With 152,720 stores around the United States, the convenience store and gas station industry is known for providing time-hungry customers who are always looking for ways to save time and money with affordable access to the products they need on the go. One of the product categories that’s always played an extremely important role in driving sales and profitability in C-stores is tobacco. Alongside the heavily regulated management of lottery ticket sales, the tobacco channel is simultaneously one of the most regulated and one of the lucrative products on the shelves in a C-store or gas station.
In this article, Success Systems shares with convenience store owners and managers how the performance of tobacco sales have shifted in the last few years, and how C-store owners can take advantage of tobacco sales to create an additional revenue stream by participating in major tobacco vendor’s tobacco scan data incentive programs. The blog concludes with a discussion as to why participating in these programs is about more than short-term profitability and touches on the larger trend of data and analytics being the driving force behind successful businesses in the C-Store industry.
The Shifting Role of Tobacco Sales in C-Stores
At 71% of total US tobacco sales flying off of convenience store shelves, it’s no surprise that tobacco has always remained a primary sales driver for C-Stores. Despite attrition in smokers due to changes in perception of the habit and new generations’ focus on health, reduced-risk alternatives such as vapor products have quickly slid into the gap, sustaining tobacco as a strong product category in overall annual sales. Even with cigars seeing tremendous growth in movement through C-stores and gas stations, and the boom in e-cigarette and vapor products, cigarettes and loose tobacco remain strong performers.
Rebates Through Tobacco Scan Data and Store Automation
While legislative efforts continue to push for increased taxes on tobacco products, the top tobacco companies in the industry are working hard with retailers to incentivize sales and leverage consumer loyalty and the habits that come along with that loyalty in order to maintain tobacco sales. But in order to accomplish this, tobacco companies need access to consumer purchasing trends. Using this information they can craft targeted marketing initiatives and discount campaigns. How do they get to that data? Instead of gathering it themselves, tobacco companies have learned they can incentivize retailers to simply supply the necessary data by offering rebates for doing so. This has resulted in the creation of tobacco scan data incentive programs.
In order to take advantage of the tobacco rebates offered by the major players in the industry, it’s necessary to input their information into a scan data module installed into your back of house reporting system. Once you’ve gained access to the correct programs, you have to add the retail items to be tracked into the data module by departments, brands, and products. The tool allows you to apply the various manufacturer discounts such as multipack discounts by way of pricing formulas managed by the data module and applied to your POS pricing data.
At the end of every week, the interface allows retailers to pull sales data according to the associated branded products and compile them into a report that is then submitted. Retailers will then receive a check on a set schedule. The value of the check will be based on how many cartons of cigarettes were sold, how well they performed in certain promotions, and other targets.
The Smokin’ Rebates Advantage
Managing the process of gathering and reporting data can be tedious and time-consuming. That’s why Success Systems developed our own proprietary platform, Smokin’ Rebates, that largely automates the processes necessary to participate with four of the major tobacco scan data incentive programs. Let’s take a deeper look at what Smoking’ Rebates accomplishes behind the scenes once it’s been integrated with your retail management software platform.
Tobacco Scan Data We Collect
Designed to work behind the scenes and compatible with many major POS terminals in use throughout the industry, Smokin’ Rebates can be configured to capture tobacco and tobacco-related sales. That information is then configured for reporting to one of four of the major programs maintained by RJ Reynolds and the Philip Morris company:
- The RJ Reynolds Scan Data Reporting Program
- The Philip Morris Company Scan Data Programs, consisting of the PM USA Scan Data Incentive Program, the USSTC Scan Data Incentive Program, and the PM USA AOM Scan Data Incentive Program.
Weekly, that data is compiled into an automatically configured report based on each of the four programs’ specific standards, and automatically submitted. There’s no need for input from the manager, but the same access can be viewed and used to generate in-house promotions and track trends.
What Do You Get Out of It?
Your operation could accrue up to $0.10 per carton purchased, and other rewards based on the sales performance of specific items during promotions. One chain using Smokin’ Rebates was able to earn $631 across three stores in one week. Of that $631, one store alone generated $500 off of the sales of roughly 3300 SKUs. Extrapolate this information out over the course of a year and your operation is conservatively bringing in $20,000 to $30,000 just for selling products you would be selling in your day to day operations regardless of Smokin’ Rebates’ presence.
What’s Your Obligation?
For a low initial setup fee, an ongoing minimal fee in order to keep using the program, and at the cost of sharing your sales data, you get access to the powerful automated analytics tools of Smokin’ Rebates. However, there is no contractual obligation to continue the program after the initial three months.
Store Automation For Your Business
Convenience store owners and managers live and die by the data generated by consumer traffic and consumption habits. With fuel transactions only bringing pennies on the dollar on a commodity that is highly regulated and difficult to maintain an accurate inventory on, C-Stores rely on automated fuel management programs in order to easily manage the product. When it comes to food sales, which provide upwards of a 50% profit margin, C-store owners are challenged by very specific consumption patterns based on dayparts that are influenced by consumer habits and health trends, which at times results in waste that could dig into any profits achieved in that product channel. When it comes to tobacco consumption, the challenge to capture and build sales is just as difficult to manage for a C-store owner on their own. Because of high tax rates in some states, and strict regulations overall, cigarettes net the operation around 14.4%, depending on taxes, making it a challenging product to market well without support.
On the flip side, tobacco product vendors such as Philip Morris and RJ Reynolds have the challenge of being crippled when it comes to advertising and gathering client purchasing habits in traditional ways. Instead, they’ve brilliantly outsourced all of the heavy lifting to their retail partners by offering the cash incentive in exchange for sales purchasing data.
What the tobacco companies gain from this is highly detailed trends showing them how effective or ineffective special offers at the store level are, as well as general purchasing patterns that can be taken advantage of using other avenues of advertising and incentivization of sales. Together, the insight offered by C-stores sales data along with the incentives and discounts strategically deployed according to tobacco vendors’ analysis of that data creates opportunities for consumers to save just when they’re looking to buy.
Tobacco Scan Data Integrated With Our C-Store Management Software Solution Means Increased Profits for All Parties
Convenience stores rely on a combination of data-driven advertising and product placement and the sheer volume of sales in order to be successful. Fuel nets pennies on the dollar, but remains profitable through effective automated management solutions. Ready to eat food offerings are a growing profit center, but remain challenging and require managers to leverage detailed sales patterns to ensure the right amount of product is made available at any given time to minimize unnecessary and costly waste. And with tobacco products, vendors have to be able to determine when to deploy discount programs in order to be most effective and in order to do that they need a product like Success Systems’ Smokin’ Rebates, which provides users with access to the same traffic data that are submitted to vendors. Using the traffic patterns discerned from integration with the POS, vendors and C-store owners alike can together craft promotional programs for and around tobacco sales to build loyalty and sales.
If you’re impressed by the scope of Smokin’ Rebates, you’ll want to learn more about Success Systems and our suite of proprietary C-store software solutions and c store automation products designed for automating inventory management, fuel management, and other essential functions that free up managers and owners to focus on running their business. Have questions about how to partner with us? Reach out today! We’d love to learn more about your business challenges and help you identify solutions to the issues you face navigating C-store ownership.
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