Expanding the Business

Source from:  tobaccoretailer.com By Mike Smith  09/18/2007

Find tips on growing your retail tobacco business "It may be a cliché, but happy customers really are your best advertising." Mike Smith, Smoke Screenings columnist and cigar store owner Whether you're starting up a new tobacco shop or want to expand your current one, there are many business strategies to try. Some will be failures and some successes. You'll only know when you try it, so don't be afraid to experiment. Look at some others' experiences to provide new ideas and get an indication of which things might be effective for your type of business. Assuming you already know how to buy from the best places and can get the products you need, there are still many questions to ask. How much do you stock? How do you generate more traffic for these items? How do you do the marketing and advertising? Do you need more equipment or fixtures? Do you need to use the Internet and in what capacity? Ask questions The best and simplest way to get the answers is to look around you. Check out the competition and learn from them. What do they carry and how much? Are they a similar business to yours? Look at those far enough away from your store so that the proprietor might be willing to answer your questions. Most shop keepers tend to be generous with their knowledge if they don't consider you competition. Attending trade shows lets you interact with many of the manufacturers and other shop owners. For those of you who trade mostly in cigarettes and smokeless products, there's the Tobacco Plus Expo (www.tobaccoplusexpo.com). If cigars are more your line, the International Premium Cigar & Pipe Retailers Association (IPCPR), formerly known as the Retail Tobacco Dealers of America (RTDA), hosts an annual event that puts you in touch with many retail stores as well as manufacturers and distributors of cigars, pipes, loose tobacco and accessories. You can view their Web site at www.rtda.org. Most shop owners will discuss their business and ideas at length and in great detail with any kindred soul that doesn't have a shop right down the street. Also, ask the manufacturers and reps what their other customers do. They'll tell you. They want you to grow your business with their products. Building relationships How do you fight against the discounters, especially those online? First you have to realize that you are in a different business. You both sell tobacco products, but that is all the discounters do. You are providing a relationship. Or, if you don't, you should. Your bricks and mortar make it easy for customers to try out a single item. You're convenient. You give advice on all the products you carry. You may have a place to nurture your customers for a relaxing pastime. They attend smokers that you and manufacturers sponsor so they can easily and inexpensively try new products as well as meet and socialize with others with similar passions. You need higher margins than the online retailers have and your customers will allow you to have them in return for the other things you provide. Carry some products that aren't found in other places or at least in many of them. If you sell cigars, for example, you might have your own private label of cigars. These can be purchased from a number of manufacturers. Some don't require huge quantities. You might make up discounted sample packs with four or five products you package together at a 10-percent discount. These packs could be a variety of cigars, premium or bundled, different pipe tobacco blends or combinations of accessories, to name a few. Some of the boutique or limited-production cigar manufacturers have products that may fit in this plan. If you're near a community of immigrants, consider carrying cigarettes and other products from their homelands that might not be seen in the average U.S. tobacco shop. Make things easy for your customers that are hard to do with online sales. If a customer comes in and says, "I bought this box of cigars here last week and two of them were plugged so badly that I couldn't smoke them," walk over to your box of singles and hand the man three new ones. Yes, three. While doing so, apologize for his trouble. You'll go a long way toward making a life-long customer. The next guy in tells you, he'd like to buy in quantity to save some money but he really likes variety. Tell him if he buys twenty five cigars that you'll give him 10 percent off, just like the boxes. You can be much more flexible than the big boys. You can't start a relationship if the customer doesn't show up. You can win that person over enough to get him to come back for a second time and maybe a lifetime by how you treat him. Somewhere along the way, people stopped teaching their kids to say "please and thank you." How many times have you heard those words from a cashier lately? Try it on your customers. They don't expect it and it will often blow them away. They will want to give you their business. Do whatever it takes, this side of ridiculous, to keep your existing customers. You've heard it before-it costs a lot more to get a new customer than to keep an old one happy. A customer that spends 10 bucks a day in your store adds up to $3,650 of revenue a year. At that rate you only need about 275 customers for $1 million dollars of revenue. With 100 or less of these customers, your income will total six figures. Valuable space This business we're in is about cash flow and inventory turns. If you have a package of snuff or a box of cigars that sits on the shelf for a year before it sells out, you might not want to buy that one again. Your space is precious and there is never enough. If you want to add something new, often something old must go. You can attempt to do that with your memory, hash marks on an old sales slip or go full bore on a point-of-sale system. Bar coding your stock takes some time, but you know every item you've sold on any given day and time of day. This knowledge is priceless. You can see trends. You can print out a list of your top-sellers by quantity, sales price or profit. How valuable is that when you have to pick a product to drop in order to add a new one? That's without taking into account how much easier it is to train a new cashier or trips made back and forth to look for prices. Location may influence how you price. Are you in expensive beach property or high-end mall space? You may be forced to charge a bit more to cover the rent, but how much more? There's a tradeoff to be made. If you're near the beach, like me, you can often sell higher-margin products, but you may not have much trade from the locals. A little lower profit per product may be worth the extra volume you get. An added benefit is that the local trade tends to balance your seasons a bit more. It's not as much feast or famine if you don't depend upon whether or not it's tourist season or the snowbirds are still up north. Keep it simple Limit your brand selections and broaden the number of sizes or options. Or have a broad brand and shallow size offering. When you're starting out, broad and shallow has some benefits. Obviously you can't see what you'll sell if you don't have it. Many times, simply buying a different size of something doesn't keep the customer from buying an item, at least short term. Study what sells. If something goes fast, maybe you need to buy two boxes of those rather than one. Keep notes religiously on what things people ask to buy. They'll often tell you what they want. If you get lots of requests for Cuesta-Rey #9 Pyramid, then you likely need to carry it. If you get requests for a box of something, it's a good idea to consider carrying a full box in addition to your open one that is selling by the stick. If you are selling one product hot and heavy, try another size or two as additions and see how they do. Be as quick to eliminate a size of a best-selling brand that doesn't move as you are about an entire brand that simply sits there. A handout catalog or an online reference can be a great sales maker, especially to visitors to your area. Remember those items customers can't find in other stores? Be sure the customer knows you carry them if he's not a regular, and drop in a business card with your Web site, e-mail address and phone number on it so he has the opportunity to buy your store's brands or other limited-availability merchandise. Oh, you do know whether the guy is a local or not, don't you? If you don't, don't be shy. Ask him. Build that relationship every chance you get. Your Web site (yes, you do need one so people can find you) doesn't have to be an e-commerce site. Take orders by phone or e-mail. Many like the personal attention that phone calls get them rather than plugging in an order on the Web. While you've got that new stranger in the store with his purchases and you've found out he's a local, get his name, e-mail address, phone number and mailing address on your list of those to be notified of upcoming events. Few will refuse if you tell them why you are collecting it. If they don't have e-mail, tell them you'll call. It's also handy to have a phone number in case the e-mail address doesn't work or you've ordered something for them and it arrives. Order things for your customers. You decide if you need to charge for it up front. Maybe "yes" to someone you don't know and "no" for a regular. Be an expert Become an expert on your products. If you love cigars, sell them and have a flair for the written word, consider writing a weekly or monthly cigar column. Small town newspapers usually have tight budgets and might consider adding a good, reliable columnist to fill out their pages. You may have to do it for free or in exchange for an ad, but the exposure for your store will be invaluable. Lots of people who won't read an ad will read a cigar column. They will start recognizing your name and will come to you for help picking out their cigars and to hear your opinions on product-related items. Or if the politics of tobacco is more your thing, bone up on the latest legislation that's coming out of Washington or your state capitol. Consider joining the National Association of Tobacco Outlets (NATO, www.natocentral.org), which is very politically active. Let local TV and radio stations know you're available to give the pro-tobacco side of any debates. Host a smoker If you sell premium cigars, definitely host smokers, as often as monthly. It's like a tasting party done one day or evening at your store with a sales rep for a given line. The rep gives out free cigars for the customers. Offer a "buy two (or three) and get one free" deal with the rep providing the free ones. Have a raffle of some sort with items, such as cigars, shirts, hats, cutters and humidors, all provided by the rep. People love this stuff. Have some snacks and beverages, possibly with alcohol, if you're so inclined. Some jurisdictions don't have a problem with you being unlicensed if you're giving the alcohol away, but it's very important to check with them first. Some manufacturers will bring a model or a cigar roller along to help draw the crowds. Smokers are a bit of work, but sales for the events are good and you can add names to your list from the raffle tickets everyone fills out. Have them put e-mail addresses and phone numbers on the tickets. Take pictures and put them on your Web site. The attendance will start out a bit low but will grow with each additional smoker. A small place can often get 40 to 50 people to stop by for a good event. Almost everyone buys something. For more details on how to host a cigar tasting, check out the June issue of Tobacco Retailer. There you have a few ideas. Experiment with a few and see if they make you more money. If not, then try another one. If you do make enough money from it, grow it until it won't grow any more. Figure out your mix. Keep those customers happy and they will send or bring new ones to you. It may be a cliché, but happy customers really are your best advertising. Enditem