With new tobacco laws threatening to affect visit frequency, we look at ways to protect profits and boost footfall in your store
The countdown to the demise of small and branded tobacco packs has well and truly begun, with manufacturers no longer able to produce cigarettes in packs of less than 20, or roll your own (RYO) in pouches of less than 30g.
At the same time, plain packaging legislation has been enforced, calling time on the manufacture of branded and pricemarked packs (PMPs).
While retailers have a further year, until 20 May 2017, to sell through old branded packs and smaller sizes, the reality is that stocks are likely to run dry long before then - some fast-selling lines by as early as this July.
While the impact of such weighty legislation on overall tobacco consumption and its affect on sales can still only be guessed at, many in the retailing community are fearful that it could prompt a fall in the frequency of visits to c-stores.
Many retailers worry that with the advent of larger packs, regular adult smokers who in the past have visited stores each day might only need to visit every other. While such a move might not harm overall tobacco spend, it’s the fall in daily associated purchases that’s causing concern.
It’s a grave concern as smokers have higher frequency of visit, with many buying small formats every single day as a way of managing consumption and daily budgets, and given that the average tobacco purchaser is worth almost £2,500 a year to a convenience store versus £1,400 for a non-smoker, according to JTI.
Others, meanwhile, are worried that loyalty could suffer once key drivers such as PMPs no longer exist. According to HIM, a third of UK adults say that knowing a convenience store sells PMPs positively influences their decision to visit that particular store.
Exactly how shoppers will respond once this competitive advantage over the multiples is gone remains to be seen.
The loss of PMPs is a real worry for retailers such as Raj Patel of Weybridge News in Surrey. “Lots of customers currently come to us, as opposed to the Morrisons and Waitrose supermarkets on our high street, because we sell PMPs of tobacco. However, once these no longer exist that may change, which is a big concern.
“Any decline in visit frequency is bad news, particularly with regards to associated purchases. It could definitely have an impact on impulse items such as confectionery and snacks,” he says.
So what action should retailers be taking now in a bid to protect, and even potentially boost, footfall to stores in the face of these new changes and challenges?
In addition to a clear campaign of communication to adult smokers, many retailers are investing in ways to boost visit frequency outside tobacco among existing and new shoppers in a bid to offset any potential declines in tobacco sales.
“We have recently invested in a Snowshock slush machine,” Raj adds. “I’m hoping for a warm summer, which should make the slushies really popular with school children, and it would be great if we could start getting more custom from them. We’ll be the only store on the high street with a Snowshock machine, which should hopefully boost footfall,” he says.
Get clever with your categories
Ramesh Shingadia of Caterways in Horsham, West Sussex, is also focusing on finding new pulls for customers at his revamped store. “Fresh and chilled is a huge category, and has grown by 50% since relaunching the store, so that is one area where we will definitely be focusing. The same is true for food to go, and off licence, where we are also seeing growth. It’s really important that retailers find other pillars that will take up the slack if tobacco falls off. Focusing on services such as parcel collection is another way,” he adds.
Bestway club & symbol director James Hall agrees that services such as money transfer, parcel collection, dry-cleaning, utility payments, and food and drink franchises and concessions such as Costa, Subway and Greggs, could play an important role in boosting footfall.
“Tobacco is not the only footfall driver. The fact that shoppers have changed their shopping habits to ‘local, little and often’ has seen the convenience sector grow. They are buying much more than just tobacco from their local stores. This is a fantastic opportunity for retailers to re-evaluate their category and product mix to reflect shopper missions and satisfy consumer need states.
“The tobacco mix in Best-one stores is lessening as we encourage members to embrace other areas.”
Getting them through the door
Hall is not alone in realising the benefits of adding services. Matt Croft, of Croft Stores (Nisa) in Silverstone, Northamptonshire, is also going down that route, recently adding a post office to attract customers.
“New services such as a post office will really help once the new tobacco laws start to make their impact felt,” Matt says.
“The local post office was relocated into our store late last year and it’s already proving a really successful footfall driver, bringing in people who have never shopped here before. Once they are here most tend to pick up additional items, or make impulse purchases.
“Paying much closer attention to the weather and seasons, and responding quickly to any changes, will also help to keep footfall buoyant,” he adds.
“If it’s going to be a cold and rainy week, then ordering in more comfort foods such as warming soups is a good idea, and if it’s going to be hot stock up on coal and BBQ food. The weather plays a crucial role in driving footfall and it will be more important than ever before to meet customer needs when they pop in.”
HIM’s marketing executive Ruth Cousins says that focusing on meal occasions will also become especially important within convenience stores should the new legislation impact sales.
“HIM predicts that by 2020 there will be a potential £10bn opportunity in the meal-for-tonight and food-to-go occasions in the c-sector,” she says.
“Young couples over-index in the meal-for-tonight mission while, surprisingly, only 1% of young, free singles are shopping for meals for tonight in c-stores, making a case that retailers need not always be focusing on meals for one in order to tap into this market. The meal-for-tonight shopper’s basket typically includes fresh items, with 37% including fresh fruit and veg. However, 15% of retailers say they are currently not equipped to deliver a credible fresh offer, meaning that fresh is something that retailers should strive to excel in in this offering.”
Meal deals and cross-promotions could also play a beneficial role in attracting shoppers, Hall adds. “Stores should also be doing evening meal multi-links and cross-category promotions with alcohol. For example, this month Best-one is offering a meal deal of a Goodfella’s pizza, garlic bread, chicken dippers and a bottle of Echo Falls wine for just £10. This offers exceptional value to shoppers and is bang on trend with what shoppers are looking for.”
In the dark
It is impossible to predict the impact of the latest tobacco legislation and how shoppers will behave. However, according to a HIM poll of 3,115 shoppers carried out in April, 55% did not know about the legislation. Of those who did, 32% said they did not expect it to discourage people from smoking, while just 13% thought it would.
Make sure you maintain a fair tobacco pricing policy
Maintaining and communicating a fair tobacco pricing policy could help to attract and retain the custom of adult smokers in the face of laws which will see the end of pricemarked packaging, Bestway club & symbol director James Hall believes.
“Retailers need to think about their pricing post the removal of on-pack prices as the temptation to ‘rework’ the rrp to become more lucrative in terms of margin will possibly discourage customers to visit if the multiple retailers and others stay true to rrp,” he says.
He adds: “Shoppers are increasingly looking for value for money across all categories and tobacco is no different. By staying true to the rrp, post the removal of PMPs, independents can protect their tobacco business.
“If they put an additional 10-15p on a pack to make a quick buck they will lose the sale.”
He points out that the penetration of stores selling tobacco makes it easy for smokers to leave and go elsewhere where their price perceptions will be matched. “We are advising all Best-one and Xtra Local stores to maintain their current pricing levels and expect that other retailers will follow our lead,” he says.
Keep shoppers informed to keep them coming
Efficient communication between staff and customers will be key for retailers hoping to maintain their existing volume and value of tobacco sales. Informed shoppers are far more likely to remain loyal shoppers, meaning that explaining the law changes to smokers’ and informing them of their new options is paramount.
In Surrey, Weybridge News owner Raj Patel has been telling customers about all the changes they can expect for weeks, and continues to do so.
“We’ve been explaining what is going to happen since March, so by now all of our regular adult smokers will hopefully be prepared and keep on using us.”
The new tobacco laws will also require convenience retailers to become true “tobacco category experts”, according to Philip Morris sales director Jerry Margolis.
He believes c-store retailers who can speak confidently about the alternative products available to adult smokers as and when small pack formats and branded packs die out, would stand in good chance of keeping customers.