I have been getting lots of emails from Tobacconists worrying about, and struggling with, the current economic downturn; not to mention innumerable conversations on the topic. Overall, I would say half of the retailers I have spoken to say business is down significantly. The other half are either flat, or [claim to be] growing – but much of the growth is from newer stores. Either way, these are difficult economic times and many people are hurting.
My retail businesses are down a few percentage points. To me, this is a significant problem: if it wasn’t for [some of the annual vendor] price increases, we might be down 8 to 10%! And of course there is the rising cost of freight, energy, rent, and everything else. Ultimately, if you’re not growing, you’re declining.
Now we must do some things to CUT COSTS:
- Re-negotiate our CC* processing fees
- Re-assess our phone line(s) usage
- Tighten up Labor
- Look for more profitable products
- Start charging for freebies, like water, shipping, etc…
- Buy more generic packaging materials: zip-top bags, shopping bags, etc… (in fact, we have cut back to just one size zip-top bag for cigars – I really miss the 4×8 but the 5×10 fits everything)
- Clean & Organize! This process will help you find dead weight, inefficiencies, and opportunities
*The credit card processing fees, in particular, are a great place to start: get a quote from their competitors and ask your company to match the price – last year we saved over $500 per store!
While cost cutting is important, I am much more fond of re-investing, making improvements, and enhancing service. I have been through tough times before and always made money.
The only way I know how to get through them is to be proactive; not to shrink in fear – don’t make decisions rooted in fear. Already this year, my shops have seen new computers, cabinets, furniture, products, and more. Keeping the shops fresh and invigorated is imperative during tough economic times: Customers Will Notice! Even if customers don’t say something about your proactive efforts, they will notice both consciously and subconsciously.
I think the worst thing you can do during difficult times is:
- Shrink Inventory Noticeably
- Change Your Vision (i.e. get rid of great cigars and replace with bundles)
- Decline Service Standards (Step It Up!)
- Complain to Your Customers (Don’t Lie & Don’t Whine)
- Make Decisions Based on Fear
If anything, this is the time to be grateful for your existing customers: say hello, please, and thank you; fulfill special orders; ask them what they want and exceed their expectations! Frankly, a great cigar is just what we need during difficult economic times. We are in the business of selling relaxation, quality of life, decompression, escapism, and camaraderie – the cigars are consumable but the value is priceless. I see many new and old faces coming through the shop lately and they look like they need a cigar! This is a great time to provide a sanctuary to your customers – they will be grateful for it.
** If you need help, suggestions, advice, ideas, or would like to contribute some, please send us an email.