retailers and vendors alike is free displayers. “They like units. They don’t have display fixtures, they’re not set up like a typical gift shop,” says Barbara Olmsted, vice president of sales for Cathedral Art Metal, Providence, RI. Display units should be designed to make maximum impact in a small footprint. While a great many gift stores have limited real estate, space devoted to gifts in a “moonlighting” business may be even smaller still.

Product should also be of manageable size and easy to merchandise around the main businesses’ requirements. “Our main concern is always being able to display because floor space is really premium in bookstores. We don’t have walls so you can’t buy a lot of hanging things: no clocks, no artwork,” notes Pat Becker, gift buyer for R.J. Julia in Madison, CT. Gayle Shanks, co-owner of Changing Hands Bookstore in Tempe, AZ, agrees; she’s looking for “things that don’t take up a huge amount of space, that come in their own display.”

Many businesses are taking a step away from their core product in choosing gifts. When this happens, retailers tend to gravitate toward product that resonates with the store’s theme or target audience. Shanks looks for “interesting, quirky things that you wouldn’t expect a bookstore would ever have, as well as the things you would.” Besides bookends, Changing Hands sells soap dishes, spa products, purses, baby products, robes and slippers, Kotobuki Japanese pottery, edgy novelties, pet products, pirate products and four or five candle lines.

About 24 to 34 percent of the store’s sales come from gifts, depending on the season. And Shanks mingles the gifts and books throughout the store. “We put things in customers’ way, so that they can’t help but see, and can’t help but buy.”

Cathedral Art Metal got into the car wash market through auto visor clips. But according to Olmsted, some car washes carry much more. “California is unbelievable with their gift shops in their car washes,” she says. “They’re neat, clean, huge. They will do wind chimes; they do it all.”

From car washes, Cathedral Art expanded into truck stops. “It’s a whole new industry,” Olmstead explains. “They do everything from t-shirts to truck accessories to cases with blown glass figurines to jewelry to CDs.” Truck stops are even a better avenue for general gifts, according to Olmstead, because while car wash prices must be $10 and under to appeal to impulse buyers, truck stops attract vacationing families looking for souvenirs and truckers shopping for their families.

For alternative gift retailers, hitting the right price point is vital. Winford L. Jones, owner of Yoder’s Shipshewana Hardware Inc., Shipshewana, IN, says, “We try to stay with gifts that we can get a full margin on and still stay under $20 to get the kind of turns that we want.” In addition, businesses that view gifts as a sideline may bring different lines in and out for novelty or special occasions, so they can be a good channel for discontinued items.

That doesn’t mean moonlighting stores only move cheap products, however. Says Jones, “We’re not afraid of going to higher price points if we like the item. Quality is important — something that’s got eye appeal and lasting value.”

Shanks agrees. “I need all price points,” she says. “I have everything from impulse items that cost $2 to pseudo-Tiffany lamps that cost $250. When we first started carrying Woodstock Chimes, we worried because they sell for $50 or $60, and we couldn’t keep them in stock.”

What she still worries about, however, is minimums. And she has advice for vendors: “Have a low minimum to get into the product,” she says. “I can’t invest $500 in one line of soap. What I’d like them to say is, 'Okay, try $50, put it in a basket, see what happens.’”

A comparatively high markup is one of the big appeals of gifts, especially for booksellers, who often get narrow margins on their core product. However, they also often get to return non-moving merchandise to the supplier. If a vendor can afford to take the risk, backing a product with a similar guarantee is one way to convince non-gift retailers to take a chance. Shanks has even built her relationships with certain companies and reps to the point that if she buys a product and it turns out to be terrible, they’ll take it back.

Of course, for mainstream gift stores, it’s hard to consider such a broadening of competition as good news. But given that gift wholesalers need to sell their wares, competing with the car wash may be a little better for traditional gift retailers than competing with big box discounters. For one thing, they’re probably not undercutting gift stores’ prices. Says Dawes, “Many [car washes] have gotten a better margin than a gift store because it is a captive audience. Some are getting two times their cost.”

In addition, alternative gift retailers are more likely to be locally owned independents, which means they put more money back into the community and are better placed to take a chance on new, small vendors, preserving diverse choices for everyone. Their relatively small gift real estate also means it shouldn’t be too hard for them to avoid picking lines already for sale locally — or, if they do, for neighboring gift stores to eliminate duplication.

Gift store owners might even consider teaming up with a local business to create a store-within-a-store. The host store gets buying and merchandising expertise and a share of the profits for little effort; the helper gets a chance to put its brand in front of a whole new audience, a share of the profits plus the chance to make sure a new competitor doesn’t step on any toes.

All this channel hopping may sound as if every business wants to be a one stop shop, but in practice selectivity, not comprehensiveness, is all most stores have room for. That’s part of the appeal. Strongly branded businesses from Crunch Fitness to Whole Foods can become lifestyle retailers: consumers like that someone they trust vetted the products. But even in a business based on need rather than emotional connection, shoppers can appreciate a manageable selection that’s not overwhelming, and the convenience of shopping where they are instead of making a special trip. With doctors moving into big boxes and ATMs everywhere, Americans will only become more used to businesses coming to them. So gift vendors may find it worthwhile to reach out to new channels, even if it means selling a few gifts to a lot of stores instead of a lot of gifts to a few stores. As for retailers, they must make sure a trip to a gift store really is special. n