July 19, 2019
The panel discussion titled ‘Margins – The Retailer’s “Worm’s Eye” Ground-level View’ at the first Vape Business Conference held on July 3, 2019 in London presented the worm’s-eye view of the sector, direct from the shop floor, with retailer panellists quickly getting down to the nitty-gritty of stocking and selling vape products.
The fact is that as cigarette sales decline, vape products on average command margins at least five, and often eight times or more higher, along with growing sales. If one eighth of your nicotine sales are vape, you will equal income from tobacco products – and now is the time to go vape.
Amish Shingadia, the owner of Londis Caterways in Horsham, recalled: “I’ve only been in vaping properly for about a year. I went to the IEA’s conference in November and they had a whole thing about vaping – not a single person in the room out of a hundred top retailers had a clue about vaping, even the people doing the conference, about what suppliers they should be using and so on. It amazed me.”
Amish says that £200 of vape sales creates more profit than £1200 of tobacco sales and it’s a no-brainer to sell as much vape as possible.
“Cigarette sales were very static, and we were not stocking very much vape for a few years, and then suddenly we started to see a change with many more vapers. We got all the information we needed from asking at local vape stores!” Amish admitted. “We make about 60 to 70 per cent margins on vape. We can undercut the vape stores by a couple of pounds, and we were open until late in the evening.”
Amrit Singh, owner of Nisa Local High Heath in the West Midlands, said he had been researching vape for a long while and has come up with a solution for his shop, dedicating about 4.6 metres of open shelf space to it and investing over £15,000 in design and fitting a complete vape “concession”. He has an iPad system so that customers can browse and educate themselves about the vape products on display, taking their time before buying.
The imminent arrival of the TPD [Tobacco Products Directive] menthol and dual cigarette ban [in May 2020] means that the “cliff edge”, as Amrit calls it, is here and the time to capture smokers for vape is now: “If you’ve been smoking menthol cigs for ten, fifteen years, what would you do? Where am I going to get nicotine and the menthol flavour that I love so much?”
“I think menthol flavours are the most popular,” Amish added. “And now you’ve got more fruity flavours and CBD.”
“If I’ve got £10,000 of cigarette sales and I can convert 15 percent of that into vape sales, I’ll have £1500 of vape sales with an average 60 per cent margin on vape, on the £10,000 I’ll make about £1000 max – around what I would on the £1500 vape. And in vape I don’t have to sell as much and the stock value is not as high either so I’m at less risk,” explained Amrit. “The only downside is the knowledge.”
Also on this panel was Danny Sohota, Managing Director of Real Trading Ltd and founder of Vape Station (and, it appears, everybody’s vaping supplier). He said he has been there from the beginning – “from cig-alikes to open tanks to closed tanks, to pods, short-fills and absolutely everything!” He too believes the vaping in Convenience is about to take off … again. “That’s where vaping first started,” he said.
“It was Convenience stores that first converted smokers to vapers, but what then happened was that the vaping community matured but the Convenience retailer did not mature with the product. Vapers then went online, to vape stores – the Convenience sector opened up the vape store sector!” said Danny.
“Now we’re on a catch-up and we’re still far behind’” rejoined Amrit. All agreed that education was key to retailers unlocking the vast revenues latent in the growing vape market.
This article first appeared in the 19 July 2019 issue of Asian Trader magazine.