PETRO SOFT ARTICLE
By Melanie Widmann
Increasing Your Bottom Line with Cigarette Manufacturer Rebate Programs
COVID impacted businesses in surprising ways. Predictably, it reduced the demand for fuel both on the supply and demand side. But surprisingly, it reversed the decline in cigarette sales.
According to a report by Ernst & Young, cigarette sales increased by 24 per cent in June 2020 compared to 2019. Convenience stores in certain areas of the country experienced even higher growth, including 44.9 per cent in New Brunswick, 47 per cent in Prince Edward Island and 44.3 per cent in Newfoundland and Labrador, compared to June 2019. This, for some, brought a renewed focus to the category and rebate programs.
Why Should You Care About
If you are new to or want to take a second look at these programs, participating ensures you remain competitive and/or stimulate sales. If you are not actively participating and managing the compliance of these programs, you are simply leaving money on the table. Many convenience store operators also need to consider their fuel brand and their own promotions as they add manufacturer rebate programs to the mix.
Types of tobacco price promotion allowance can include:
- Total buy-down allowances
- Multi-can allowances
- Multi-pack allowances
- Loyalty fund allowances
Although program requirements can differ widely from manufacturer to manufacturer, the following are typically included:
- Is product specific
- Is customer specific, including quantity sold per targeted (loyalty) user
- Requires a stated dollar or percentage discount
- Is time-limited
- Requires special signage/promotional advertisement placements (in-store and forecourt)
- Requires reporting sales data back to the manufacturer
- May also provide additional discounts for additional data (loyalty)
The Burden of Compliance and Collection
Program requirements may be easy to meet by larger companies but can become burdensome to the small convenience store retailer. A few reasons that make these programs difficult to manage are not knowing how to:
- Set up the promotion
- Report information back to the manufacturer
- Track the reimbursement
- Book the sale
- Determine the tax impact
Companies that leverage technology rely on integration between the manufacturers and technology partners to reduce the administrative burden and meet compliance requirements. The role of a technology partner, usually a back-office or scan data app provider, is take advantage of any new integration opportunities. The role of the business partner, such as a manufacturer, is to enable the integration. One overlooked advantage of these apps is their built-in automated and manual workflows that ensure store owners enter and track the needed information.
The Rise in Demand for Data and a New Class of Scan Data Apps
Manufacturers are increasingly interested in validating the performance of their products at the store level and need to access convenience stores’ sales data within shorter and shorter intervals. This data helps manufacturers validate and optimize their promotions while improving their distribution in a much more responsive way.
One proof point of the rise in demand for data is the entry of a new class of app. Technology companies are now offering “data scan” apps that provide two main functions:
- Automates the data exchange needed for compliance
- Automates the program opt-in process and acceptance of promotions
The opportunity for c-store owners is these apps help to reassign the administrative burden back onto the manufacturer through automation and integration. The product promise is the app will pay for itself by reducing these administrative and compliance burdens. Manufacturers find value in the shift as it promises to increase participation (opt-in) and compliance with their programs.
A Few Final Thoughts
It is expected the demand for data will only grow. But regardless of how many programs manufacturers offer to convenience store owners, the burden of administration and compliance can put the small operator at a disadvantage. We believe technology’s role and product promise is to level the playing field by automating and making it less time-consuming to opt-in and comply with these programs regardless of the company’s size.
Melanie Widmann is the creative director for Petrosoft, a leading provider of cloud-based c-store automation solutions. Born in Ottawa, Canada, she moved to the US to earn her B.Sc. and MBA. Melanie is active in the convenience store industry, has served as a NACS supplier committee member and has chaired the Conexxus FDC working group. She currently resides in Pittsburgh, PA.