The smart ones are arranging an ample array of ashtrays; they’re honing in on humidors, and cashing in on candles and scented SKUs. There seems to be no such thing as a tobacco outlet being overly accessorized these days. In fact, in many cases it may be a customer’s only retail access to complementary tobacco items.
“Just because the large chain drugstores have made the decision to get out of the category doesn’t mean the demand has vanished,” says Arron Sissom, president of Music City Marketing, a major distributor, importer, and private label manufacturer of tobacco accessories. According to Sissom, tobacco outlets now represent the fastest growing market segment for the company—a phenomenon that only took place in recent years.
“In years past, accessories sold by Music City were primarily sold into traditional smoke shops, while tobacco outlets were mainly a source for cigarettes and inexpensive cigars—things have changed,” Sissom maintains. “As the anti-smoking sentiment continues to sweep the nation, the overall picture of business in our industry is changing. It is getting more difficult for the average smoker to run into a neighborhood drugstore, for example, and pick up an ashtray or any other accessory item they might be looking for. Many of their old sources are drying up, and they are discovering tobacco outlets.”
Tobacco Outlet Products, makers of smoke odor exterminator candles, sprays, and travel tins, has also noticed increasing accessory demand in the channel, specifically in candle sales, which have increased 24 percent over 2005. “We had a surprise growing our category like we did; we expected sales to be flat,” says Kelley Van Es, general manager. “Now, we are going in with high expectations that 2007 will see an increase also.” Apparently, more outlets and their customers are being enlightened by the company’s 13 ounce candle jars, which burn up to 70 hours for a suggested retail of $7.95.
Tobacco outlets have heard it before, but it bears repeating—profit margins in accessories are a well-needed boost to flimsy tobacco profit, especially as the category gains more clout in the channel. “In most instances, retailers can expect to double their money with our accessories,” says Sissom. But that’s not all. “In some situations where we are the exclusive distributor, or where the brand is our own private label (Castleford, for example), or where we are importing from the manufacturer, the retailer can easily more than double their margins,” he adds.
There is similar prosperity from the candle/scents side of the business. “Our gross profit margin is anywhere from 40-46 percent after shipping; this is a very good profit margin for tobacco outlets,” says Van Es.
Action Plan
But the profit margins don’t just act on themselves. Tobacco outlets that want to boost profits—as well as be complimented for how well they’re complementing tobacco items with accessories—should heed these tips:
• Knowledge is power and profit, just as in many tobacco categories. “Employees must know the difference between a guillotine cutter and a plug cutter,” states Sissom. “If they don’t, they won’t sell many of either.” Van Es adds, “Sometimes consumers/customers compare our product line to scented candles. Our product line is different in that it doesn’t just cover up odors, our products have a mixture of enzymes that exterminate odors. Our products work quickly and effectively.”
• Utilize special displays. Accessories, unlike cigarettes, must be available for the customer to examine, according to Sissom. “They have to be able to put the items side by side so they can see/feel the difference between two or more items. We provide display items for some SKUs and highly encourage retailers to take advantage of displays as they tend to lead the customer to the item, or in many cases, are instrumental in building the brand.”
Tobacco Outlet Products recommends its floor display “because it merchandises our entire Smoke Odor Exterminator Product Line on one display,” relays Van Es. The floor display can hold up to 135 candle jars or a mixture of the complete product line. The company also provides a header card for the top shelf and a three-tier acrylic display for smaller stores that require less inventory on-hand. These smaller displays work well on the counter, according to Van Es.
• Create promotions. “Many of our retailers do their own promotions, such as ‘buy two for $15’ and some display holiday scents on the counter or create special displays for impulse sales,” reports Van Es. In the summer of 2005, the company held its own merchandising contest for first and second place retailers who sold the most products. Winners received free product from Tobacco Outlet Products.
• Pay attention to groupings. “If a customer is looking for a humidor, all the humidor accessories—such as a hygrometer, humidity control systems, humidification fluids, etc.—should be near,” advises Sissom. By grouping items in this way, “the customer feels as if he is making the selection and is not being told what he needs,” he adds.
• Transition into higher-end lines slowly. The way Sissom sees it, one of the biggest challenges a tobacco outlet faces in the category is “finding the perfect balance between self-service mass market items and the more traditional smokeshop items,” such as humidors and accessories. “We highly recommend bringing in traditional items slowly and bringing in a select range of products with specific price points,” he says. “Unless you have customers telling you that they are looking for a $500 humidor, you probably are not going to sell one.” Instead, he suggests bringing in five to six humidors in the $60-$150 range and seeing what happens. “Your customers will ultimately let you know what they are looking for,” he asserts.
• Meanwhile, stay on top of new lines and new line additions. Tobacco Outlet Products’ new scents for 2006 are Clothesline Fresh and Lavender. Pumpkin Spice is a limited fall scent that sells through Thanksgiving. Also worth noting are its best-selling scents so far: Honeydew Melon and Mulberry Spice.
Music City Marketing is “constantly working on something or has something new,” according to Sissom. Its two latest projects are its exclusive “Spot-On 70” line of humidor solution and ultra pure de-ionized water for humidors (8 ounce bottles of 10 percent and 50 percent glycol solution that retails for $4; the water is a 12 ounce
bottle and retails for $3). Another recent entry is its exclusive Dugout brand of incense, which is receiving “rave reviews,” according to Sissom. It is a premium hand-rolled incense that comes 12 packs to a unit (each pack contains 20 sticks) and retails for $11.40 per unit (that’s a suggested retail price of only 95 cents per 20-stick pack) with a keystone markup. If the retailer buys six units, he will receive a free display rack. “This is a great deal, represents a great margin for the retailer, and is available in 12 different scents,” says Sissom.
Not as new, but “one of our most exciting lines—is our exclusive Castleford line that covers the entire spectrum in accessories,” Sissom adds. “We have a great selection of teak wood accessories (ashtray, pipe stands, pipe racks, etc.) that retail from around $20 and up” (with keystone mark up). The line also includes quality imported vinyl and leather rollup and zip tobacco pouches which retail between $4 and $12. •