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Stores focus on the hunt
ASSOCIATED PRESS
Photo
In this June 13, 2011 photo, shoppers buy toilet paper at Costco in Mountain View, Calif. Shoppers go into Costco, TJ Maxx or a DSW shoe store looking for a bargain on something they need and end up splurging on irresistible finds.(AP Photo/Paul Sakuma)
ASSOCIATED PRESS
Photo
In this June 13, 2011 photo, RayBan sunglasses are displayed at Costco in Mountain View, Calif. Shoppers go into Costco, TJ Maxx or a DSW shoe store looking for a bargain on something they need and end up splurging on irresistible finds.(AP Photo/Paul Sakuma)
Associated Press
Trader Joe’s, the specialty grocery chain, might not have the cheapest toilet paper or the most varieties of ketchup, but it hooks customers with mango butter, chocolate-covered pomegranate seeds and cilantro-and-jalapeno hummus.
These goodies aren’t on most grocery lists, but they’re eye-catching enough to tempt shoppers into an impulse buy. At a time when families are watching dollars and the Web makes discount-hunting easy, unexpected treasures are an increasingly important strategy for stores.
“It’s the wow factor that’s getting people to buy,” says Wall Street Strategies analyst Brian Sozzi.
So shoppers may go into T.J. Maxx or a DSW shoe store looking for a bargain on something they need but end up splurging on irresistible finds.
Dollar Tree lures customers with rock-bottom prices on cleaning supplies, then tempts them with extras such as leather iPod cases. And at Costco, tucked inside the hulking pallets of mayonnaise and paper towels is a section where shoppers never know what they’ll find.
Costco has been using the term “treasure hunt” for years to explain why up to a fifth of its stock is limited-quantity items that are in the store for as little as a week.
The wholesale chain shows that the treasure-hunt strategy can pay. Revenue at U.S. Costco stores open at least a year was up 10 percent last quarter from last year, with strong growth in nonessentials like jewelry and home and garden.
Walmart, on the other hand, is still trying to correct itself after a move to pare down to the basics — the opposite of the treasure-hunt approach — proved unsuccessful.
Constantly cycling in fresh merchandise is critical as the Web makes it harder for stores to compete on price. After all, why drive to a store that offers “everyday low prices” when you can find the same products cheaper online? Surprises also create suspense and encourage repeat visits.
TJX Cos., the parent company of T.J. Maxx and other chains that sell designer goods at a discount, gained momentum during the recession, when frugality came into style. That growth is continuing after the recession, at a time of high gas prices and stagnant incomes. First-quarter revenue at Marshalls and T.J. Maxx stores open at least a year was up 4 percent over the same period last year.
By embracing the treasure hunt, dollar stores have been able to keep the middle-income shoppers they attracted during the recession. Dollar Tree CEO Bob Strasser told analysts the store has taken the opposite approach from Walmart, expanding its assortment of “fun” discretionary products and adding more brand names. That means more surprises to tempt shoppers.
It’s working. Dollar Tree’s revenue at stores open at least a year was up 7.1 percent in the most recent quarter. Both traffic and the size of the average transaction increased.