In the October – December 2014 newsagency sales benchmark study, the findings from which will be released tomorrow, the number of newsagents selling cigarettes has declined. 38% of the 169 newsagency businesses in the study do not sell cigarettes. This is up from 29% in the same study a year earlier.
Put another way, the results of the latest newsagency sales benchmark study reveal that 30% of the newsagencies have quit cigarettes over the last year. I doubt this is reflective of the whole channel as many (but not all) newsagents who participate in the benchmark study are either transforming their businesses or preparing to.
There are several factors playing into this move by newsagents: concern about public health, falling sales, tougher competition and better margin elsewhere.
A consequence of the regulation of tobacco products is that supermarkets tend to do it better. They have a big service counter at the entrance – a cigarette counter I’d call it. The size is such that it promotes it better than your average newsagency business can behind or under the counter. Cigarettes at a supermarket are more noticeable than in a newsagency.
The focus on health through retail changes, packaging changes and intensified health warnings provide for little or no upside in from a pure retail sales perspective. If there is no upside in a product and no mechanism through which a retailer can engage to drive sales then it is time to consider quitting.
I have seen newsagencies recently remove their cigarette cupboards from behind the counter and replace them with a new display space for gifts or other higher margin lines and report a better return on lease space as a result. As more newsagents share stories about such transformation more will follow.
From my benchmark study and accompanying basket analysis I have developed a couple of benchmark data points for my discussions with newsagents. Cigarettes sales of under $2,000 a week warrant careful consideration. An inefficiency rating of 50% or more – the percentage of times when cigarettes are purchased and nothing else – ought to intensify focus.
Whether to sell cigarettes or not is a personal choice newsagents get to make for themselves. My advice is to be guided by your own business performance data, layer this with a realistic assessment of competition and then consider the opportunity of the freed space. Whatever you do, you must do it competitively and in ways which financially benefits the business from a growth, return on investment and return on floorspace perspectives.
I stopped selling cigarettes in my newsagency in 1998. Our sales then were around $1,500 a week. 65% of sales were inefficient – cigarettes and nothing else and of the remaining 35%, the majority companion products were newspapers. Our stock holding was $3,500, labour cost each week around two hours and shrinkage running at 2%. The numbers were not working so we quit. It did not affect newspaper sales or any other sales. Indeed, the space we saved was put to better use which generated a better return.
Looking at my sales it initially looks as though our sales are a fair bit down but then looking further I find it is mostly cigarette sales that are down. BATA refused to sell me less than 10 cartons a week. I could sell about 8 plus tobacco but this was not good enough for them so they closed our account. Now I am working towards totally going out of cigs, but have to have the money for new slat board and fixtures to replace cig case. It will look 100% better.
Carol, I reckon you could buy slatwall cheaper than 8 cartons of smokes.
You are probably right Allan.
Allan is so right Carol, and even if it does cost you a bit more than you want to spend you will soon make it back in extra sales from the great gift ware you have in that spot!
Carol, it will be so worth it, after numerous break ins with the result only being stolen smokes we removed them and put gifts in the effect at the front of shop is a clean bright gift area. never having to listen to customers complain about ongoing price rises and staff issues with plain packaging and id checks is an added benefit
How we approach these things depends on the type of people we are. Ripping off the band-ad is always my preference.
…..not to mention the savings on insurance premiums…
i don’t sell much cigs, but we have bulkhead for cigs above our counter
I was addicted to rolled cigarettes, especially kretek cigarettes made in Indonesia that I bought online.
I really enjoyed it taste and I still can not move to the filtered ones. But most importantly, I always smoke alone without anyone else around me.
About 18 months ago the Department of Health paid us and all resellers of tobacco products a visit in a town of 500. The girl they sent in I would swear in court was around 22, she was in fact 17 and the daughter of the Officer. My staff member served her at the busiest time of the week and was charged, as were 4 others in town. They all had to go to court and received section 10, convicted but no conviction recorded. Then when our supplier told us we had to order 10 cartons or more we decided to stop. It just isn’t worth the aggravation. My staff was made to feel like a criminal and she is a lay minister at the local church. Bloody disgraceful. Entrapment at its best.
Peter the best approach is to set age checking in your newsagency software. This causes a pop-up. It can be offered as a defence for the business should you have a rogue employee – which is not the case for you. However, it is another step you can take for surety.