We know that tobacco (much like fuel) is historically a driving factor in customer traffic and loyalty for convenience stores. Typically, customers who enter the store for cigarettes are more likely to spend additional dollars on food, snacks and alcohol. But, costs per pack have gone up over the past year, and rebates, inventory management and resource allotment can often seem unsuccessful and result in tight margins.With electronic shelf labels (ESLs), however, convenience store retailers can improve their pricing and promotion strategies, make the most of their lean labor forces and increase their margins. Below are four categories where ESLs can not only support tobacco manufacturers, but ease the burden on those retailers who sell them:
1. Agile Pricing
Tobacco is not only a very commoditized category, but is also a heavily price and promotion-driven category. With ESLs, convenience store retailers can gain the competitive advantage by becoming extremely price agile and reacting quickly to competitor pricing. ESLs allow price changes to be amended at the head office and changed remotely on any shelf-edge in seconds.
2. Labor Management
Convenience store associates are often tasked with a wide variety of responsibilities, and as a result, price execution can be very poor. This means lost sales to more price competitive and agile stores, and results in poor promotion execution and loss of promotional reimbursement dollars. With ESLs, however, convenience store retailers can increase sales through the display of eye-catching promotions. Our research shows sales increase by up to 6% when ESLs are installed and an increase in margin of 2-3%.
3. Promotional Execution
Due to limited resources on the retailers’ side, the velocity of promotional models for tobacco manufacturers often outpaces the day one execution capacity of their trade partners. With ESLs, convenience store retailers can launch more effective (and timely) promotions.
4. Tighter Feedback Loop
Although some tobacco brands have become more sophisticated with their promotional models, that strategy is only as good as the precision with which it is implemented. With a wide variance in execution across an enterprise, it is much more difficult to calculate the effect of the promotion. ESLs give retailers the ability to know precisely when a promotion was executed across the enterprise. This gives convenience tobacco brands a clearer understanding of the effects of a promotion and the ability to access data which can be fed back into their models to make future promotions even stronger.
If convenience store retailers look at their tobacco inventory smartly, by utilizing ESLs to manage products more efficiently and streamline their operations, they can realize higher profit margins and continue capturing their customers’ loyalty in 2017 and beyond.