With tobacco product sales declining, newsagents need to carefully assess their position and know when it is time to quit the category. In the latest newsagency sales benchmark study I have data from some newsagencies experiencing 30% (and more) year on year declining sales.
The decision about when to quit tobacco needs to be approached in the same way you’d approach it for any product. This involves considering:
- Return on inventory investment.
- Return on space.
- Return on labour.
- Risk.
- And the opportunity cost associated with the above.
While we would usually talk about what we can do to grow sales of a category that is challenged, with tobacco this is complicated by the regulations in place. Hence the need for newsagents focus on when to quit – or if not that, at least considering their position in relation to tobacco.
I can see plenty of newsagents in the latest benchmark pool who ought to consider this on sales numbers alone. The cost, space and other factors would make it uneconomic. They can easily see what is sold with tobacco products to assess the likely impact on the business.
While my query here is more about the financial justification for selling or not selling tobacco products, there are other reasons including public health. This is why I stopped selling tobacco products in my first newsagency in 1996. Researching this issue I found an interesting report out of California on the movement among retailers on tobacco products.
No matter where newsagents stand on the issue of public health and tobacco products, they need to ensure that the category is paying its way for it to re=main in the business.
The covering of cigarettes handed an anti-competitive “free kick” to the supermarkets and chain-store operators. Now no one really knows that I sell cigarettes. They’ll go to the local servo and convenience store despite my prices being significantly cheaper.
We see cigs as a break even department the same as newspapers, not a loss leader but not far off it. We only hold enough stock on the shelf for a few days and replace 2 or 3 times a week if needed but we no longer have them in prime position behind the counter but tucked away in the corner.
As an industry I think we cannot keep cutting departments and cutting lines as this damages who we are and customers will simply stop coming in and start using servos, 7/11 stores and our other competing destinations as the new go to shops as newsagencies once were.
It is my view that we are a convenience business as well as having unique pull departments so we need to stock what our competitors stock but as you have stated in previous posts, as a shop of last resort for cigs we price accordingly as well (20% above cost). I would not stock anything that was losing me money as I saw paper deliveries so sold upthe runs but we need to still offer what customers “think” newsagents should.
Andrew Moore commented on Sunrise on Tuesday morning that kids were buying cigs from Newsagents……a claim which I challenged him to prove. Maybe it is time to “quit” the product……seems as we are all so irresponsible!!!
our cig sales are holding up, and have been slowly greeping up our % GP every price rise for the last 18 months. Still see cigs as an important drawcard especially for early morning traffic (we open at 530)
last qtr saw unit sales down 2% and dollar sales up 1% to $60k despite new regulations. Will be stocking cigs for a while yet, im not about to pass judgment on whether its right or wrong to smoke otherwise where do i draw the line, no choccies for you because i think your overweight, or do you really need to spend that much on lotto?
We stock major sellers only and have a small stock holding as we are convenience and last resort purchase. Coles around the corner with a queue are cheaper. As a convenience store they come to us for convenience. As for who should smoke or not we have a government who acts as nanny we dont need to be one too.
Luke your approach is the best in terms of responding to why people purchase form you.
Only stock winnys pjs and long beach and a couple of different types of pouches .3 years ago after a flood that left only 2 shops open i managed to get rid of every other brand of smoke that never really sold .I then did a report on what did sell and this is what i was left with , i still get some in asking for different types and they are quite happy to go into woolies next door and buy them with out being to upset about it . As far as price goes i stick to the RRP mainly because i am a smoker (actually have not had one for a month ) .
Used to keep them in our main store but quit them as soon as Woolies opened up. That was 4 years ago and for about a year we still had customers coming in asking for them but it was on a very noticeable decline. I still get some coming in on those rare days that Woolies are closed. I replaced a four bay display cabinet in prime retail location behind the counter with ink & toner cartridges and have never looked back. It’s so much better having real estate that is promoting my products visibly as opposed to hiding behind the shutters.
When I did have them the only issues we seemed to have was with school kids and friends of some of the junior staff coming in looking to score some fags though this was fairly easy to keep on top of.
I keep cigs in our other Newsagency on the ski slopes and can say from that perspective sales have remained steady. Perhaps it’s all the fresh air! We charge quite a premium up there for them which no seems to mind as there are no other shops up there that want to keep them.
We have grown our tobacco busy by 10% in the last year. We have engaged 2 of the 3 suppliers and work with them in 2 for deals or price points. We have a WW within 100mt. Margin has grown by 2%.
We’re progressively getting out of tobacco. Hope to be completely done by the time my tobacco license renewal comes. As a general rule tobacco only ever made up a small number of sales for us, and generally sold with lotto and scratchies. As we don’t have another lotto agent in town, getting out of tobacco is not a big issue for us.
We gave the space over to ink some years back and like Angelo have never looked back. Rising sales as opposed to falling sales, getting rid of the under aged who “left their ID in the car” (they never came back to produce ID) and my anti smoking attitude made this an easy decision at the time and one we are glad we made.
As long as they remain legal we will sell them. Over the past couple of years large price rises, a complete display ban being introduced and numerous quit campaigns have had little effect on my sales (I use packets sold rather than money in the till).
We have reduced the range by taking out poor sellers & not stocking all the quantities of each brand, only stock what we know we can sell inthe next 7 days, top up 2 or 3 times a week (wholesaler only 5 mins away), Mon – Fri we average 60 – 70 packs per day, weekends more.
Most cigarette buyers make multiple purchases and ususally make repeat visits over the week giving good customer loyalty. We premium price all tobacco products and find it a good income stream in a general landscape of diminishing returns..
Like Steve, we have reduced our floor space. We have used the area to display gift card range, postal products (express items) and gift ware.
Given it is usually prime real estate (right behind us and the customer sees it everytime they come to the counter), blank walls is not attractive with the cases.
We keep the top sellers only. Seems to be doing the trick.
Brendan, do you only stock items that match your values? Whats your position on exploitation of women (porn mags or even lads magazines), killing of animals (hunting mags), childhood and adult diabetes and obesity (confectionery) or problem gambling (lotteries). We are retailers and we should stock legal products that our customers want without getting our opinions involved. People are not going to stop smoking a legal product just because you don’t stock it as others will. I don’t smoke but as long as the Govt collects taxes off it and it is legal then I give my customers what they expect me to have or they go to the majors and we complain about the duopoly.
Luke, why are you offended by my attitudes?
We did sell tobacco products for a number of years and my attitude towards smoking was not the reason we changed our range, it was a business decision that happened to match my values.
Porn? stopped stocking that to as the very small sales did not warrant the space and we were sick of the grubby people who snuck off to a corner for a read and left these magazines in places where we didn’t find them until well past return dates. Again not a moral decision but a business decision. The reasons we range stock are based on turnover and cost of stocking and managing that range. Tobacco did not meet our needs here but it may for you it’s your choice to make.
Not offended by your attitude Brendan, if your decision was based on sales then great but based on your first post I could not see why your values should effect your customers. The big stores are grabbing newsagent customers at a great rate because we keep giving up what used to make us stand out to them. I never smoked but who am I to tell someone I will not sell to those that do. We live in a nanna state as it is. Again no offense intended if you based your reasons on sales.