Tap the E-Potential

From a growth perspective, Wells Fargo Securities LLC predicts the market will eclipse $10 billion by 2017 (it is currently close to $2 billion, including online sales).

From a marketing perspective, e-cigarette ads are getting more bold and pervasive. NJOY Inc., for instance, recently launched a TV campaign urging adult smokers to quit regular cigarettes and switch to its NJOY Kings e-cigarette brand in the New Year as part of their resolutions. The campaign uses messages such as “Everyone who loves you wishes you didn’t smoke. So do we.” and “Friends don’t let friends smoke.” The company’s Global Chief Marketing Officer Geoff Vuleta said part of NJOY’s long-term goal is “to make cigarettes entirely obsolete.”

Convenience store chains have been early adopters and are fond of the e-cigarettes category, in part, because it is helping offset losses in traditional cigarette sales. At a Wells Fargo Securities event late last year, Casey’s General Stores Inc., with 1,749 locations, reported that e-cigarettes comprise a small amount of its tobacco sales, but are doing “extremely well.”

Profit margins in the e-cigarettes category are another attraction for c-store chains. Some retailers report the vapor category is providing profit margins they’ve never experienced before — well over 50 percent and in some cases, as high as 80 percent.

“E-cigs are in their infancy, but we are seeing dramatic growth,” Core-Mark Holding Co. CEO Tom Perkins said at the Wells Fargo event, noting these products carry at least three times the profit margin of traditional cigarettes. “This is great news for both us and the c-store retailer.”

Single-store owners can tap into the profit potential of electronic cigarettes by adopting the following best practices circulating the convenience industry:

• Vary the assortment — C-stores may be limited on space, but e-cigarettes and related items don’t take up too much of it. If a single-store owner is going to tackle this category, the first best practice suggested by industry manufacturers and retailers is to vary the assortment both in brands and price points. Tony Vecchie, senior vice president of sales and distribution for ECO-CIGS, believes stores should now carry at least three different brands each of both rechargeable and disposable e-cigarettes — and not all at the same price point.

Similarly, a spokesperson for CIGR8 said retailers would be best with at least five facings: two premium brands, two regular brands and one value brand. “If retailers don’t have different quality levels and price points, they’re missing out on this growing marketplace,” he stated.

• Train employees to be e-cig aware — It is one thing to sell e-cigarettes. It’s a far better thing to sell them with category-astute employees. Single-store owners would be wise to borrow a page from Smoker Friendly Inc., based in Boulder, Colo. The retail tobacco chain with more than 800 authorized dealers (some of them gas stations/c-stores) not only carved out a special section for its continually expanding array of e-cigarettes and vapes, but also backed it up with sales training and education on each of the different brands it carries. “We feel that having well-educated employees who are able to explain the differences between e-cigs and vapes gives us a competitive advantage,” explained Jeremy Weiner, marketing and purchasing director.
   
• Illuminate the section to invite customers over — As autonomous purveyors, single-store operators have the freedom to get creative with a highlighted e-cigarette section. Again, the tobacco channel is a good resource of ideas. With 50 stores, Wild Bill’s Tobacco based in Birmingham, Mich., is quickly becoming known as the e-cigarette destination in its area, according to Justin Samona, chief marketing officer. Its stores are equipped with modern e-cigarette super centers, which it has named “Mr. Vapor.” Each store highlights this section with chrome shelving and blue LED lights, which “attract customers right when they enter the store,” said Samona. Customers are invited to sample disposable e-cigarettes, rechargeable kits, tank kits, mod systems and more than 100 different flavors and strengths of e-liquids.
   
• Remember the accessories — The latest craze in the category expands way beyond just the actual e-cigarette and vape products themselves. Single-store operators that want to make a real impact should stock all of the related industry items such as e-liquids, atomizers and replacement batteries. Suggestive-selling of these items is also a best practice worth emulating.
   
• Keep abreast of the latest and greatest — New e-cigarette and non-combustible tobacco products are hitting the market fast and furiously. Single-store owners don’t have to try everything that comes out, of course, but they should be market savvy. This means not only merchandising those devices and displays that make the most sense for their store, but also being ready to answer customer questions intelligently and thus gain loyalty.

One company making recent headlines is Vapor Corp., which unveiled a prototype of its new Vapor X personalized, rechargeable vaporizer. It incorporates patent-pending biometric fingerprint technology to keep the device locked and turned off unless the authorized user is present.

• Connect with industry support — The electronic cigarette industry is now bursting with association support, and single stores would be wise to reach out and utilize these resources for knowledge and ideas. Organizations include: the American E-Liquid Manufacturing Standards Association (www.AEMSA.org), dedicated to creating responsible and sustainable standards for the safe manufacturing of e-liquids; the Consumer Advocates for Smoke-Free Alternatives Association (www.CASAA.org), created as an answer to the anti-tobacco harm reduction groups’ efforts to ban such products; the Smoke-Free Alternatives Trade Association (www.SFATA.org), which serves as an educational and lobbying resource for manufacturers, wholesalers, retail sellers and distributors of personal electronic vaporizing units; and the Tobacco Vapor Electronic Cigarette Association (www.TVECA.com), which can provide information on the completed science around e-cigarettes, as well as current and past legislative and judicial actions.

New trade shows and conventions are also popping up, such as Vapor World Expo, which will take place May 7-8 in Rosemont, Ill., at the Donald E. Stephens Convention Center. This “all-vapor business-to-business conference and exposition” will set the stage for innovation, product safety, harm reduction, education and market profitability for c-stores, smoke shops, wholesalers, distributors and other industry players that want to keep up with the vapor market expansion.

• Stay alert to regulations — In addition to the likely federal regulations coming down the pike, single-store owners need to be aware that some cities, such as Chicago and New York, have taken action to ban the use of e-cigarettes in public places where smoking is already prohibited. This type of local regulation is expected to spread across the country.