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Saturday, October 27, 2007

Keystone Is Keystone

Keystone, as defined by Merriam-Webster dictionary, is “something on which associated things depend for support” and “the wedge-shaped piece at the crown of an arch that locks the other pieces in place”. Without the “keystone” in the latter definition, the structure will collapse. This is also the case with our industry’s Keystone Margin: without retailers having the ability to make a reasonable markup, we will collapse. Retail Tobacconists cannot make enough money to sustain themselves without a reasonable markup on single cigars. Anything less than Keystone results in the commoditization of our products, declining margins, and ultimately ‘going out of business’ sales.
As a retailer, I do not sell any products that are not Keystone, nor am I interested in supporting any company that does not support my ability to make enough money to survive. Obviously, mail order and internet operations thrive on non-keystone products and deals: they exist to thrive on and undermine the brick and mortar (B&M) keystone marketplace. And our economy proves this is a viable strategy for growth – just look at the big box retailers and discounters in every community. But this market thrives on reducing quality and diversity in exchange for cheap homogenized products. One of the worst and most damaging examples I can think of is the Shop-Rite supermarkets here in NJ, where they have a large selection of premium cigars at retail prices that are unbelievably cheap. I, of course, refuse to shop there. But I am not single-handedly able to make any kind of impact on their bottom line. Obviously manufacturers should refuse to have their premium handmade products sold next to shaving razors and tampons. So what are they doing about it???
Ultimately, the Keystone Margin is that which B&M Tobacconists ‘depend on for support’. And if we want to see our industry get new customers, introduce new and innovative products, and survive, we must protect B&M Tobacconists, which means protecting our margins.
This year the Supreme Court ruled that manufacturers do in fact have the right to establish a minimum retail price for their products. Lets hope our vendors have the chutzpah to protect their retailers, sacrifice a little in the short-term, and preserve our industry for generations to come.

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