With hard-to-predict influences in the form of regulations at all levels of government, supply disruption, newfangled products and shifting consumer behavior, merchandising the tobacco back bar may seem as tricky as ever to today’s retailers.
Cigarette dollar sales have been relatively flat, rising just 0.1% for the 52 weeks — and slightly down 0.8% for the 12 weeks — ending Aug. 8, 2021, according to total U.S. convenience data from market research firm IRI. Spitless tobacco and electronic nicotine delivery systems (ENDS) were consistent big winners, registering boosts in dollar sales of 46.7% and 18.4% respectively for the same 52-week period. Other tobacco products (OTP) showed the biggest drops, with both pipe (-24.2%) and roll-your-own (RYO) (-11.4%) tobacco seeing large 52-week declines.
With a product that is so heavily regulated, it can be difficult for retailers to use the same incentives as other products to boost sales. That means stores must maximize the discounts and other incentives offered through manufacturers, like special pricing and loyalty discounts. Here are some tips on boosting sales for the segment:
1. Build Customer Loyalty
“Loyalty’s a big thing,” said Vince Segura, merchandising manager for Fuel City’s seven stores in the Dallas-Fort Worth Metroplex. How do customers become loyal tobacco patrons? Ensuring top products are in-stock and running all available tobacco deals can keep your store top of mind for tobacco users.
“Multi-pack specials are probably the best that we get,” Segura noted. And his customers know they can find them at Fuel City.
Retailers would be wise to stay on top of suppliers and be sure to know all of the manufacturer incentives — not only those running currently, but those planned for down the road.
While Fuel City has run specials on dip and other smokeless products, the chain has found that simply having the product in-stock can give its stores an edge. Supply disruption has been a factor with smokeless products, noted Segura. That’s led to more smokeless customers buying the multi-pack — “a log,” he called it.
“There is a customer base that comes in, and they want a log of Copenhagen or what not, especially if it’s hard to find,” Segura said. “COVID’s put a hurt on a lot of companies all around, but tobacco especially.”
With tobacco users’ strong brand loyalty, the now-familiar COVID-19 pandemic stock-up mentality kicks in, and they buy plenty of product in fear they may not be able to find it later.
It’s also smart to pay attention to what kind of promotion and advertising that brands are doing on a larger scale. Often, retailers can see a connection to national advertising and strong store sales, especially with new types of products, like nicotine pouches.
“ZYN has been doing really, really well,” Segura observed. “I think they do a good job of marketing that throughout the U.S. on TV, stuff like that. So that’s really popular in all of our convenience stores.”
Lots of buzz from a strong advertising campaign could mean stronger demand for that product — it’s also the worst time for a retailer to get caught with out-of-stocks. The sales opportunity isn’t all that you’ll lose — it’s a blown opportunity to show you’re the store that customers can count on.
2. Master Compliance
While it’s important to please the right customers, retailers need to be just as mindful to NOT sell to the wrong customers. Do not overlook regulatory compliance in merchandising the tobacco set.
“Here in New York state, there is a required red-lettered sign that says that we don’t sell tobacco products to minors,” said Jim Calvin, president of the New York Association of Convenience Stores. “There’s also a corresponding sign about not selling vaping products to minors. But every state has different requirements.”
Staying on top of these requirements — especially if you have locations in multiple states — is essential to properly selling the tobacco back bar. For example, some states require very specific signage while others do not, Calvin noted.
3. Prioritize Training
Going even further, Calvin strongly recommended developing a store “culture of continuous vigilance” in preventing the sale of tobacco products to minors. And that means repetitive training. “Training people once and hoping that they remember it and retain it forevermore — it does not work,” Calvin cautioned. “There need to be constant reminders.”
A store’s entire staff, he said, must internalize the responsibility so it becomes automatic. “There has to be that constant vigilance that is in the hearts and minds of your cashiers every hour of every day,” he advised.
4. Get Involved Legislatively
Calvin also stressed the need to be active in convenience industry trade organizations as well as with other retailers and industry groups. When you amplify your voice, it’s more likely to be heard. “It’s important to be plugged in to your trade association as to what types of laws and regulations are already on the books and new ones that are being proposed,” he advised.
Retailers should remember that they are able to have some influence with lawmakers by attending the next public hearing or town board meeting. This is becoming increasingly important given the trend of local governments passing tobacco-related ordinances. More localities are requiring retailers to have a town or city or county tobacco license — on top of a state license.
5. Promote Tobacco Deals
Using signage to promote tobacco prices and deals is key to boosting tobacco sales, advised Fuel City’s Segura. “Make sure that if you are offering those multi-pack specials, put that big around your tobacco displays so (customers) can see that. Be consistent with it.”
Segura strongly advised that retailers give the customers what they ask for — that’ll lift sales throughout the store.
“We have a lot of return customers,” he said. “If you find a customer that likes an off-brand … and they want it, bring it in for them. Then keep it in stock for them, and you’ll keep that customer coming.”