Alternate Retailers

October 1, 2006
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Alternate Retailers

Candy delivers a great revenue opportunity for nontraditional retailers.

Alternate channel retailers may not be candy destinations, but a growing number of national chains are finding that the category is capable of generating incremental revenues. Nontraditional retailers that have recently added candy to the assortment include Circuit City, FedEx Kinko’s, and perhaps most visibly, Home Depot.
Candy sales in nontraditional, national chain retailers will approach $1 billion for 2006 and are growing at an estimated 10 percent annually, reports Jim Corcoran, vice president of trade relations for the National Confectioners Association.
Many alternate channel retailers have large shopper bases, notes Todd Hale, senior vice president, consumer and shopper insights, ACNielsen. Statistics compiled for ACNielsen’s “Chanel Blurring and Consumer Trends” study show that in 2005, nearly eight out of 10 households shopped in the hardware/home improvement channel, for an average of eight times annually, for example.
“Although shopping frequency is relatively low within alternate channels, levels are sufficient to support the distribution of products that have been historically stocked in traditional channels,” states Hale in a presentation based on the channel blurring report.
“What we have clearly learned is that people buy candy where they shop,” says Ray Jones, a senior executive and frequent candy category analyst for consulting company Dechert-Hampe and the National Confectioners Association.
In addition, for alternate retailers focused on categories such as books and music, hobbies and crafts, electronics or the like, the likelihood of purchase is increased by the fact that the shopper tends to be in the store for an extended period of time, says Jones.
“We’ve learned from consumers…that the longer that people are in a store, the more likely it is that they’re going to pick up candy on the way out,” he states.
“We’ve also heard people say that, ‘Candy is my reward. I’m running my errands, and as I’m leaving, I’m going to give myself a treat because I deserve it,’” Jones adds.
“There is competition for the shopping occasion,” he reflects. “But once someone is in a store, once you’ve captured the shopping occasion, you’re not taking away from the purchase.”
The infrastructure to support candy sales is in place. Leading candy makers have created special sales forces to service the channel and to get the word out about candy’s revenue generating potential.
SWOT Analysis
Strengths
• Candy’s high margin and strong impulse appeal
• Alternate retailers are shopped regularly

Weaknesses

• Store-level execution can be spotty because category is unfamiliar to employees
• Assortment is critical

Opportunities
• Because it’s almost strictly an impulse purchase, candy can be priced higher than in mainstream channels and still sell well
• Not all alternate channels have been tapped

Threats

• Finding time and personnel to manage the candy category can be challenging
• Many alternate channel retailers do not have a perishable distribution network in place

 

 

 

 

 

 

 

 

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