Six Steps to a Winning Tobacco Business in Today's Ever-Changing Landscape

LAS VEGAS — There are many famous quotes in history that people can not only recognize, but they can name the speaker. One quote you'll most likely never hear is that next year will be the easiest year for tobacco.

Kicking off his keynote presentation at TPE 2019, Michael Herklots, vice president of retail and brand at Nat Sherman Inc., predicted that no one will ever utter those words — and that's because of a combination of factors.

Yes, the Food and Drug Administration's tobacco regulations and proposals may be disruptive, Herklots acknowledged, but he noted that the agency's actions are just one of many challenges to the tobacco business.

To combat the challenges, he outlined six key strategies for achieving a successful business in the ever-changing tobacco landscape:

1. Define Your Brand Experience

"Every business is a brand and within your brand, you have to have a certain philosophy and clarity to what your brand is and what your brand is not," Herklots said.

A tobacco retailer needs to be "all in" on its key experience and not try to be everything to everyone. 

"We have a tendency to want to be everything to everyone, but that's not practical," he explained. "You can't be the best at everything."

One of the easiest ways to develop a brand experience in the tobacco industry is through events — an advantage brick-and-mortar retailers have over online retailers. However, retailers need to choose events that are authentic to them and their customers, Herklots advised.

2. Be Consistent

"Consistency is everything when it comes to branding, marketing and experience," according to the tobacco executive.

Tobacco retailers need to set expectations they can meet and hopefully exceed, he said.

"What story is a customer going to repeat to their friends when they leave your store? That's where we win in brick and mortar," said Herklots.

The internet may be able to win on price, but in the absence of price, the focus is on quality: quality of service and quality of people.

3. Merchandising MATTERS

"How you present your product is your billboard," he said. "And today, more than ever, our product has to do the selling for us."

To not merchandise your products correctly is leaving money on the table.

"Merchandising is the first step in starting the conversation," he said.

4. Embrace Partnerships

According to the Nat Sherman exec, retailers need to identify key vendor partners and grow their businesses together.

"True partnership is not sprinkling a little bit of business around," he said. "As a retailer, you can own that partnership."

Having a great vendor partner allows a retailer to trial products and train their associates better, and provides more margin, more promotional support and a competitive edge, Herklots explained.

5. Trust Your Gut & Your Data

These days, tobacco retailers have great systems in their stores to provide data. That data is critical — but so is trusting your gut.

The combination of data and gut "allows you to be nimble and agile as we move through these changing landscapes," he said.

Data and gut help retailers with their product selection, leading with products that show their brand experience, selling products their customers want to buy and setting achievable, focused goals.

6. Anticipate Change

Whether it is regulatory or consumer related, change is inevitable, Herklots pointed out. To survive change, a retailer needs to be "significantly different and valuable to its customers," he said.

A few steps retailers can take to weather change are:

• Create plans that are more resistant to regulatory change; for example develop a membership program;
• Offer experience-based initiatives that are not just price or promotional driven, but an experience that cannot be replicated without brick and mortar; and
• Be involved with the community, other businesses and elected officials.

TPE 2019, traditionally the first tobacco show of the year, took place at the Las Vegas Convention Center Feb. 11-13.