E-valuating Electronic Cigarettes' Potential in C-stores

NATIONAL REPORT -- The electronic cigarette (eCig) has caught the tobacco industry by storm, and was made even more appealing to retailers in late April when the Food and Drug Administration (FDA) said it would regulate it as a tobacco product and not under stricter rules for drug-delivery devices. But is it a good fit for convenience stores?

In a Convenience Store News/Balvor survey conducted even before the positive FDA announcement, 11 percent of retailers said they planned to test eCigs in 2011 and another 25 percent said they were currently evaluating the product.

While legal issues and social acceptability were category concerns expressed by retail participants at this year's CSNews Tobacco Roundtable, one best practice -- to educate staff and therefore, customers, about the product -- was already underway at Jubilee Food Stores, according to Dave Williamson, retail vice president.

"We gave [eCigs] to all our clerks in the stores," he stated. "That really helps get conversations going about the product."

Despite the hype, "there's still a lot of education that needs to take place regarding e-cigarettes," said David Bishop, managing partner at Balvor LLC. "Even consumers who previously purchased them online don't necessarily understand the product. Many are looking to the retail establishment to fulfill that."

Ray Story, CEO of Tobacco Vapor Electronic Cigarette Association (TVECA) agreed that a c-store's staff is instrumental in educating consumers about electronic cigarettes.

"C-stores with more than one cash register will usually sell more of these because the cashier can then take more than a minute to chat with the customer about it," he told CSNews. "And online sales that are curbed now -- because many banks are not allowing online transactions by credit or debit for tobacco products -- will drive this business to c-stores where it belongs anyway, where there is face-to-face interaction and communication."

As far as products go, c-stores are reportedly finding greater success with the disposable varieties of electronic cigarettes thanks to a much lower price point (around $9.99) than starter kits, which can be upward of $50; some in the $100 to $200 range.

"The typical consumer within the convenience channel is an immediate-needs consumer and the disposable product better meets their needs in terms of price and product," said Michelle Sausen, vice president of marketing with Convenience Valet, which represents Finiti, a disposable electronic cigarette brand.

One East Coast retailer admitted that "we are more in the market for a disposable e-cigarette; it's more of an alternative short-term solution. We haven't seen the success with the big packs and refills. Our customers are price-sensitive and not looking for the larger investment."

Smaller, less-expensive kits are also attracting some convenience retailers. "In the past, we had the $100-plus kits that basically sat there," explained Jon Fleck, merchandising manager for Cenex Zip Trip. "We are now promoting the smaller starter kits -- below $20 -- and refills that sell off of wire racks at the counter."

The chain has been trying this approach at 25 percent of its Spokane, Wash.-area stores and the sales have been better than anticipated, but still have a ways to go. "Keeping them out in the open, at the checkout lane, at a reasonable retail [price] has helped them to climb," Fleck added.

At Maverik Inc., "it took a long time to find the right manufacturer," according to Jeff Arnold, category manager. But that turned out to be Nicotek's Metro electronic cigarette brand because it provided the best of all worlds -- a good starter kit in the $50 to $60 range, refills and a disposable option for $9.99.

"Most manufacturers are not doing both kits and disposables," Arnold said, noting the brand has "a very nice display piece, made so it can sit on the front counter, but is only accessible from the back."

The majority of c-store retailers are listening to positive input such as this and taking their time to "still access the category," as one put it.

"We're passionate about it, but we're waiting to see what kind of demand it generates," one retailer stated. "It needs to justify any tobacco space we assign it."