As the day from which plain packaging kicks in for cigarettes draws closer, more newsagents are quitting selling tobacco products. It seems that this latest move was all they needed to get out of the challenged product category.
With cigarette consumption on the decline in Australia, many newsagents have taken the packaging change as a push ton asses the economic benefit of the product category.
Many newsagents I have spoken with say they have quit or will quit cigarette sales because of the declining financial return. Once they factored in the cost of stock, the value of prime space at the counter, labour and risk to do with age and display compliance requirements, the return was not there.
While I don’t have sufficient a dataset to say how many are quitting the category, I am prepared to guess that it’s somewhere between 15% and 20%. Whatever the number, it will decline with time.
FOOTNOTE.
I quit cigarettes in my newsagency in 1999 having calculated the return on investment we were achieving. I did this of my own free will. What is happening today is not of the free will of newsagents and other retailers. It is happening because of restructuring.
It is disappointing that while politicians of both sides support financial assistance for the auto industry and TV stations to help them fund restructuring, no money is on the table for small business for restructuring it faces.
I pulled down the smoke cabinet 2 weeks ago and have had not one complaint about it .
I would like to remove mine from the prime space they now occupy but I can’t afford new fixtures. Don’t we make the same on cigs as we do on mags and there is very little involved in stocking them? My monthly bill for cigs is much the same as magazines so I must be still making something on them. I put the price up yesterday from recommended by .50cents a packet to cover extra handling. I had already done that with Winnies and got no complaints. Servo charges far more than me and I have noticed IGA have put their prices up too.
The reason I stopped is I have to pay up front so that’s about $1000 a fortnight for me .so $1000 before I even make a sale .i figure that’s .1000 extra I can spend on gifts etc that make more money and carry no risk of a staff member selling to under ages .We (I) complain about paying mag company in 20 days but the old smoke company’s get there money before we sell a packet .to top it all off only one company was crediting so these are the key reasons I got out of them .
What sort of gross sales $ numbers per year are people talking about when deciding to pull out of this department?
cigs still making me money and a destination product that often has an add on sale, no problems playing in this space for me
Rick,
Ditto here
Shaun S,
I got credits / swaps from 2 companies.
Phillip Morris get no attention from me now. I will treat them the same way they treat me
Took my ugly old cabinet down two weeks ago put glass shelves up and shop now looks ten years younger. We still have cigs in old packaging to flog by friday and that alone tells me they are not selling. We’re going to keep cigs in draw but don’t think it’s worth it to keep up with the laws. Will
lose some money now but should make back from display behind counter. Should have done this months ago!
Moved our cigarettes from on display to under the counter about 15 months ago after a break in to pinch them. No one sees them so , touch wood, theres been no further break ins even though others in the area have been hit since.
I’m in a similar circumstance to Rick. I find there’s often an add on sale which is often a drink or confection that we make good addittional money on. I’ve cut my range substantially to only the ones I know will turnover rapidly and am happy to leave it at that for now.
Has anyone been notified about change over of old stock? BATA are on the ball with a package arriving fo us to returns old stock but Imperial and Philip Morris are dragging there feet and have had months to get this sorted out. Rep was in the shop for Imperial last week and I said oh thats great your here to change over stock. Headed back to office and left him to it but found he had not changed it at all.
Carol,
We have had both imperial and philip morris through to change over stock, and BATA has provided the satchel to return stock – guess that they will eventually be through.
Cigs for us are a big part of our business – we have really seen no decline in sales since the introduction of plain packaging. It is very rare that our customers only purchase a packet of cigs – they almost always buy drink, chips, confect etc.
Tracey,
How did you get Phillip Morris to change over your stock ?????????
They would not do it for me and I know of someone with several supermarkets and Phillip Morris would not help him either .
We had Imperial in the other week and they swapped over a bit and said they will do the rest in December. We have received the satchel from BATA. We have been told Phillip Morris are not swapping over anything with us. So if we continue with cigarettes I know which comanies we will purchase from.
Sorry that should be companies.
Al,
Same here
no problems with any of the companies swapping stock over, all done here
I was told by Philip Morris that ONLY stores who have a rep. allocated can swap over stock; they will lose a fair bit of bussiness b/c of this I think. To be fair though, anyone who sells cig.s should have done their homework months ago.
We were not told by Phillip Morris.But we have been monitoring and slowly winding down all stock on the basis that we may not be credited. We have hardly ordered at all from them over the past 2 months.
Anthony: I have heard of $40,000 and below.
If Phillip Morris are only swapping out stock for stores that have a rep that will likely be those stores that are either part of a buying/pricing group or have a space agreement with PML.
I’m actually surprised that the government didn’t make the retail deadline early next year given that 2 months is not much time for product to filter through from manufacturing to wholesale to retail and into the hands of customers. It would have allowed retailers to get through the busy xmas period without having to deal with the teething problems of plain packaging and ensure very little branded stock remained
Talking to a local tobacconist yesterday who told me plain packaging is costing him an extra $500 a week in wages because of the extra time needed in deciphering stock to reorder and stock take. Newsagencies with Large tobacco sales could feel this effect too.
Allan one of the cig delivery drivers told us it has doubled his delivery time to tobacconists and the like who need to check that their entire order has been received correctly. The issue is that while the plain packaging cartons have the stock number printed on an end which is clearly visible in the various packages poutches do not and packages have to be physically opened and the number found on them or the name read.