Snack bars feed growth in miscellaneous

Discount Store News, August 4, 1997

Never underestimate the lure of fast food. Snack bars were the only segment within the miscellaneous category that retailers separated out in large numbers by name this year. Snack bars, particularly those with high brand recognition such as McDonald's, Burger King, Wendy's and Little Caesar's Pizza, are growing in the mass market as retailers concede that consumers prefer name brand fast food to their own generic offerings.

Wal-Mart leads the industry in the move toward pairing up with name brand fast-food outlets through its broad-based program. The chain has already joined up with McDonald's and PepsiCo's Pizza Hut, Taco Bell and Cinnabun.Wal-Mart also offers Baskin-Robbins ice cream parlors in 17 of its super-centers and may even soon feature Dunkin' Donuts and Baskin-Robbins ice cream combination shops within its stores.

The last of the Big Three to recognize the trend in branded snack bars is Target, which switched its new Skeedattle's snack bar format in many of its new Greatland locations to include the Express formats of Taco Bell and Pizza Hut. The previous format was a food court-style snack bar with breakfast fare such as muffins and standard lunch items like hot dogs and pizza. The new configuration is designed to be more appealing to customers and take up less floor space. Gone is the open square-shaped, food preparation area that was usually situated in a corner near the main entrance. The new format is well-lighted, bright and open, with a walk-up counter and an adjacent seating area.

Kmart is again remaking its snack bar department. The retailer will maintain its relationship with Little Caesar's, keeping the 500 restaurants already in stores. The chain will co-brand the balance of the restaurants under the K Cafe label. Beginning soon, Kmart's restaurants will be known either as K Cafe featuring Little Caesar's Pizza Station or K Cafe Little Caesar's Express. The entire operation will be set in less space than is now allotted for food service to help drive productivity. The new program will feature a more rounded menu, including breakfast.

Home video rental, which has shown up in the miscellaneous category in recent years, was virtually absent in the 1996 survey. This is despite the slow but steady growth of video departments operated by outside vendors such as Blockbuster or Blowout Video. Some industry experts estimate that mass merchants account for as much as 2% of the nation's overall video rental activity. To most major discount store chains, video rental is not looked upon as a big part of the miscellaneous category.

While still far from dead in mass merchants, video rental appears to work only in certain locations and is not a concept that can be successfully incorporated into every store. Substantial competition from Blockbuster Video and large upstart rental specialty chains such as Hollywood Video, West Coast Video and Movie Gallery is likely to hinder the growth of video rental sections in mass merchants.

Luggage, seasonal (including live plants, pool supplies, lawn ornaments and trim-a-tree goods) and even commodity paper products have been included in miscellaneous, helping to increase its size. This year, the "category" recorded an increase of 5.16% over the year-earlier period, a testament to the variety of goods retailers consider outside their regular category guidelines.

Miscellaneous may continue to grow as retailers grapple with new products and services that remain outside normal operating parameters. These areas might include in-store optical departments, fresh flowers and hair salons.

Miscellaneous Productivity

Department size     4,246 Sq. ft.
Sales per sq. ft.         $866.60
Turns                         6.3
Initial markup             40.00%
Gross margin               39.49%