Less Can Mean More for OTP

This article is brought to you by Cheyenne International. 

Economic pressures are continuing to weigh on consumers, who are spending their money primarily on the products they know and love, according to David Brinkley, vice president of sales at Cheyenne International. 

“Cigarette price increases and tax hikes have pushed smokers toward the fourth-tier category, which is where all the growth is right now. It is the destination category,” he said. “Our customers are making the same trip every time—they come to the store for the product they know they want and expect the prices to hold.” 

If a retailer doesn’t have their product in stock, or a consumer can’t spot it quickly, “they’ll go to another c-store,” Brinkley said. “They usually don't substitute.”

That means it’s important to keep the right products in stock, but that can be challenging in today’s backbar. 

“The backbar is the most sought-after space right now. With a lot of products emerging and the OTP category exploding, the fight is no longer brand against brand—the entire segment is competing for the same linear feet,” said Brinkley. Retailers may believe a backbar with variety offers more choice, but the reality is too much variety can lead to reduced efficiency and missed sales opportunities, Brinkley said. 

“There are too many variants chasing the same consumer. A brand has a dozen SKUs on the wall, but only four are selling,” he explained. “So what you end up with is a lot out of stocks of your best movers, cash tied up in items that nobody's buying and a slower line.”

According to Brinkley, retailers can increase sales and make sure customers leave with the product they came in for by simplifying the backbar assortment, focusing on offering high velocity SKUs instead of a wide variety. When best sellers are consistently available, “they turn fast. That high velocity is where you’re going to get return on your transactions,” he said. 

He encouraged retailers to evaluate their company level data and build the planogram out starting with the best sellers, as well as adopt a “one in, one out” approach for new products.

“As a manufacturer, we are only asking you to carry a few of our SKUs because they are time-proven best sellers in the category. Cheyenne’s Core Four—Full Flavor, Classic, Menthol and Wild Cherry—represent distinct consumer segments and shopper needs while minimizing unnecessary assortment overlap,” said Brinkley. He offered Wild Cherry as an example: That single SKU can satisfy a broad range of demand from flavor-seeking consumers, without requiring retailers to keep multiple flavors in the backbar. 

This is the first article in a two-part series from Cheyenne International. Look out for part two, which takes a closer look at a retailer that found success with a high-velocity SKU strategy.

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