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Saturday, May 30, 2009

What's Ailing Cigar Retailing

What's Ailing Cigar Retailing
by Bob McDuffee

 Modern cigar retailers face a number of challenges to survive or prosper in this age of restrictive smoking polices, increasing taxes and declining economic circumstances. As you would expect, none of them look forward to raising prices and losing customers. However, amidst the predictable angst is another, perhaps more sinister, sign of trouble for our beloved neighborhood tobacconist. In recent months I have spoken with both traditional neighborhood retailers and Internet retailers about the challenges they face in attempting to prosper or survive. What I have discovered is that the threats to retailers come both from poor policy decisions by manufacturers and from within the retailing industry itself.

     Traditionally, cigar manufacturers have relied on neighborhood retailers to provide promotional support for the facings through direct customer contact and service. In return for the loyalty of a retailer, manufacturers would offer special purchases, floor planning (financing) of stock and in-store event support. As the economy has nose dived and smokers have been openly vilified, the pressure on neighborhood retailers has caused a crisis in retailing. Retailers are failing at an ever increasing rate as a result of these economic and social pressures but to make the matter even more difficult, they are now being undercut by some of the very organizations they serve, the manufacturers.

     Manufacturers and, to some lesser degree, distributors have traditionally exercised a form of self policing that prevented larger retailers from gaining an unfair advantage over the smaller retailers by implementing price protection policies that limited any one retailer’s ability to heavily discount the product. My research has revealed that today these limits may no longer be enforced against large volume retailers, particularly those selling on the Internet. In fact some manufacturers are now turning their backs on the small retailers in favor of the massive volume resellers that populate much of the Internet. In my discussions with retailers, I have learned of a technique used by some large retailers to secure huge discounts and access to restricted lines of cigars. As it was explained to me, a retailer (either Internet based or traditional storefront) will order large quantities of cigars that exceed the volume of their operation. Then the excess inventory will be sold “out the back door” to other retailers that may not be authorized for that line or that will move the cigars quickly by offering substantial discounts to consumers that exceed the manufacturers limit. The manufacturer provides terms of 60 to 90 days for payment thereby financing these questionable trade practices. The original retailer receives a small percentage of the sales price for their part in the trans-shipment of the product and the lucky recipient of the illicit merchandise then sells at a heavy discount making up in volume and very low overhead costs for the slim margins. With no store front or sales force to support, these retailers are able to realize significant profits. This practice hurts the neighborhood retailer by undermining the street value of the discounted cigars and it hurts smaller manufacturers that cannot offer the flexible payment plans available from the much larger manufacturers.

     In other conversations with boutique (small volume) manufacturers, I have been told of cases where a smaller manufacturer is offered the opportunity to sell a large volume of their product to a large Internet retailer only to see the product later sold at substantial discount so it can be cleared out of inventory quickly. This has long term consequences for the small manufacturer by again, undermining the street value and perhaps the reputation of the cigar as a premium product. It can also result in a shortage of the small manufacturer’s product in traditional retail channels. My conversations with retailers has also indicated that although manufacturers are aware of these practices, many simply ignore them in order to continue doing volume business with the offending retailer.

Tuesday, May 19, 2009

A Real Revolutionary: Where The Sight of Tobacco Is Illegal


Imagine not being able to smoke in a retail tobacconist.

Furthermore, imagine not being able to display any kind of tobacco products to the public.  This is not a nightmare, but rather a reality for Bob Gee, a 30+ year veteran tobacconist and owner of Mader’s Tobacco Store in Kentville, Nova Scotia.   And just like a glacier from the last ice age, this draconian legislative mentality is moving south – beware American tobacconists! 

Bob Gee is a bonafide revolutionary because he refuses to relinquish his right to do business and represent his products.   But the government is prosecuting him for displaying tobacco products in his own store, where people have the right to choose whether or not to walk in.   It is a travesty that one man/tobacconist should have to sacrifice his livelihood, time, and income to pander to health zealots and unreasonable legislators who have no respect for individual freedoms.  But if you think our leaders in America are different…. think again.  If we fail to act now, this will be our fate.  And the biggest losers will be consumers and retail tobacconists, because big tobacco and mail order companies will survive and even thrive without retail tobacconists.

You can read more about Mader’s Tobacco Store at Pipes or just google it.  Let this be a warning to us all.  It’s time to join the CRA and get certified.  There is no time to waste….

If you would like to help Bob Gee with his legal and economic struggle, donations/contributions can be sent to:

Mader’s Tobacco Store
13 Aberdeen Street
Kentville, NS B4N 2M9, Canada
(902) 678- 3816

Sunday, May 17, 2009

A Real Revolution


Merriam-Webster defines revolution as ” a sudden, radical, or complete change” … “a fundamental change in political organization” … ” activity or movement designed to effect fundamental changes in the socioeconomic situation” and a fundamental change in the way of thinking about visualizing something: a change of paradigm”.  All of these definitions can apply to Tobacconist University (TU).  
When TU certifies a tobacconist they accept a professional code of ethics and standards and learn the fundamental as well as technical knowledge they will need to be extraordinary professionals.  This foundation of professionalism is important to our customers and our industry.  But, more importantly, as we grow our ranks (140+ today) and forecasted to triple by year end), we will be able to turn our credibility outward and start to carve out a sustainable existence in our society.  Tobacconists and our industry need to move beyond the taxation and legislative nightmare that is currently usurping our freedoms and beating our industry to death.  There is no sustainable future for retail tobacconists or the luxury tobacco industry in the current political, social, and cultural climate.  We desperately need a revolution!  A paradigm shift. 
In the short and medium term, the CRA (join now) battles on the legislative and political fronts.  But, we will need to do much more to create a sustainable industry that will be able to thrive for years and generations to come.  The real ‘war’ is global, political, economic, and social in nature and there are no small or easy solutions – it is a culture war. 
The most fundamental and first thing we need to do is prove to the world that we are indeed valid and credible professionals* … and that process starts with certification.  If you want to join a real revolution, not just pretend**…. Get Certified!   We are proactively fighting for our survival and we must do everything possible to change public (mis) perceptions and earn respect.
*Most people don’t even recognize or know that Tobacconist is a profession… much less one worthy of preservation. 
**Marketers throw the word “revolution” into their marketing mix to evoke satisfying emotions/thoughts and motivate you to bond with their products.  Just because you smoke an oddly shaped cigar or chat on a particular forum does not make you a revolutionary.  In fact, the word “revolution” has been diluted and emptied of its true meaning for far too long.  If you really want to be a revolutionary, it will take work, focus, and commitment.  Otherwise, it’s just an empty word propped up with useless actions…. Don’t be a fake revolutionary. 
Leave a comment and tell us how TU can make the biggest contribution towards changing public perceptions of tobacco and tobacconists.  

Saturday, May 2, 2009

Cigar Culture Wars

This week Cigar Rights of America (CRA) reported that the Cancer Action Network (lobbyists for American Cancer Society*) are about to spend $3 million dollars over the next few months to lobby the administration and Congress to increase taxes on cigars and other tobacco products. Absurdly, this is happening just weeks after the S-CHIP tobacco tax increases that will fund health care for people making under $80,000 per year. The Campaign for Tobacco Free kids noted, “There is plenty of room to go [for taxes] for cigars and smokeless.”
You must see by now that tobacco taxation is not really about using the money to recoup societal costs incurred by smokers. Sadly, it is estimated that only 5% of tobacco tax money is used for health care, cigarette cessation and education programs! Clearly, this level of extreme taxation is a punitive measure used to penalize a minority of people who do not conform to ‘dictated’ norms. In fact, the de-normalization of smokers is nearly complete as in California it is almost illegal to smoke outdoors on public sidewalks. And the hysteria and lies regarding second hand smoke has people believing smokers are dangerous and dirty people. Yet, any open-minded person who has ever read beyond the first page of the Surgeon’s General report on ETS must find smoking bans perplexing and unjustified.
Sadly, tobacco taxes and smoking bans will continue to increase because they are politically expedient. Over the last two decades our economic, political, scientific, and ideological arguments have failed to preserve individual, business owner, and tobacco user rights. Just take a look at how many republicans vote for smoking bans, declining rates of return on increased taxation, and the fact that smoking rates are relatively flat.
The increased persecution and taxation of tobacco users defies logic. It is about ideology. This is a cultural war against a certain ‘kind’ of people. And apparently, I am one of those people. Yet, cigar smokers only represent about 5% of the population – we are a bonafide underdog. That means each of us will need to convince at least 11 people to respect and support our freedoms, just to survive. In addition, as cigar and pipe smokers, we must proactively support the CRA as they are our infantry which battles the local, state, and federal government on a daily basis.
However, winning political battles will not be enough either. The anti-smoking movement is funded and organized beyond reason and comparison to any other political farce (sp?). They have waged a cultural war and we must meet them with commensurate force. The only force capable of resisting this movement is the value of freedom, inherent to being American. And the only way to change the culture is through education. So, Tobacconist University continues to build and project the credibility of our industry – endeavoring to preserve luxury tobacco for generations to come. There is a lot of work to be done and we must start yesteryear. Please join the CRA, convince 11 people to respect you, and get educated – sign the TPA, share & communicate, and learn something.

* Yes, it’s true, American cancer has a society and lobbyists. And if they have their way, all of the delicious carcinogens and smoke surrounding this steak will eventually be taxed, controlled, and eliminated as well.

Friday, May 1, 2009

Retail Exposure Test

In thirty years of combined Retail Tobacconist operations I have seen a lot of unexpected, amusing, and occasionally frightening things.  I have:
- had several Tobacconists attacked by drunk and/or belligerent customers
- seen women and men expose themselves; usually to show off a new piercing or tattoo
- experienced countless bathroom ‘problems’, electrical outages, and floods
- seen customers, employees, and products break (both physically and/or mentally)
- thrown out and arrested enough customers to fill a large bus
- chased both wild and domesticated animals out of the stores
- and generally, seen much more of the world and human nature than I could ever have imagined.
There is nothing like Retail: you open your doors every day of the year (except Thanksgiving and Christmas) and cross your fingers… It’s like playing roulette; you have a 1 in 35 chance of dramatic consequences. I respect any retailer who is committed to their customers. Customer Commitment requires devotion that goes beyond words. For me, I can’t ever relax until the last shop has closed for the day, and then there is a tremendous sense of relief.  If the day ends without catastrophe, We Won!