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industry peer at a trade show in the early 1990s, Lee
Silverman learned about the tobacco outlet channel of
retail and was intrigued.
In 1992, Lee Silverman hired Joe Young, who worked
in the grocery store business, to open the company’s first
store. Young has opened every store since and “has been
instrumental in the growth of the retail operations,” says
Randy Silverman. “Without Joe and several other loyal
employees who are not family members, it would be very
difficult to grow our business.”
“We went out West to visit his store and decided to
come back and give it a try,” Lee Silverman recounts,
noting that it proved a pivotal decision. “This industry
is in flux all the time, but being in the retail business en-
ables you to control your own destiny to some extent—
so that piece of advice from a competitor in a differ-
ent state really helped us. If there’s one piece of advice
I would give anyone, it’s that relationships are really
key in this business; it’s very important to keep in touch
with people in your industry and be open-minded to
new ideas.”
Randy Silverman, meanwhile, had grown up, gradu-
ated with a degree in industrial engineering and moved
to Cleveland, where he was working as a computer pro-
grammer at NASA’s Glenn Research Center. But by
1993, after having held jobs at larger organizations, he
was ready to return and apply what he had learned to
the family enterprise. “I think when you come from out-
side, it’s easier to see things that can be fixed,” he says.
“There was a lot of low-hanging fruit in terms of pro-
cess innovations and structural changes that I recognized
would be helpful in growing a smaller business.”
After re-entering the company, Silverman set about
making changes to Klafter’s billing system and inven-
tory management, adding point-of-sale systems and
streamlining the cigarette-tax stamping process. Those
changes, in turn, paved the way for the company to be-
gin opening new retail locations—it now has 16 in Ohio
and Pennsylvania—and also to adapt to changes in the
competitive landscape due to shifts in tax policy and in
cigarette company promotional programs. “The compe-
tition has gotten a lot tougher over the last few decades,”
says Silverman, who cites shifts in manufacturer pro-
grams as an example. “We used to differentiate by selling
cigarettes at the state minimum, but now that Marlboro’s
MLP program has forced most retailers to go to the state
minimum, we no longer have that price differentiator.”
Today, Klafter’s continues to participate in promo-
tional and loyalty programs, but it also strives to stand
out by offering a wider selection than its c-store compet-
itors, as well as standout customer service, and through
close and careful management. “In this business, you
have to be really focused—it’s labor intensive,” says Sil-
verman, whose wife, Renee, joined the family business as
marketing director in 2000 (See sidebar, “A Family Af-
fair,” p. 86). “You need to reinvest in your stores so they
don’t get dated and dingy, to make sure you take care of
your customers and to manage your inventory closely.”
PICKING UP PREMIUMS
Expanding into cigars was one change that paid off
for the company. “Premium cigars represent about 20
percent of our sales, and machine-made cigars bring in
another 5 percent, so cigars in general are an import-
ant part of our business,” says Silverman, who credits
his brother, who has since left the business, with hav-
ing been instrumental in bringing premium cigars into
Klafter’s during the cigar boom of the 1990s. “They
Klafter's
Continued
If there’s one
piece of advice
I would give
anyone, it’s that
relationships are
really key in this
business; it’s
very important
to keep in touch
with people in
your industry
and be open-
minded to
new ideas.
—Lee Silverman
Tony DiCarlo, a Klafter's employee who joined the company in 1941, in front of a
photo of the company's first location in New Castle, which opened in 1911.
Klafter's Warehouse