Tips for Improving Your Odds at Tobacco Retailing
LAS VEGAS — When it comes to tobacco, retailers need to figure out their competitive edge and what they can do tomorrow to improve their odds of winning at tobacco retailing, according to David Bishop, managing director of sales and marketing firm Balvor LLC.
"Winning at retail is about doing a lot of things well; there is no one panacea," he told attendees of this week's Tobacco Plus Expo (TPE) 2017.
To that end, Bishop presented a three-part "checklist of actions" for retailer to improve upon: educate, evolve and engage.
Education empowers people to learn the skills and knowledge "to do what's right and needed," but also demonstrates that a retailer is a responsible retailer, he explained.
Referring to tobacco sales training, Bishop noted that there are six key areas of a training program and according to a recent survey Balvor conducted in collaboration with Convenience Store News and Tobacco Business magazines, only 30 percent of tobacco retailers are currently incorporating all six areas.
Retailers also need to evolve, he said. Manufacturers innovate, and retailers need to adapt — similar to the theory of survival of the fittest.
"The ones who adapt the best are the ones who survive," he pointed out.
Adding new products to the backbar does lead to an upswing in the margin trendlines, a picture seen mostly with other tobacco products (OTP) where there is more innovation. "There are troughs and peaks as a result of innovation," according to Bishop.
Notable innovations in the tobacco category over the years have included the move from loose tobacco to pouches; smokeless to snus; foil-wrapped cigars; and electronic nicotine delivery systems. Every time innovation like this happens, "you see rapid growth and rapid margin growth," he said.
"The lifeblood for retailers are new products," Bishop stated, adding that this doesn't necessarily mean new-to-industry, but new to a retailer's store.
Part of evolving also involves "how we examine our business, our customer and the market," he advised. "This helps identify where there may be potential growth."
For example, one potential area of growth is legalized marijuana. According to Balvor's research, 59 percent of those surveyed support the legalization of marijuana and 63 percent of the U.S. population lives in states that have some form of legal marijuana laws on the books. Going further, 13 percent say they use marijuana, compared to 15 percent who say they use cigarettes.
"There are opportunities for the sale of accessories that support the product," Bishop said.
The third component in improving your tobacco retailing odds involves retailer engagement — or advocacy. Pointing out that positions are changing, Bishop explained that there is more uncertainty surrounding tobacco and tobacco retailing, and uncertainty can lead to a lack of control, which is not good.
Looking at the numbers, he cited that 74 percent of convenience store retailers are optimistic about the overall tobacco industry for 2017. However, a convenience retailer's business model is not entirely predicated upon tobacco. Conversely, only 33 percent of vape shop retailers, or one in three, said they are optimistic.
"Clearly, the deeming regulations are a cloud hovering above the industry," he said.
Participating in what's happening on the legislative front is crucial. "If your voice isn't heard, the story and narrative is your opponents," Bishop contended. "Politicians sit up, listen and respond to small, local businesses because they are their constituents."
Groups like the National Association of Tobacco Outlets can help, but they need their members to communicate what is going on in their communities, he continued.
"These three actions are intended to, first and foremost, protect your position. They will also help manage your profitability," Bishop concluded.
TPE 2017 took place at the Las Vegas Convention Center Jan. 25-26. In addition to education sessions, Tommy Chong, author, activist and actor, joined the keynote presentation as the celebrity speaker on Jan. 25. TPE also featured a show floor with exhibitors occupying Tobacco Turnpike, Vapor Vista, Alternative Alley, and General Merchandise Main Street sections.