Saturday, July 26, 2008

Tough Times = Better Business

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 4x8 but the 5x10 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.

Wednesday, July 23, 2008

200 People + 2000 Years = 1 Cigar

Yes, its true: 200 people + 2000 Years = 1 Cigar*. While most educated Tobacconists know that the leaves in a premium cigar have been touched by human hands over 300 times, we also know that it takes decades and generations of knowledge and traditions to produce a great cigar**. In fact, cigar making is a communal effort based on science, artistry, and oral traditions: it begins with humble farmers and culminates years later in a Tobacconist's humidor. But the term 'cigar maker' can be misleading because it takes far more than one man to make a great cigar. In fact, great cigar makers rely on many individuals throughout the 'cigar-making' process. And those individuals, such as farmers and rollers, often carry knowledge passed on to them from previous generations. Obviously, great cigar making cannot be learned from books; even tobacco agronomists rely on 'old-timers' and oral history.

The fact is that more than two thousand years of human experience goes into every cigar we smoke! Ponder this thought the next time you enjoy a great cigar.... This is a profound perspective***.

Remember, great cigars take more time and skill to create than great works of art and architecture. Yet, their destiny is to return to dust.... Savor your time.... and cigars.

* Formula: "Leaves x Job/People x Generations x (Years) Experience = Total Years Contributed to a Premium Cigar". Assuming a Premium Cigar contains 6 different leaves, we can calculate that over two thousand years of human experience contribute to making a premium cigar. All of these numbers have been conservatively estimated: there is no need to exaggerate the extraordinary nature of premium cigar making.

6 Leaves x 1 Agronomist/Master Farmer x 2 Generations x 20 Experience = 240 Years
6 Leaves x 10 Farmers/Farm Hands x 1.5 Generations x 10 Experience = 900 Years
6 Leaves x 10 Curing/Fermentation/A┼łejamiento Specialists x 1 Generation x 10 Experience = 600 Years
6 Leaves x 10 Sorting & Quality Control Specialists x 1 Generation x 5 Experience = 300 Years
2 Torcedore: Bunchers/Wrappers x 1.5 Generations x 10 Experience = 30 Years
10 Packaging/Handling x 1 Generation x 5 Experience = 50 Years

*** Eloy, Gracias por tu perseverancia y perspectivo!!!

Tuesday, July 22, 2008

Price Everything: content preview

In retail, it is imperative to price all of your products. There are countless stories from customers who have asked for prices and received different answers (on different occasions) from their Tobacconists. This leads to a lack of trust, loyalty, and eventually a declining business. Not pricing products can also lead to selling them for less than our standard markups, so pricing everything protects our margins.

Ultimately, we owe our customers a clearly articulated price on every item in our store: it is one of the fundamentals of professionalism. While every Tobacconist knows that pricing the hundreds or thousands of products in our store is a challenge, it must be done.

The pictures in this section show a myriad of pricing techniques and styles: some products are priced discreetly to avoid 'cluttering' the display, while other products, like cigars, have very prominent labels. Labeling decisions are up to the individual Tobacconist, but every product should still be priced.

Certified Tobacconists have committed to Price Everything when they accept the Code of Ethics & Standards.

Monday, July 21, 2008

Exact Change - Register Procedures: content preview

Every penny counts, and that is a fact. A penny per customer, per day, adds up to $182.50 loss per year; assuming 50 customers per day. If your company is lucky enough to earn 10% profit per year, that means you have to sell $1,825* worth of products to get back your one penny!

Giving and receiving exact change at the register is imperative. Admittedly, it can be easy to let a good customer 'slide'. But, if done consistently, this laissez-faire attitude can lead to debilitating losses. Fortunately, this is a hemorrhage that can be fixed. Remember that every penny counts and treat the register cash like it is your own. You must respect the money. Also, when dealing with money, annualize** your expenses to see the bigger picture.

*Calculate the 'real' cost of an expense as a function of profit; this will help you see the bigger picture. If you really want to get profound and depressed, calculate the opportunity cost of that $182.50. If you buy and sell that six times over the course of a year, assuming a keystone markup, that is $11,680! Every Penny Counts!

**Annualize: calculating expenses on an annual basis. Annualizing expenses for management and perspective purposes helps everyone in the organization see the value of not wasting, cost management, and being efficient. A dollar an hour for a full-time employee is $2,000 per year, or $20,000 worth of sales if you make 10% profit!

Saturday, July 19, 2008

IPCPR 2008 - Las Vegas

It was an exciting week in Las Vegas, to say the least. The response we received as the IPCPR's Official Curriculum Resource for Professional Tobacconists was stunning. We signed up over eighty new stores with even more Tobacconist Apprentices. In addition, we certified extraordinary Tobacconists from Georgetown Tobacco in DC and C.I.G.A.R. in San Antonio.

As I have always said, Tobacconists are starving for the credibility they deserve and now we are well on our way to providing it. This is a big first step towards building a better future for this honorable profession and we are thrilled to be a part of it.

Sunday, July 6, 2008

Tobacconist Traffic

While Tobacconist University uses the internet to broadcast our academic curriculum and other services (for free), we are not an 'internet company'. We do not sell our traffic (clicks) or allow advertisements, and we go to great lengths to distinguish our educational platforms from simple information and infotainment. As a University it is our mandate to research, learn, and teach. In that process, we certify and promote the credibility of our retail Tobacconists.

As we ask potential sponsors to help fund certifications and academic development, we make it a point to de-emphasize our internet traffic, since we are not 'that kind' of company. In reality, we do not measure our success in quantity, but quality - like education vs. information. With that said, our internet statistics do offer some amazing and unparallelled facts: our average visitor views 8 pages while more than 40% view more than 3 pages; 11% of our daily visitors spend more than 40 minutes on the site while 60% spend more than 3 minutes.

I think the daily traffic picture above says it all (red dots represent 5 or more pageviews): serious people from all over the world spend significant amounts of time learning about luxury tobacco - through Tobacconist University. I know the internet site looks 'different' as there are no frames, advertisements, or constantly changing headlines with sensationalized information. We don't report on current events or host chat groups or product sales techniques. The uniqueness of our website occasionally leaves people confused since we are used to being bombarded with marketing messages. But in this case, different is good: we are sharing substance and quality, for free.