Page 20 - TOB Magazine Jan/Feb 2013

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TOBACCO OUTLET BUSINESS
JANUARY/FEBRUARY 2013
Growing Pains and
Prospects
TOB: Do you believe there was/is
opportunity for store growth in the
industry? Do you see your store count
holding, growing or decreasing for the
near future?
COLLETT: I believe there is growth
for our company—maybe more specific
to our company than to the industry
as a whole, thanks to economies of
scale and our name recognition, which,
together, allow us to take advantage of
opportunities in the marketplace more
readily. Our goal is to open six more
stores this year through startups and
acquisitions.
DAVOLI: We believe there is great
opportunity for growth in the tobacco
outlet business. As convenience stores
continue to reduce SKUs, our variety
will entice the adult tobacco consumer
to shop in our stores.We did close some
underperforming locations and opened
new locations at about a “one for one”
pace. We continue to look for suitable
locations to open.
EWALD: There is opportunity for
growth, but the ‘business as usual’
thought process is no longer valid. We
are regularly checking out new store
locations—however, we thoroughly
review a new area prior to opening a
location.
MAHONEY: Ours is holding at
best. It’s difficult to open a store these
days, it takes a long time to build a
new market; it’s definitely not an easy
process. There is still opportunity but
it’s not like the old days.
MCCOY: Yes, there is room for
growth in the industry. In many
markets, populations continue to grow,
creating additional opportunities.There
is also room for consolidation of retail
outlets. With the shrinking pie and
margins ever so tight on cigarettes,
companies must look to acquiring
additional locations to create leverage
for better costs from manufacturers.
Our store count doubled this year due
to merging with our main competitor.
SILVERMAN: I believe there is
opportunity for conservative growth
in the industry. We are in a declining
industry, so it isn’t like we are gaining
new customers into the industry. We
have to get them from someone else. I
would like to see us open one to two
stores in the next year. Finding good
locations is the key.
Positive Store Change
TOB: What’s the best change you
made this year at one or all of your
stores?
COLLETT: We set our stores based
on a sales-to-space merchandising
approach. If a category represents
30 percent of our sales, for example,
we make sure it has adequate space;
cramming it into five percent of the
store makes no sense. We did that with
categories where we are not restricted
by a contract, such as RYO, chewing
tobacco, etc. We have seen increases in
the categories where we did that. By
the same token, we eliminated items or
reduced the space with items that didn’t
warrant it, based on sales.
The second change we made, and
it’s ongoing: suggestive selling and
improved customer service.We practice
it and preach it, day in and day out.
DAVOLI: For us, it was the training
process that we go through with all of
our employees to stay in compliance
with the FDA requirements and to
reiterate our policies and procedures.As
responsible retailers,we wanted to make
sure that we followed the new FDA
regulations to the letter. It is somewhat
frightening when we have discussions
with other retailers and they have not
yet addressed the training and record
keeping. Why were we proactive? We
want to sleep at night!
EWALD: We cosmetically updated
several stores. We also adjusted the
space appropriate to items in the store
to keep up with current trends. These
changes have provided for a pleasant
shopping experience for our customers.
MCCOY: We installed a new POS
system that allows us to better control
our inventory by utilizing perpetual
inventory and automatic ordering
processes.The new system was installed
and tested over a three-month period.
Our goal was to reduce cigarette
overstock in our stores without
experiencing out-of-stocks. This allows
us to keep more capital in play for other
opportunities.
SCHWARTZ: We have a new look
we’re excited about; we went more
upscale. We were concerned about
stores in low-income markets—we
didn’t know how it would be received,
but it’s been received very well. We did
in-store renovations, using cherry wood
cabinetry and dark colors. It used to be
a red, white and blue Americana theme
and we went to a richer, more upscale
look, and it’s worked out. There’s a
reason franchises like McDonald’s do
store updates every three to five years.
We decided we would follow suit.
There’s no reason a discount tobacco
store has to look discount, especially