TOB_Magazine

[ T O B A C C O B U S I N E S S . C O M ] TOBACCO BUSINESS [ 79 ] Almost every retailer who has been in the premium cigar industry for any length of time can share the same story: You bring in a new cigar, con- servatively at first, and the cigar proves to be a big hit. News spreads, and within days nearly every customer coming into the shop is asking for it. So you order more and expand the selection, but you’re barely keep- ing up with demand. As the supply of your second order dwindles, you decide to make an even bigger commitment, ordering several boxes of every shape and size and remerchandising the humidor to make room for all the new boxes that you’re confident will fly off the shelf—but they don’t. The next latest-and-greatest cigar has hit the market and drawn customers’ attention. And those cigars in which you just made a huge financial investment gather dust and are forgotten, taking up dead space in the humidor—and taking a big chunk out of your profit margin. The peaks and valleys of retail cigar sales will always exist, but cigar retailers can adopt certain measures to protect their bottom line from the whims of a capricious market. Dead inventory has an insatiable appetite for eating away at a store’s overall profit—and this is espe- cially true today, when higher local, state and federal taxes are already eroding profit margins. If your state or municipality chooses to impose a floor tax, your dead inventory could lead to your store’s death. The good news? Adding those few percentage points to your yearly profit margin that may make all the difference can be done by tackling your inventory problems. “Inventory control has been a big part of my business for the last 12 years now,” says George “Shorty” Koebel, owner of Havana Connec- tions, a chain of five premium tobacco shops in Richmond, Virginia. “It takes discipline, but you can’t be successful if you don’t manage your inventory better.” All it takes is a little buying discipline, the help of a point-of-sale sys- tem (POS) that allows you to regularly monitor product sales through reports, and the ability to admit defeat and find creative ways to unload underperforming cigars to make room for potentially better performers. Having better control over your inventory might mean a little extra work in the beginning, but that additional effort should pay off handsomely for your business’s bottom line—and for your own peace of mind. To Buy or Not to Buy? Tobacconists are typically people pleasers. You want your customers to have an awesome experience whenever they enter your store. You’ve developed close relationships with some of your sales reps, and you want to help them be successful. And through your years as a retailer you’ve met some pretty charming manufacturers who might have treat- ed you to a trip abroad to visit their factory or committed themselves to making a personal appearance at your store. You believe in their brand and would like to partner with them. Any or all of these factors can make it difficult for a premium tobacco retailer to exercise discipline in deciding what products to bring into the store. Still, say “yes” too often and you’re likely to have a significant portion of your yearly budget tied up in slow-moving or completely dead stock. So how does a tobacconist become a more discerning buyer? “It depends,” says Christian Hutson, owner of Just For Him in Springfield, Missouri. “When I first started in this business, bringing in the core brands that everybody knew—Fuente, Padron, Davidoff, Ashton and Avo—was easy because they have an active sales staff that supports a new line or size. If you’re already doing well with that com- pany, then it’s an easy decision to bring in their products. Now we’re presented with a wide variety of boutiques and it’s much more difficult to pick out the ones that will be successful. We consider the quality of the products, but we also look for popularity with our local clientele and marketing support from the company that makes them.” Deciding whether to bring in a new cigar line is just part of the overall equation. Figuring out how many to buy is critical to the cigar line’s ulti- mate success. Buy too few boxes and you run the risk of not being able to sustain the demand before customers’ attention moves on to another brand. Buy too many and you’re likely to get stuck with a few slow-sellers. “In the early days, we took whatever we could get,” says Koebel, who is celebrating Havana Connections’ 20th anniversary in 2018. Koebel started Havana Connections as a kiosk in a local mall in the midst of the Cigar Boom, when it was difficult for new retailers to get cigars to sell. “I would take two boxes of each [size]—one to show and one to go. Now we’ve found that brand-new product rarely gets a box sale, so ➤ The Ins and Outs of InventoryManagement Discover how better inventory control can improve profits. ❘ BY STEPHEN A. ROSS