Back bar or front counter--finding a perfect home for e-cigs
NEW YORK -- The back-bar space crunch is nothing new to tobacco retailers.
Between contract requirements and a revolving door of new products, space management is an ongoing struggle. So the entrance of a sales-driving, margin-generating new tobacco segment not subject to the same placement restrictions as combustible cigarettes should make a category manager's job easier. Right?
Yes, electronic cigarettes don't have to be merchandised on the back bar. But because it's almost exclusively adult cigarette smokers entering the segment--and because regulations may ultimately require non-self-service placement anyway--many retailers have voluntarily moved e-cigarettes off the counter and into the space-strapped back bar.
"Many chains are moving to allocate space from their existing cigarette and OTP fixtures to create a permanent home for this category," Ed Denk, marketing promotions manager for Swisher (which offers an e-Swisher line of e-cigarettes and cigars) told E-Cig Update. "They recognize this category is not going away and the profit potential it brings."
"Cigarette lines continue to decline whereas e-cigarette lines continue to grow with great margins," agreed Miguel Martin, president of the Livingston, N.J.-based Logic Technologies. "They warrant a standalone, top-down fixture."
Whether e-cigarettes warrant the placement, Greg Doyle, CEO of Wheat Ridge, Colo.-based Nicotek LLC, said he believes the back bar is not the always the best spot--at least while the segment is still so new to consumers. "This product line is too raw to hide," he said. "We have consumers to educate, and we will not be successful in continuing this rapid growth by hiding the product."
Scottsdale, Ariz.-based NJOY is another company that believes e-cigarettes are best merchandised on, not behind, the sales counter because of the infancy of the segment. The company's "spinner" fixture, which gives consumers the opportunity to interact with the products, has been placed at approximately 60,000 retail locations.
"Non-self-service front counter placement allows the adult smoker to learn about NJOY which is extremely important since they typically only have about eight seconds at the point of purchase to make a purchase decision," said Vito Maurici, NJOY's senior vice president of sales and distribution. "A residual benefit to front counter placement (versus back bar where traditional cigarettes typically are) is that it signifies to the consumer that e-cigs are different than traditional cigarettes and have a unique offering."
Martin argued that top retailers such as The Pantry and Hess have found success in the back bar, leveraging in-store signage and advertising to drive awareness. For Vuse, Reynolds American Inc. took this concept to the extreme. While the product itself was housed in non-self-service fixtures, the company offered retailers in Colorado freestanding "education centers" that advertised Vuse and provided informational brochures on the Winston-Salem, N.C. company's digital cigarette.
Still, even if a retailer wants to create a permanent back-bar home for electronic cigarettes, immediate placement isn't always an option due to the rate at which the segment is expanding. Such is the case for William Slattery, tobacco category manager for the Dallas-based Alon Brands Retail. Though Slattery merchandises his core e-cigarette brands behind the counter, he often places new products or extensions on the front counter until space is found on the back bar.
"It's not just about finding space, it's about finding space as quickly as we need to," Slattery said. "There's not a whole lot of fluff behind the sales counters to add additional space--so the challenge becomes what goes away instead?"
In an attempt to avoid the space crunch in the future, Alon has invested in custom-made back bar racks, as opposed to the traditional manufacturer-provided fixtures.
"Most brands have their own fixture to merchandise that brand in, but not the entire category," said Denk.
There are some manufacturers looking to change this. Shortly after acquiring blu eCigs, the Greensboro, N.C.-based Lorillard Tobacco Co. recognized the need for a merchandising solution for the electronic cigarette category and began offering retailers a complimentary back bar rack meant to house both blu and an array of other electronic cigarette brands.
Logic now offers a similar fixture, requiring placement for roughly 30% to 35% of the space but giving retailers the option of merchandising the rest of the space how they see fit. It's an approach Martin described as "category merchandising," and added that merchandising best-selling SKUs next to one another has worked time and time again in other categories. Why not e-cigarettes?
"We have no concerns about being adjacent to our competitors," he said. "We believe when retail stores have the best brands in one location, they win and the category wins."