Electronic cigarette sales are surging. CSD partnered with Study Hall Research to go inside the minds of e-cigarette consumers to learn
what motivates their tobacco purchases.
By John Lofstock, Editor and Josh Tahan, Study Hall Research
The prevalence of electronic cigarette usage amongst the general population is growing and analysts are predicting the category now accounts for more than $500 million in retail sales in the U.S.
The category’s popularity has grown at a record pace. “E-cigarette sales have been growing at over 30% annually,” Bonnie Herzog, managing director of beverage, tobacco and convenience store research at Wells Fargo Securities LLC,” told Convenience Store Decisions. “E-cigarette sales could surpass the sales of traditional cigarettes in the next decade.”
New products and the long-term market for e-cigarettes is creating a renewed optimism in the tobacco category. To understand why this category has grown so quickly with consumers and what is motivating them to buy electronic tobacco products, CSD partnered with Study Hall Research to communicate directly with e-cigarette consumers.
In April 2014, Study Hall Research surveyed over 500 adults aged 18 or older about their perceptions of e-cigarettes. Respondents were asked about their usage of traditional tobacco products, electronic cigarettes, purchase channels and other ‘smoking’ related questions.
In total, 561 surveys were collected between April 14-28.
Regarding e-cigarette usage, 18.2% of respondents indicated they use electronic cigarettes exclusively, which is nearly triple the Centers for Disease Control and Prevention’s 2011 estimate figure of 6.2%. Seventy-five percent of all users of electronic devices who were surveyed have been using e-cigarettes for less than one year’s time.
The survey also found that 8.2% of respondents use e-cigarettes and traditional tobacco products concurrently. Of the 8.2% of these respondents who indicated use of traditional tobacco products concurrently with electronic cigarettes, 84.8% smoke traditional, combustible cigarettes.
In addition, the electronic cigarette consumer has tried at least three different brands in the past 12 months, but only uses an average of two different brands concurrently. Half of all respondents prefer to use rechargeable and e-hookah/e-juice refillable electronic devices.
Another 16.2% of respondents prefer to use disposable devices, a staple SKU in most convenience stores across the county, although 27.7% of all respondents reported that they use a disposable e-cigarette at least occasionally.
Electronic cigarette users spend, on average, $43.70 per month on electronic cigarettes and related purchases, whereas those consumers likely to purchase from a convenience store indicated they only spend $20 or less per month on electronic cigarette purchases, according to results.
Respondents with a household income of $75,000 or greater are less likely to use electronic cigarettes, but more likely to buy them from a convenience store than those who have household incomes below $75,000 per year.
Fifty-seven percent of all electronic cigarette users have purchased electronic cigarettes from a c-store before. However, 20.03% of respondents indicated they buy their e-cigarettes at a c-store most often, indicating a significant opportunity for c-stores to capture a greater percentage of e-cigarette sales.
Only 41% of those customers polled said they have purchased accessories/refill cartridges/e-juice from convenience stores. This consumer drop-off is much larger than in other channels, specifically when compared to retailers that only sell e-cigarettes and the corresponding accessories. Fifty-five percent of all electronic cigarette users have purchased products from an e-cigarette retailer and 49.7% of those consumers indicated they have purchased replacement cartridges or e-juices from the same channel.
Also, tobacco shops are the leading destination for e-cigarette customers. Of the customers surveyed, 29.7% said they purchase electronic tobacco products and accessories most often at tobacco-only shops.
Bolstering sales of replacement cartridges and e-juice liquids will help c-stores regain many customers that make an initial purchase from their stores but look to other channels for accessories and supplementary products.
Additionally, electronic cigarette users stated they purchase their refill cartridges or e-juice from electronic cigarette retailers (Internet or brick and mortar based) most often. While 56.1% of consumers prefer to purchase from these specialty retailers, 16.9% of consumers indicated they will go to a convenience store for such ancillary products.
Respondents who do not use electronic cigarettes overwhelming attributed this to the fact that ‘they do not smoke cigarettes.’ It is clear that non-users of these devices do not see electronic cigarettes as a stand-alone product, but as a substitute for traditional, combustible tobacco products. Only 12.2% of the non-cigarette user respondents indicated health concerns as their reason for not using these devices.
Inside the Numbers
Among other key findings:
• 11.6% of all respondents exclusively use tobacco products (cigarette, pipe, chewing tobacco, etc.);
• 18.2% of all respondents use electronic cigarettes exclusively;
• 8.2% of all respondents use electronic cigarettes and tobacco concurrently;
• 62% of all respondents do not use either electronic cigarettes or tobacco products. Of these respondents, 38.4% have used tobacco products before, with the majority having used their last tobacco product greater than five years ago.
Of those surveyed that indicated tobacco usage (111 respondents total):
• 87.4% use cigarettes;
• 23.4% use cigars;
• 19.8% use hookahs or water pipes for tobacco;
• 6.3% use chewing tobacco;
• 9% use loose leaf tobacco pipes.
One quarter of the 148 respondents that use electronic cigarettes have used e-cigs for more than one year. The remaining respondents fall into these timeframes:
• 18.9% have been using e-cigarettes for 1-3 months;
• 22.3% have been using e-cigs for 3-5 months;
• 21% have been using the product for 5-8 months; and
• 12.8% have been using e-cigs for 8-12 months.
Of the 148 respondents that use e-cigarettes:
• 52.7% of these electronic cigarette users use rechargeable, e-hookah or e-juice based devices;
• 39.9% of these electronic cigarette users use rechargeable, cartridge-based devices; and
• 27.7% of these electronic cigarette users use disposable devices.
The survey found that respondents prefer to use rechargeable, e-hookah or e-juice based devices more so than any other type of electronic cigarette.
• 16.2% prefer to use disposable devices (although 27.7% of all respondents are currently using them);
• 33.8% prefer to use rechargeable, cartridge based devices; and
• 50% prefer to use e-hookah or e-juice based devices.
While the e-cigarette consumer has tried at least three different brands in the past 12 months, the survey found that the average customer is loyal to two different brands concurrently.
Based on the respondents’ feedback, electronic cigarette consumers are likely to agree the following factors led to their electronic cigarette use:
• Curiosity about the new technology;
• Opinion electronic cigarettes are safer than tobacco products;
• Belief that electronic cigarettes are a better value than tobacco products;
• Opinion that electronic cigarettes have less secondhand smoke than tobacco products;
• Ability to use electronic cigarettes in places that combustible tobacco isn’t allowed;
• Belief that electronic cigarettes can help them quit tobacco products.
While e-cigarette users spend on average $43.70 per month on electronic cigarettes and related purchases, those customers who spend $20 or less per month on e-cigarette purchases are more likely to buy from a convenience store.
Only 12.7% of e-cig users said they would not consider purchasing from a convenience store, seemingly good news considering that 57% of all e-cigarette users have purchased e-cigarettes from a c-store before.
However, there are a few hurdles. Just 41% of those same respondents said they have purchased accessories/refill cartridges/e-juice from the same stores. C-stores are getting the initial purchase, but they are losing a key opportunity to sell additional e-cigarette accessories and refills.
In the survey, 16.5% of respondents that are non-active electric cigarette users stated that they have tried an electronic cigarette at least once. When asked why they do not currently use an electronic tobacco device, the following open ended responses were tabulated:
Respondents who stated that they do not smoke tobacco products are likely to agree that electronic cigarettes are a safer alternative to smoking tobacco. These same respondents are likely to agree that electronic cigarettes have less social stigma than traditional tobacco products. All respondents neither agreed nor disagreed that convenience stores have competitively-priced electronic cigarettes and/or accessories. These respondents neither agreed nor disagreed that convenience stores have a greater selection of electronic cigarettes or accessories than other type of stores.
Similarly, all respondents were slightly more in agreement that electronic cigarettes are a safer alternative than regular tobacco products and are a more cost-effective alternative to regular tobacco products.
The next big challenge associated with e-cigarettes for convenience store retailers is the need for proper merchandising to drive interest and awareness in this growing category. Most stores don’t have room for fixtures from all the various brands, but it’s time to make room for the key players.
It’s early yet in the e-cigarette evolution, and the general public doesn’t yet understand them, according to Lisa Dell’Alba, president of Square One Markets, a nine-store chain in northeast Pennsylvania. “People aren’t sure where they can consume them or what answer they can give when people say ‘Hey, that’s harmful to me.’ Tobacco as we know it is changing. In a few years, the back bar is going to look very different.”