One of our expert retailers, Peter Lamb, sheds light on his tobacco success ahead of the display ban. His cigarette ‘vending machine’ offers an alternative option for retailers that aren’t getting gantry solutions from tobacco manufacturers.
In the bad old days when cigarette gantries reigned, it was a cash flow nightmare keeping them filled with stock. At any one time, we used to have around £3,000 tied up in cigarette stock just sitting there waiting to be sold. Add to that the 4% profit margin and all-in-all, cigarettes were simply a necessary evil.
We decided to change the way we looked at tobacco and looked around to find an alternative way of stocking and selling them. After some market research, we found a company called Sinclair Collis that provide cigarettes in old repurposed pub vending machines. These machines are linked together, bolted into the floor and fully stocked by Sinclair Collis at no cost to the store. You simply feed the machine £20 notes whenever someone wants to purchase a pack and the chosen selection is dispensed for sale, enabling you to pocket the profit on each sale.
This has two advantages:
- The stock does not cost you anything until you sell it and;
- The units meet the standards for when we have to go dark in April
The next challenge was, “How do we make any money from cigarettes?”
The answer was simple in the end although it carried some risk. We decided to look at Sainsbury’s price per pack and charge 10% above that price. This gives us an average profit margin of 14% on tobacco products. The risk, of course, was that the customers would complain about the cost of the cigarettes.
The way we negated that risk was simply to tell them what we do, we say to customers openly that our cigarettes are 10% more expensive than Sainsbury’s giving them the option to purchase elsewhere. Guess what, no one does! In fact it has become a source of banter in the shop with many customers coming in and asking for our “gold-plated cigarettes”.
Another way we turned smoking into a profit centre was to stock e-cigarettes as an alternative to traditional smokes. These are a healthier option for the smoker and a very healthy option when it comes to profits. Most e-cigs generate 30% profit on the units and cartridges.
What was initially a drain on cash flow has become a profitable sideline for our business.