CATEGORY MANAGEMENT
Quick tips for keeping cigar profits high
Stock the right range.
Stocking the right range of brands that cater to the store/gantry size, the demand in your area and consumer preferences goes a long way in maintaining traffic in your store. Be sure to cover all segments – size and price point – which are relevant to your area.
Know what tobacco products are in demand in your area.
And stock the right products accordingly. Convenience stores have a competitive advantage against multiples in that they are more personal and tend to engage more with their consumers. Take advantage of this to know what your consumers like and want stocked, and they will surely keep coming back.
Availability is extremely important.
Always make sure your stock is up to date. 22% of customers will not return after experiencing one out of stock of their products, and 41% will not return if their product’s out of stock for the second time.
Staff training is crucial.
Many customers take convenience store staff recommendations very seriously. So it is extremely important to train staff on tobacco products offered so they sell the right tobacco products to customers based on preferences.
Know and understand the legislation.
It is very important to keep your gantry and store in a lawful state. Be sure to check and stay up to date with legislation as it is constantly being updated.
Know your profit margins.
Knowing which products have high margins and actively selling those products will no doubt increase your profits and grow your business. Remember, cigars have double the profit margin of cigarettes, so they are worth pushing.
Merchandising
Visual merchandising is all about maximizing profits by creating an interesting and targeted shopping experience for your customers. It’s hard to underestimate how important this is. Large companies spend millions on it as it’s been proven to directly impact profits in a big way.
Everyday items go at the back
Everyday consumables should be at the back of the store – customers should have to walk past other items to get to these. The path to products like milk, eggs and bread should be lined with attention grabbers – products on offer or new and interesting items.
High ticket and theft risk products never go at the back
Don’t make thieves lives easier by placing high value or easily re-saleable items out of sigh to the cash desk.
Impulse purchase items and high margin products should line the path to the cash desk
The customer’s journey around the store should be thought out properly so that, whilst they are waiting to pay, snacks, sweets, magazines and other, smaller impulse, purchase options tempt them.
Signage
Visual communication and sign posting are an important tool in retail sales. Clearly displaying items that are new, or on special offer will attract customers to them.
Consider bundling everyday items and offering ‘weekend essentials’ deals. By observing how the supermarkets attract customers towards high margin products with colorful signage you can help customers choose items they want and that make you the most money.
The cash register area
The cash register area is prime real estate for selling low cost but high margin products. Ideally you should make at least a 50% mark up on anything sold here.
The tobacco gantry
Tobacco is a key driver for convenience store footfall and it’s important to make it work as hard as possible. Remember to place colorful products such as Signature cigars in the customer’s eye line. These still have branding and attract more attention than the murky green cigarette packaging.
They also offer double the margin of cigarettes so making sure smokers know about them is the first step to selling them and for every cigarette smoker who moves to cigars you could make an extra £250 per year.
Key areas
Customers tend to look right when entering a store. Use this knowledge to place seasonal or high profit items either to the right of the door, or directly in eyesight as the enter. This is especially important for seasonal items as they sometimes have a shorter shelf life so it’s important to give them the best chance to sell quickly.
It’s not easy to ensure your store is perfectly merchandised, it’s an ongoing process but it’s one that will increase your profits if you pay attention to it.
Selling products with high margins
The profit margin per product is a key consideration for retailers looking to increase their profitability. After-all it’s far better to make a larger profit on the same sale, and repeating this leads to a regular and dramatic increase in profits.
Like all of us, your customers are busy and they don’t always have time to look at the entire range of products that you stock. People tend to fall back on something they’ve tried before. It’s easier and quicker, and there’s less risk of not liking something new.
Everyone likes something new
However, customers are also more likely to try something new – if you tell them about it. And it works to both your advantages, your customer gets advice and feels valued, whilst you can ask for feedback on the product and suggest options that are going to make you a higher margin.
Tobacco is a key area for offering higher margin products
With tobacco the difference between the margins is more dramatic. As you know if a customer swops from cigarettes to cigars you’ve doubled your profit margin instantly. Each customer who does so can make you an extra £250 per year. And that’s a recurring income – it only takes 5 customers to swop for you to have an extra £1000 profit per year.
You’ve got a reason to talk to them
It’s actually easier to talk to tobacco customers about the options you stock. As they cannot see the product you’ve got a good reason to engage them. If they’re buying a value brand cigarette it might be worth letting them know that they could save a lot of money by trying a little cigar or cigarillo.
For other product categories you need to make sure you take note of what the margins are. Impulse purchase products such as crisps and snacks are an ideal place to add a high margin product to the mix. Remember you don’t have to use a hard sell technique to get customers to notice it. Place it prominently in eyesight and ask customers if they think they might like it – explain you’re trialing some new products and their feedback is important.
Three key considerations
With all the products that you stock you need to take into account a few things – whether the price point is right for your customers, if it looks like something they might like and whether or not it makes enough margin to justify giving it space on your shelves.
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Using a planogram is essential to not only maximise your profit per shelf, but also to help your staff remember where products are to be found when dealing with customers. If you want further advice on how to maximise your sales please book a visit from one of our trade reps who will be happy to advise you.