June 1, 2006
Mary Ellen Kuhn
I’ll bet you say it frequently. I know I do. “Candy is fun.”
But for those of us working in this industry, candy is much more than that. It’s a business. A fun business certainly, but a business with the attendant realities of revenue objectives, retail space justification, profit margins and bottom lines. So it is gratifying to hear about candy’s prowess as a revenue generator and profit-margin performer in the fast-growing segment of alternate-channel retailing.
Candy’s ability to generate impulse purchases is well documented. Its rise in alternate channels demonstrates that candy has substantial price elasticity as well. In other words, if you’re shopping in a pet store or sporting goods outlet and decide you want to scoop up one of the candy bars on display at the checkout, you probably won’t hesitate to shell out 95 cents for it.
Still, alternate-channel retailers do need to be smart about how they merchandise candy. As Brian Keller, Circuit City’s savvy candy buyer, commented, “It’s a matter of having the right product at the price they [consumers] are willing to pay. It doesn’t have to be the lowest price in town.” But, he might have added, pricing can’t be over-the-top either.
And assortment matters, too. It’s got to be a mix that addresses the preferences of the customers within that particular channel. Jeff Heyman, vice president of retail for FedEx Kinko’s, notes that the chain of business centers altered its candy and snack assortment after discovering that patrons apparently weren’t all that wild about some of the good-for-you snacks originally stocked.
My guess is that this is only the beginning of the sweet excitement in alternate channels; clearly there are untapped opportunities here. Certainly chocolate and coffee is a pairing that deserves to be further exploited in specialty coffee shops. Starbucks, Caribou Coffee, are you paying attention? I can’t be the only one who would relish the opportunity to cap off an evening with a decaf skim latte and a tasty morsel of oh-so-premium dark chocolate. Functional or performance confections offered in health club gift shops or vending machines make sense. And how about something delicious and decadent to be sold in hair salons or spas, settings where the clients already are in the mood to treat themselves? Specialty products for specialty retailers — now there’s a concept worth some additional exploration.