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42TOBACCOOUTLETBUSINESSMAYJUNE2009MikeGrippco-ownerCigaretteOutletDavenportIowaNo.6with48storesCommitmentisourmiddlename.x1cWex19rejustcommittedtotobaccostores.Wehadaantasticyearlastyearx14antasticsalesx14everystorewasmakingmoney.Butweknewthatintheuturewithallthetaxationcomingdownthepikeonlythestrongwouldsurvivesoinsteadoopeningnewstoreswewerecommittedtostate-o-the-artto-baccostores.Wespent500000convertingourexistingstorestothenewprototypewejustcompletedtheconversioninFebruary2009atertwoyears.Aspartoourcommitmenttoremodelingwebroughtinallnewbackroomsotwareandnewcomputersorinventorytrackingandweconvertedtoglasscountersandmadealotocategoriesnon-sel-servicex14suchasRYOx14becauseothehighertaxesandthehigherlikelihoodorpilerage.x1dWhatittakestobeaviableplayerinthisbusinessx1cYoumustbesmoker-riendlywhichmeansasmoker-riendlyenvironment.Itdoesnx19tnecessarilymeanaloungebutitdoesmeanthatitemsmustbedisplayedproperlyanddepartmentsmustbecategorized.Youhavetomakeyourstoreanevent.Wex19vehungsignsinourliquordepartment.Wehaveneonsig-nageoverthecoolers.Ourstoresarewell-litx14theylooklikeashowplace.Whencustomersdrivebyyouhavetomakethemwanttostopin.Tatx19swhatx19sworkedorusx14andwex19reverydisadvantagedwithtaxes.Rightacrosstherivertherearebor-derstoresthatare6-a-cartoncheaperoncigarettesbutwex19vesurvivedbecauseoourstores.x1dCommon-sensebusinessstrategiescanhelptoo.x1cWex19vebeeninbusinessor13yearsandwehavenodebtthathasalottodowiththingsrightnow.Nooverheadhelpstre-mendously.Wex19vealsodonebusinesswiththesamedistributoror13yearsx14thathashelped.Weknowthempersonallywex19vedevelopedpersonalrelationshipsx14thesametwoguysarestillinchargealltheseyearsandastheyx19vegrownwex19vegrown.Wehavebothhelpedeachotherout.OcourseIwouldnx19twanttobestartingatobaccobusinessrightnow.x1dTebottomlineIx1fitx19sasmoker-x1friendlyx1full-fedgedtobac-costoresmokingconsumerswillshopit.x1cEverytimetherex19sbeenapriceincreaseovertheyearstobaccostoreshavealwaysseenajumpinsales.Whathappensisthemarketshrinksbuttheremainingsmokersaremoreinclinedtoseekoutariendlytobaccooutletstore.Wehaveeverythingorsmokersandc-storesdonot.Astaxesincreasetobaccosaleshavenotallenoforus.Itx19shurtingsomebodybutnotus.x1dCautiousOx9timismTOpBillyGrantzco-ownerCoxx19sSmokersOutletLouisvilleKy.No.31with17storesAgooddiversityplancanbringgrowth.x1cWewonx19topenanymorestoresunlesswecandoacom-binationospiritsandtobaccobecauseproitmarginsandvolumeseemliketheyx19vebeenslippingorthepastewyears.Butwhenwecombinethetwodierentcat-egorieswecanincreaseourgrossproitmargins.Liquorandwinemarginsarealotstrongerthancigarettesandtobacco.Eightoour17storesrightnowhaveliquorwex19rereadytoconvertonemoreandwex19relookingornewlocationsthatmakesensetodothecombination.Andiwehavestoresthatarenotveryproitablewewillpossiblyclosethemandopencombinationstoressome-wherenearthosenon-proitablestoresorinanotherpartothatcity.Wex19relookingtogrowbutwex19rebeingrealcautiouswhereweopen.Wex19redeinitelynotinterestedindoingtobaccoaloneanymore.x1dNeverthelessthetobaccosidewillsurvive.x1cBusinessintobaccoatthemomenthasbeensurprisinglygreatwithalotocustomersbuyingextraproductinthemonthoMarchx14itwasarecordmonth.Cigarettemanuacturersthrewusalittlecurveballwhentheyde-cidedtostarttheirpriceincreasesearly.ButevenwhenthingsslowdownagainIthinkthisbusinesswillsurvive.Peoplearegoingtosmokeandusetobaccoproductsbutwehavetogetbetteratwhatwex19redoingultimately.Inthelongruniwedoitrightthetobaccooutlettypeostoresmaybeneitalittlebitromthisbecauseyoumayseesomeothertypesoretailerscuttingthecategorybackormaybegettingoutothecategorybecauseothepricelevelsthattheyaregoingupto.Wemayseesomec-storescuttingbackonthecategorysomewhatornotcar-ryingasbigoaselection.SoIseesomepositivesthereascustomerslookoraretailerthatx19sgottheullselectionoproducts.Ithinkwex19llbeneitromthatdeinitely.x1dItx19stheperx1fecttimetox1fine-tune.x1cEverythinginourbusinesshasbeengoodx14wehadareallygoodyearlastyearandwejustgotbetteratwhatwex19redoing.Wex19vebeenbabysittingourbusinessalittlemorethaninthepastmeaningwex19rebetteratpromotingmerchandisingcustomerserviceandbeingmorecautiouswithourinventorylevels.Wex19rebetteratwatchingdatesonproductswithallthesepriceincreases.Ultimatelywheretherex19sawilltherex19saway.Wex19llbeinex14wex19llsurvive.x1d