Adapt and Overcome

As the other tobacco products category continues to gain market share, advanced category management can help maximize sales.

July 14, 2015

The July issue of NACS Magazine included an article, excerpted here, written with support from Swisher International Inc., a NACS Hunter Club member. The complete article is available here.

The Other Tobacco Products (OTP) category has evolved tremendously over the past several years and is delivering an increasing share of c-store inside sales, representing a critical area of growth as external factors continue to erode tobacco sales. This makes it particularly important for retailers to strategically manage OTP sales, in order to continually adapt your product portfolio to align with changing demographics and consumer preferences, and thus help to grow sales and drive traffic,

According to data released at the most recent NACS State of the Industry Summit (SOI), in the latest 36-month period, sales and margins for OTP have grown 27% and 23%, respectively, while those for cigarettes sales have dropped 1% and 8%, respectively, a trend that industry experts expect to continue.

Finding the delicate balance between tobacco and OTP inventory is therefore critical for optimizing sales not just of those products, but for ancillary items, too.

“According to industry data, the average OTP customer visits a convenience store 13 times a month — it’s one of the biggest traffic drivers,” said Jeff Rossi, CPSA, senior director of trade marketing and category management for Swisher International. “And their basket size is consistently one of the highest. So having the right items at the right price in a small space is critical … You can’t afford to have a lot of dead space.”

While intuition is a logical starting point for mapping out a planogram and accompanying inventory, in today’s data-driven culture, a more deliberate approach provides greater returns. To that end, Swisher works closely with retailers to understand each store’s demographics, traffic flow and customer preferences while also drawing on advanced analytics to leverage sales opportunities.

“Category management used to be defined as shelf and space management,” Rossi said. “But it’s far more than that today and includes pricing, finance, shopper marketing and adult consumer insights … it’s about big data and delivering store-specific planogramming. Everything is driven by data.”

It’s not a self-serving proposition, either. Despite Swisher’s prominent role in the OTP space, its team of category managers apply objective, third party standards and tools in arriving at their recommendations.

For Swisher, category management certification has boosted trust among its customers, who appreciate the consistent approach from all of the company’s representatives. Those certified experts apply their expertise to provide Swisher’s customers with the deep-dive information to help grow their OTP category.

“The retailers we call on are much more data-driven compared to just five years ago,” Rossi said. “Being able to deliver data and numbers to them in a professional way is now a core competency of Swisher, and it helps our customers justify their purchasing decisions. If we make projections about growth potential, we know they’re going to review final results and come back to us with feedback.”

Read more about the approach and success stories from retailers,here.

Advertisement
Advertisement
Advertisement