Page 38 - TOB Magazine March/April 2013

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TOBACCO OUTLET BUSINESS
MARCH/APRIL 2013
trench marketing
but it’s one he jumped into heartily,
and he gushes with confidence about
his decision. “I was occasionally a
customer at the previous store that
was here, and I saw the opportunity
that was being missed and what they
were doing wrong,” he explains.
“Many retailers typically mark up 100-
300 percent, whereas with tobacco
and cigarettes it’s more like 8-10
percent. As I told my landlord [who
ran a tobacco store on the premises
prior to the one that Ballow’s store
replaced], ‘That’s the kind of margin
that you’d offer employees—it barely
covers shipping and inventory costs.’”
Finding your comfort zone
on the inventory spectrum
is key
“The tobacco business is different
than any other business,” he says.
“The profit margin just isn’t there
in the same way, so you have to
carry other products and other
smoking accessories. Every tobacco
storeowner comes to a decision
about where they want to exist on
the spectrum between ‘old-time
tobacconist’ and ‘head shop.’ I want
an old-fashioned feel, as do my
customers, and even though glass
pipes sell well and even though some
of my customers enjoy using them,
most of my clients tell me they don’t
like walking into head shops. So my
decision was to carry glass pipes and
other products like them, but I choose
to keep them out of sight.”
In terms of the products he carries,
Ballow says his store’s small size creates
obvious display challenges. “I’ve signed
up with the two big companies (RJR
and Philip Morris), so my displays are
pretty used up. I do advertise those
other brands, but their cigarettes aren’t
out on display. I have curtains I use to
essentially hide these other cigarettes,
so when a customer comes in and
asks for Sonoma, Baron or Time, I can
pull back the veil and show them what
they came for. And those customers
usually come back over and over again.”
Marlboro, Camel, Winston and Virginia
Slims constitute the majority of Ballow’s
sales, but Pall Malls, Sonomas, Time
and Baron account for about 30 percent
of his cigarette sales. “A few English
gentlemen like the Dunhills, too,” he
says.
Trends are subtle and
may not apply in rural
locations
Perhaps it’s a result of not having
been in the business for too long,
or the remote location of his store
and the relative lack of competition,
but Ballow hasn’t picked up on any
trends—good or bad—that keep him
up at night. “It’s just the opposite,”
he admits. “I’ve seen absolutely no
trends at all. I’ve tried to do market
analysis, but it doesn’t work in this
town. Seriously, I think about whether
sales will be up if there’s a bump one
month, but so far I haven’t been able
to figure it out, and maybe that means
there isn’t anything to be figured out.
“Roll-Your-Own remains popular,
and maybe that’ll be the long-term
trend, but nothing else comes
to mind,” he says. “For instance,
sometimes Tuesdays and Thursdays
are pretty slow days, and other
times they’re gangbusters. Instead
of worrying about why I can’t find the
hidden truths, I take solace in what
I can count on,” he says. “I have to
have lots of $1s, $5s and $10s at the
start of the month because I change
lots of $20s. That, and that most of
my customers will walk in, purchase a
pack of Pall Malls, a pound of tobacco,
a box of tubes and that’s that.”
Ballow’s typical customer obviously
lives in the surrounding towns of his
mountain valley, and they’re most
concerned with price, he says. “These
are older people—they’re all over 30,
and most are over 50. Around here
you have to dabble in more than
“The tobacco business is different than any other
business. The profit margin just isn’t there in the
same way, so you have to carry other products
and other smoking accessories.”