Plugged In To Candy
June 1, 2006
Plugged In To Candy
Consumer electronics retailer Circuit City finds that candy is dandy for the bottom line.
Candy and consumer electronics enjoy a sweet coexistence in more than 600 Circuit City stores nationwide.
Which is exactly what Brian Keller had in mind when he launched a candy initiative at the chain about two years ago. A veteran of 20-plus years at Circuit City, a Fortune 500 provider of consumer electronics products, Keller has served stints in store operations, in the training department, and on the Six Sigma business improvement methodology team. Part of the latter group’s mandate was figuring out ways to generate new revenues for Circuit City, and Keller was convinced that candy was a strong candidate.
“We started bringing the candy in during October 2004 and had it rolled out to every store by January 2005,” Keller reports. “We’ve expanded, and I’m expanding further. The company is very pleased with the kind of profit margin this generates. It’s a nice add-on sale. And it’s a great customer service … for the customer who has been out shopping for a while and has got a little hunger or thirst going. (Beverages also are sold at the front end of the stores.)
“It doesn’t take away anything from our core business, which is to sell consumer electronics,” Keller summarizes.
Candy is displayed at two locations in Circuit City outlets — at the checkout and with the DVDs. At the checkout, a three-foot-long, double-sided “Sweet Spot” display fixture shows off nearly 70 candy SKUs. “It stands kind of proud,” says Keller, who credits the fixture’s simple design and crisp graphics with making the candy rollout “successful right out of the gate.”
“We were trying to do candy the Circuit City way, which was to give it a face and really make it a department,” he adds.
In the wake of the Sweet Spot rollout, about two-thirds of Circuit City stores have added a small rack for gum at the front register. Next up for the front end will be more salty snack SKUs, Keller reports. The chain already sells nuts, trail mix and some meat snacks at the front end.
“I’ve been working with my space planning and store environments group to come up with a way to display all of these products so it doesn’t look like it was done by some guy trying to run a Kool-Aid stand,” Keller continues with characteristic wry humor.
A sweet combo
The secondary location for candy is smack dab in the middle of Circuit City’s highest-traffic zone, the DVD department. About 30 theater box candy varieties are featured on three power panels housed in the department; the assortment also includes a single SKU of microwave popcorn. Point-of-sale signs encourage shoppers to “make it a movie night.”
Merchandising candy with the DVDs makes for a logical pairing, says Keller. “People are used to buying candy at the movies,” he says. “Movie candy is about $3 or $4; our prices are dramatically less, so it’s almost a no brainer: ‘We’re going to watch a movie tonight. Let’s get some Junior Mints and Sno-Caps.’ And because our selection is broader than in the typical theater, I think people tend to buy a little more.”
Selling DVDs is a fiercely competitive, low-margin proposition, so positioning candy adjacent to them and developing DVD/candy tie-in offers delivers a nice bit of profit margin enhancement. About 80 percent of a new release’s sales occur in the first 30 days it is on the market, Keller explains. “Everybody is going to advertise it at a hot, low price,” he says. “So we’ve got a hot, low price. We’re not making a lot of money on it. By being able to have a candy tie-in, we can improve that.”
Movie-themed licensed candy is a natural for this purpose, says Keller, noting that he brought the PEZ Star Wars Collector’s Set candy dispensers into the stores prior to Christmas and even featured them in national Circuit City advertising.
For the “King Kong” DVD release, Circuit City offered a free king-size Nestlé candy bar with purchase of the DVD. And with the release of the “Charlie and the Chocolate Factory” DVD, what else for a giveaway but free Wonka chocolate bars? (Consumers actually had a choice of either the Wonka bar or Wonka Donutz candy, Keller notes.)
In this environment, having candy on hand is a convenience for the consumer, and the Circuit City pricing strategy for candy reflects that. “It’s a matter of having the right product at the price they’re willing to pay,” says Keller. In a welcome contrast to the DVD business, “it doesn’t have to be the lowest price in town,” he adds.
What works at Circuit City
Theater box candy is one of the star attractions in Circuit City’s candy assortment, but thanks to the chain’s predominantly male shopping demographic, beef snacks are doing well too, adds Keller. “The Circuit City customer is about a 43-year-old male, and guys like beef,” he notes.
Because that male shopper often arrives at the store with his kids in tow, candy SKUs targeted to the younger set are strong performers as well. “That was something of a surprise to us,” says Keller. “I didn’t expect it to be as big as it is.
“We do a nice business in sours and what are traditionally kids’ candy items,” says Keller. “Twizzlers, Sour Patch Kids and Swedish Fish — those three items are in our Top 10.” Other big winners: Signature Snacks’ Flipz chocolate-covered pretzels and Jelly Belly jelly beans in a 5.1-ounce box. “They’re flying off the shelf,” says Keller of the latter item, which is housed in the DVD department and packaged in what he describes as “kind of like a vertical theater box.”
With the exception of licensed candy items that tie into DVD movie releases, and the occasional hot prospect in and out, Circuit City steers clear of most temporary merchandisers, says Keller. Store traffic in a specialty store isn’t as robust as in a supermarket or mass merchandiser, so it may take four or five months for a shipper to sell through, says Keller, noting that by that point it tends to look “ratty.”
Keller credits his distributor, Phoenix-based Liberty Distribution, with providing valuable assistance in the assortment selection process. “Liberty was instrumental in helping us pick out top sellers across the nation so that we’d have a starting point that was robust,” he says. Since then, Keller notes, he has culled the assortment, pulling about a dozen SKUs and giving some new items a try. Most of the originally chosen SKUs have been winners, however, as has the overall candy concept, he notes.