Evolving with e-cigs requires commitment, but it can pay dividends for c-store retailers.
By Anne Flint
In order to be successful with the electronic cigarettes segment, convenience store retailers have to think about the broader tobacco category and the role that electronic cigarettes play in total store profitability.
The role of electronic cigarettes is evolving but we look at it like this: More than one-third of adult smokers use an alternative form of nicotine. Electronic cigarettes provide higher margins and growth rates than most of those alternatives. Due to the fact that our electronic cigarette manufacturers are flexible we can utilize their brands and programs to build equity and foot traffic for Cumberland Farms.
We look at merchandising, pricing, positioning, manufacturing alignment and regulatory compliance from the lens of the adult tobacco consumer. We strive to create an environment where, no matter the product choice an adult consumer makes, we have options, fair price points and the proper inventory.
IDENTIFY OPPORTUNITIES
Additionally while brands are important, what is critical is how a manufacturer’s approach fits into Cumberland Farms’ strategic objectives. The challenges with electronic cigarettes are the opportunities that we can leverage to differentiate us from our competitors.
Due to the rapid growth, staying in stock is particularly challenging. We partner with manufacturers that guarantee their products and then keep buffer inventory on hand.
Secondly, due to the newness of the category many sales associates do not understand the products or the difference between key brands. We train all associates so not only can they quickly educate a guest but highlight brands that benefit Cumberland Farms.
The electronic category is dynamic and we know the investments we are making today will provide long-term benefits. These investments go beyond typical sales and marketing strategies.
Cumberland Farms works diligently to responsibly train our associates on key brand attributes so we can assist our guests in making educated decisions. In addition, we work in our local communities to ensure that regulations are fair and based on facts. We do this by being actively involved locally on all tobacco legislation that affects our stores and we closely monitor any impact on the electronics category.
For example, some cities/towns have tried to ban the retail sales of all electronic cigarettes with the only one succeeding in our geography being Blackstone, Mass. (We showed our concern and they may be revisiting the issue). The state of Connecticut chose to require a separate permit per location for the sale of electronic cigarettes, which was initially passed, that each employee had to be licensed at a cost of $435 each annually—we fought this and the law was rewritten for each location rather than employee.
Lastly, we stay abreast of emerging trends to ensure that our stores possess the options that the ever-evolving adult consumer is looking for.
While electronic cigarettes require commitment, the payback can be significant. We have seen this burgeoning product line improve tobacco category margins, reduce reliance on a small set of manufacturers, bring new customers to our stores and establish a foundation for future growth.
In a time where differentiation is difficult to achieve with cigarettes, electronic cigarettes offer retailers a unique opportunity. I would encourage retailers to support those manufacturers and programs that incentivize independence and alignment with the retailer’s goals.
It’s hard to predict where the tobacco category as a whole ends up, but we have learned if you reduce your options the incredibly valuable tobacco consumer will shop elsewhere. Electronic cigarettes are an important part of that option set and for us we look forward to even greater success with these products.
Anne Flint is the director of category management—tobacco at Cumberland Farms. She also serves on the National Association of Tobacco Outlets’ (NATO) board of directors.