Laurel Ave of Dallas had a meltdown of sorts last summer. Her $20 department-store lipstick softened into a berry-colored sludge after it sat in her parked car during the area’s record-breaking heat wave. Panicked and running late to a business lunch, Ave pulled up to a 7-Eleven.

“The store didn’t sell tubes of lipstick, but it did have a tinted ChapStick,” she said. “That’s not what I’d typically use, but thankfully, it worked out. I looked pulled together, and I made it to my lunch on time.”

In the U.S., the overall health and beauty industry is an $86 billion business, according to Nielsen. For convenience store operators, health and beauty care (HBC) products make up a small but high-margin category that involves “both need-based and preferential purchases,” said Jayme Gough, an analyst for NACS. “Category management is critical to ensure the ideal product distribution. Having these products easily reachable and clearly displayed can make the difference between a purchase or lost sale.”

HBC contains several subcategories, and margins vary. Products range from liquid vitamins, supplements, over-the-counter medications and energy shots to smoking cessation, family planning, feminine hygiene, baby care and cosmetics, and manufacturers continue to introduce new items. “Although a seemingly rudimentary category, customer focus on health and wellness has driven recent subcategory innovation, much of which was seen at the 2019 NACS Show,” said Gough.

In 2018, HBC brought in 0.83% of in-store sales, which translated to $18,100 in sales per store, up 1.6% over the prior year, according to the NACS State of the Industry Report of 2018 Data. Almost all participating retailers (99.2%) reported offering at least some HBC items in their stores.

In 2018, the average margin for the entire category was 55.05%, which generated $9,964 gross profit dollars per store. The largest subcategory in terms of sales was liquid vitamins/supplements/energy shots, which made up 28.6% of sales and had margins of 66.92%. Analgesics were the second highest sales contributor in 2018 (14.9%). Other internal OTC medications (13.4%) and cough/cold remedies (10.5%) were third and fourth, respectively.

“This category has seen quite a bit of innovation in 2019, with customers placing health higher on their priority list than ever before,” Gough said. “For many HBC subcategories, customers purchase products on a need basis, and they expect the store to be stocked.”

If you want to be in the category, you need to treat it seriously.

More Than Stuff on a Shelf

When it comes to managing the wide range of HBC products, a major challenge is merchandising. Altoona, Pennsylvania-based Sheetz stores devote between four and six feet to HBC, while Rutter’s, with headquarters in neighboring York, Pennsylvania, determines HBC real estate based on the individual store’s size.

“HBC is a category in which you can relatively capture the same sales in a four-foot section versus an eight-foot section,” said Joe Bortner, category supervisor, Rutter’s. “Because most of the sales are need-based and instant, you can cover your base in a four-foot set. As you expand, you can add options, such as more flavors of cough medicines, variants of ChapStick or line extensions of your core medicines.”

In the Madison, Florida, headquarters of the 16-store Busy Bee chain, an eight-foot HBC section is the norm. “Over time, we’ve noticed that there is a high demand for these products, especially with our interstate-located sites,” said Marshall Beck, director of marketing, Busy Bee.

At Davis Travel Center in Stony Creek, Virginia, the HBC section has been increased from six to 10 feet, a move that boosted category sales 15% to 20%. The company also has two c-stores, which have three- to four-foot HBC sections.

We do not overly price our items, but we’re still able to maintain the 40-50% margins we like to have in this category.

“We felt that with the size of the travel center and our growing business, it was a necessary to increase this area,” said Bill Decker, general manager, Davis Travel Center. “As this is a high-theft area, we moved the section so that it’s positioned by the fuel desk for more visibility.”

Most store operators admit that they’re better at adding products to the mix rather than deleting them, so it makes sense to regularly review each store’s sales data and nix anything that doesn’t move.

Joe Bona, president of Bona Design Lab in New York City, has consulted with retailers of all types, including c-stores. Each store operator must be committed to HBC or “it will never be much more than stuff on a shelf,” he said.

“We buy with our eyes before we purchase anything,” said Bona. “For c-store operators to be credible for categories they are not known for, it’s important to create an environment that is familiar and functional. You don’t need a store that looks like Sephora [to sell beauty products], but if you look at their merchandise sets, you quickly realize the displays are specifically designed to create impact at shelf, highlight the product and perhaps provide some point of sale product information.

“If you want to be in the category, you need to treat it seriously and design a section around the category to enhance perceptions, drive awareness and increase sales,” he said.

Number and Variety

At Davis Travel Center, truckers and locals can choose from both full- and travel-size shampoos and conditioners, which “sell equally well,” Decker said. “We carry both two-pack medicines and regular bottles of Advil and Aleve. In colder months, we have a large variety of Hall’s cough drops, plus Hall’s Sugar-Free Defense with vitamin C. That’s a huge seller throughout the year.”

The number and variety of offerings has paid off. “We grow year to year in HBC sales,” he said. “We do not overly price our items, but we’re still able to maintain the 40-50% margins we like to have in this category.”

Sheetz stores carry traditional health and beauty products, including small bottles of shampoo and conditioner, gel and combs. “And we offer single products, such as medication, depending on store design,” said Nick Ruffner, manager of public relations at Sheetz. “Sheetz's mission is to be the ultimate one-stop shop for our customers, and offering health and beauty aids is certainly part of that strategy.”

Basic health, beauty and wellness offerings are essential to convenience store sales.

Busy Bee offers the traditional travel-size products, but “we have a gift section in the store where we carry hard-to-find brands in large sizes, including beard oils, soaps and shampoos,” Beck said. “When guests are looking for an item like Tylenol, most aren’t looking for an entire bottle. We carry the economy packs of over-the-counter medicines, but we also carry some lines in larger bottles. Our primary concern is meeting our guests’ needs first. So, while the margins in the health and beauty section are good, it’s important to carry them for our guests’ convenience.”

Getting started with a section of HBC products or beefing up the existing category can be simplified with help from one of the many wholesalers that are experienced in working with convenience stores and advising on products, planograms and merchandising. “Basic health, beauty and wellness offerings are essential to convenience store sales,” said Jennifer Hutto, manager of merchandising, McLane Company. “Analgesics, cough and cold, allergy, eye care, lip care, vitamins, feminine care and family planning should be available to meet basic consumer needs.

“McLane has a private-label products subsidiary called Consumer Value Products,” she said. “We have a wide variety of offerings across multiple categories that offer higher margins for our customers and better value for consumers.”

“In my opinion, HBC is a need for all c-stores,” said Bortner. “At the end of the day, it’s still a high-margin-per-foot category, and there will always be customers seeking instant remedies for their ailments.”