Mass/Supercenter Channel Discounters

No matter how you slice or dice it, Wal-Mart is still the leading force in U.S. retail — by a landslide. It is, of course, at the forefront of the mass merchandiser/supercenter sub-segment that it belongs to, and in many ways, defines; but this giant American icon’s influence is even larger that that.

Its overwhelming share of sales was recently put into perspective by STORES Magazine. Aggregate 2006 revenues for the companies on the trade journal’s Top 100 list this year were just over $1.6 trillion. Wal-Mart accounted for nearly 22 percent of that total, and its total revenues ($348.6 billion, which includes Sam’s Club) are greater than those of the next five largest U.S. retailers combined.
Shhh! Wal-Mart’s talking . . .
So, of course, when Wal-Mart makes a move, it affects the entire retail world, not to mention the mass channel. And while lower-than-anticipated comp store sales caused some recent speculation over whether or not Wal-Mart was perhaps losing its way, and deviating a bit from what made it so powerful in the first place, that kind of talk has subsided for the moment: Wal-Mart has indicated it is making way for a strong price/EDLP focus once again.
SWOT Analysis
Strengths
• All retail eyes on Wal-Mart
• Mass becoming more ‘foodie’ oriented

Weaknesses
• Sears/Kmart brand confusion
• Overplaying the ‘bargain’ card

Opportunities
• Boutique candy
• Everyday confection destination
• Fabulous impulse finds at the front end

Threats
• Channel sans supercenters is shrinking
• Unique food competition is intensifying

Wal-Mart was looking to achieve its goal in a more efficient way — meanwhile squeezing more profits out of existing stores. And there will still be growth — between 190 to 200 new supercenters are expected for fiscal 2008 and 170 new stores for fiscal 2009 and beyond.
Target expands ‘private menu’
Meanwhile, Target is on a mission to increase the percentage of food offerings in its traditional and SuperTarget stores. This includes an increase in its private-label brands, such as Archer Farms, Market Pantry and Choxie, Target’s whimsical and upscale chocolate line. The company is looking to grow these and other house brands by another two or three percent by 2010, according to Gregg Steinhafel, president.
Channel Leaders*
Chain 2006 Annual Sales (in billions) % change (2005-2006)
Wal-Mart Stores*$226.07.8%
Target Corp.$59.513.1%
Sears Holdings$53.07.9%
*not including Sam’s
Sources: Company reports and STORES magazine
Sears/Kmart synergy?
And then there’s Sears Holdings, the retail mix of Sears department stores with Kmart, which has analysts scratching their heads as to the synergies. Recent comp store sales have been disappointing, with no clear plan outlined for the future.
Sweet opportunities
But being more relevant these days means offering convenient consumables — and candy and snacks are a bright impulse pull — more so than the entire channel is taking advantage of (yes, even Wal-Mart is missing some sweet opportunities).
“Some mass operators are better than others in taking advantage of the impulse nature of candy — with some stores, it even depends on the time of year,” begins Jim Corcoran, vice president of trade relations for the National Confectioners Association. “But generally speaking, the channel is not doing a great job with confections at the front end — many are losing sales opportunities with their lack of front-end merchandising,” he says.
Mass Channel Performance in Confectionery

2006 Data
Mass Candy Sales (excluding Wal-Mart): $1.3 billion
Mass Candy Sales Change (2006 vs. 2005): +1.5%
Mass Share of $28.9 billion Confectionery Market: 4.5%
*Wal-Mart Candy Sales: $3.2 billion
*Wal-Mart Sales Change (2006 vs. 2005): 6.7%
*Wal-Mart Share of $28.9 billion Confectionery Market: 11%

*estimate
Sources: Sales figures are compiled by National Confectioners Association based on input from Information Resources, Inc. NCA/CMA Monthly Shipment Reports and U.S. Department of Commerce

In addition to better front-end merchandising, another way for mass to capture more regular candy customers is through seasonal candy and its “offshoot” opportunities. “They already do a tremendous job in seasonal candy and sales, but there is more they can do,” suggests Corcoran.
Easter 2008 will fall on March 23 — which means there will be less time between Valentine’s Day and Easter to merchandise Easter candy. “It gives retailers only approximately four weeks of merchandising time as opposed to up to eight weeks, which it can sometimes have for that holiday,” says Corcoran. “So it will be very important to have Easter candy up early and promoted early next year.”
Mass vs. Supercenter Number Cruncher*

Mass Merchandisers with Supercenters
96% — Household Penetration (down from 97% in 1997)
$49 — Average Dollars Spent per Trip (up from $29 in 1997)
31 Average Number of Shopping Trips per Year (down from 33 trips in 1997)

Supercenters
62% — Household Penetration (up from 52% in 1997)
$56 — Average Dollars Spent per Trip (up from $36 in 1997)
26 Average Number of Shopping Trips per Year (up from 13 trips in 1997)

Mass Merchandisers without Supercenters
84% — Household Penetration (down from 94% in 1997)
$42 — Average Dollars Spent per Trip (up from $28 in 1997)
16 Average Number of Shopping Trips per Year (down from 27 trips in 1997)

*For 2006
Sources: The Nielsen Company’s “U.S. Consumer Dynamics Across Channels & Categories,” April 2007/Homescan 2006