The novelty category provides retailers with a uniqueopportunity to capture customers’personal hobbies and interests ina single, high-margin item. Whether it isa mother searching for the perfect Disneykey chain for her daughter or a young car enthusiast looking for a hat to wear to the big race, novelty items run the gamut andconvenience stores are faced with the challenge of identifying the trends before they reach the big-box retailers.
Noveltyhasevolved into a core category because retailers can anticipate 30 to60% margins on novelty products. With such strong profit potential, chains inmajor markets can earn about $35,000 ayear per store from the novelty category,according to Todd Green, president ofNovelty Inc.
While not every retailer is going toearn such impressive profits, Scottsdale,Ariz.-based Giant Industries continuesdevoting proper placement to the categorythanks to the high margins it yields.
“Novelty items are a small portionof our total sales,” said Mike Polo, vicepresident of retail marketing for GiantIndustries. “But the category is significantin terms of gross profit due to margin. Wenormally see a 45% or higher margin onour novelty items.”
To achieve the rings to capitalize on these high margins, novelty items needto be strategically placed at interruptionpoints throughout the store. While othercategories are competing for end capspace, trendy products are more likely tograb the attention of customers as theypass by.
Giant Industriespositions its novelty products basedon store size anddemographics.Aside from endcaps, other common display unitsinclude floor spinnerracksandcolorful counterunits.
” Weusedifferent displayvehicles to maximize the exposure ofnovelty items throughoutour stores,” Polo said. “This category hasthe ability to target fashion and fad items,and we want the products deliberatelyplaced to catch the customer’s eye.”
Most retailers turn to novelty suppliers to brief them on the current trendsand provide them with a suggested product-mix for the upcoming season. Below is aninside peek into how suppliers determinewhat novelty products will be “hot” in the upcomingmonths and how they can ensure retailers increase profits without breakingthe bank.
Increasing Profit while MinimizingRisk
Retailers looking to enhance theirnovelty category can rest easy knowing suppliers have their backs. Suppliers canoffer retailers product insurance not typically seen in other categories. Becauseof the popularity factors associated withmost novelty products, suppliers focuson turning the product and inventory andwill relieve retailers of the inventory thatis not selling.
The space retailers designate to noveltyitems is constantly stocked with a rotating array of products. Suppliers makesure their products are moving within theappropriate time frame, or else they willpull them from the shelves.
“The novelty category is uniquebecause it allows retailers the freedom totry new products without the danger oflosing tons of money,” said Green. “Theyare only risking space. If a product doesn’tsell, we replace it.”
The faith that retailers place in novelty experts allows them to offer the mosttimely items. Novelty Inc. typically rotatesits products every two to four weeks. Thetypical c-store customer shops about threeto five times a week. Thehigh turnover of novelty items allowscustomers to see anew product everytime they enterthe store.
“We wantto train the customer to buy novelty products whilethey’re standing in front of them,” saidGreen. “Retailers want to have that ‘wow’factor each time a customer walks in andnotices a new product.”
Riding the Popular Wave
While retailers are always looking tobuild customers’ market baskets, noveltyitems provide a great way to increase addon purchases.Novelty suppliers sustaintheir business by riding the popularity ofmovies and sports. They bring retailers avariety of hot items to choose from, whilestocking the stores with things that peoplerecognize and buy on impulse.
The licensed merchandise category isone of the most profitable sections of anynovelty line. No matter how difficult itmay be to predict demographic wants inc-stores, licensed merchandise has provento be a steady performer.
"Everything in the c-store is brandedgoods," said Green. "Novelty needs tobe branded, too. A customer will identify with a trendy movie and then go to ac-store and see a lighter branded with thatmovie, and they have to have it."
Most novelty suppliers have contractswith the major studios that produce popular movies. High School Musical and Piratesof the Caribbean are two of the more popular movies that have spawned noveltypens, playing cards and key chains.
Animatedmovies, such as Shrek, haveproven to be popular withchildren and teens,who often persuadetheir parents to purchase novelty items at the checkout. But all segments of ac-store’s consumerbase are viewed astarget customers. Themale may be drawn to sports themes and biker items, while women tend to have more interest inseasonal items andchildren’s products.
Licensed products fade as quickly as a movie’s popularity, while sports novelty items tend to have a longer shelf life.NASCAR, the most popular spectatorsport in America, is an on going theme inthe convenience market. Mountain ViewMarketing runs several NASCAR-themedpromotions during the year, targetingthe men and women who want durable,unique items they can wear to supporttheir favorite drivers.
"Many c-store customers are invested in NASCAR," said Mark Marshall, category buyer for Mountain View Marketing."They get emotionally tied to a driverand can relate to him. That bond lays thegroundwork for us to offer that customernovelty items connected to something heis passionate about."
High-end sports distributor SC Sportsis breaking into the c-store market witha line of novelty products specificallygeared to the industry. Traditionally soldin department stores and sporting goodstores, SC Sportshas received a highdemand for itsproducts in thechannel.
"Oursportsnovelty lineis uniqueto the channel becausewe have anestablishedhistoryinretailalready,"said JoeyBryant, corporate salesdirector for SCSports. "Retailers can be confident that customers recognize our nameand the quality of our products."
Since SC Sports offers officially licensed products fromthe NHL, NFL,MLB, NASCARand collegiateteams, retailers can cash inon two trendsat once—sportsand licensedproducts. Thecompany also rotates its offerings quarterly to coincide with the current sports seasons, and allowsretailers the freedom to tailor their novelty offerings by stocking regional teams’logos and colors.
Suppliers caution retailers not to gettoo caught up in only stocking one particular trend, since it can lead to excludingother customer bases. The luxury of thenovelty category is that suppliers canfocus on multiple trends at one time andtry to represent different areas of customer interest. Once a popular noveltyidea becomes mainstream, suppliers arealready behind the curve.
“We don’t reorder novelty items for areason,” Marshall said. “The strength ofthe category lies in providing the customerwith unique items and constantly puttingout innovative products that appeal to different demographics.”
With the warmer weather pumpingout new movies and sports seasons, retailers will be in no short supply of noveltyitems to choose from. And knowing thatsuppliers are working with them to stockthe trendiest items and ensure increasedprofit margins, it’s a win-win situation.
“Our focus is to keep retailers’ spaceoccupied with high margin products thatsell,” Green said. “General merchandisedoesn’t get better with time. The mostmoney is made in getting new merchandise into the stores.”