ABC retailing

Letters ABC have a special relationship with retail. For instance, there is a chain of grocery stores called ABC Stores on the islands of Hawaii, that sells delicious chocolate covered macadamias. They are so widespread in Oahu, that some people say that “ABC” there stands for “all blocks covered”. They are also pretty often photographed, and for that reason for some people it stands for “always bring camera”.

Another meaning of “ABC” in retailing comes from inventory analysis – it is a classification system often used for products sold at a store – those that are “Type A” generate the most revenue, “Type B” generate some, and “Type C” – would be some obscure stuff kept on bottom shelves. And while those macadamias are surely Type A for the Hawaiian chain, the question is what are the type A products for a typical American grocery store?

I was actually asked this question in class and as it happens the answer comes from Google. So here it is:

ITEM                                                  SALES ($B)                     % CHANGE

1.)  Carbonated Beverages                         $12.00                                         1.86

2.)  Milk                                                         $11.20                                        -8.44

3.)  Fresh Bread & Rolls                               $9.57                                         4.77

4.)  Beer/Ale/Hard Cider                                $8.17                                          5.42

5.)  Salty Snacks                                           $8.09                                         9.75

6.)  Natural Cheese                                       $7.64                                         7.75

7.)  Frozen Dinners/Entrees                         $6.13                                          0.18

8.)  Cold Cereal                                             $6.11                                          2.12

9.)  Wine                                                        $5.49                                         3.72

10.) Cigarettes                                               $4.63                                        -2.18

for the period of 52 weeks ending June 14, 2009.

SOURCE: INFORMATION RESOURCES INC. (IRI)

A few more numbers to complement this data: according to the Census Bureau, the total sales of food and beverage stores over the same period were $550B, which gives that the top 10 categories account for 15% of the total. It is also interesting to see what retailers do increase their profit in these categories. It is well known that store brands carry higher margins, so it’s desirable for a retailer to introduce store brand into a large category.  With some success it has been done for milk, bread, cheese, and cereal. But in the remaining categories national brands are still much stronger.

So it’s not quite chewing gum, Eric, but given that we are at Emory and in Atlanta, there is some pride in the fact that Coca Cola is up on top there.

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4 thoughts on “ABC retailing

  1. Understanding how the American supermarket environment works is highly interesting, as it seems that (from my own travel experience) both the US models for supermarkets and well as the related demands of the US consumer audience make it unparalleled in its unique nature. It is interesting to understand both the concept of the ABC system as well as what are the staple goods that fall into that A bracket.
    There are also varieties of methods that supermarkets use to market the different categories of goods, from placement in store and location specifics within isles, to expiry date ordering and aesthetic choices of the store and staff itself. Additionally, I find it interesting that there are still a relatively large number of big supermarket chains across the US, some nationwide, some geographically specific. While chains are still somewhat differentiated by “brand and type” (example Whole Foods and Kroger) nowadays many of the staple goods have minor to no differences in pricing (ex. Organic Milk is pretty much the same price in Whole Foods & Trader Joes & Publix). Therefore, it is compelling to see that such a broad variety of chains still exist, and that too profitably.
    It would be interesting to further break down the ABC analysis and control for different attributes like aesthetics or geography or even brand to see how or if it influences the results.

  2. Although these 10 top selling items remain pretty consistent over the years, it is also interesting to note that there is some variation by season and location. For example, in November pumpkin products and turkey/ham sales make their way to the top of the list. In December, holiday decorations/products, soup, and other hot products climb to the top. Pumpkin products certainly are not an A or B type product year round, but supermarkets adapt to seasonality and increase their supply and advertisement of such products in these times.

    As for location, I found an interesting article about some of the top selling UK brands:
    http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/8376619/The-top-ten-biggest-selling-grocery-brands-in-the-UK-in-pictures.html

    Although there are definitely some brands in this list that most Americans have never heard of, the types of products are fairly similar to the list of A products above. Coca cola is the number one selling brand in the UK just as carbonated beverages ranked as the top item sold here in the U.S. Bread and snack products also ranked highly on the UK scale. It’s very interesting that there are some universal preferences that dictate type A products regardless of the specific store or geographic location.

  3. As a student that studied abroad in Copenhagen last semester I found myself thinking about how this list compares to other countries lists of products that generate the most revenue. I think this classification between Type A,B, and C products is interesting when you consider that in Europe it is much more common to have specialty stores where consumers go to one store for their cheese, bread, meats etc. I also thought that it was interesting and revealing that Frozen Dinners made it to the US’s top 10 list. This is a reflection of our fast paced culture where supermarkets make money from consumers who are too busy to make elaborate meals. I do not think that this would have been the case in many of the European countries I visited. Other than that I think that many of the products on this list are common on a global scale. However, like I mentioned before in countries where huge supermarkets are less common I am curious how the Type A, B, C system and placement of these products compares.

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