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December,
2005

In 2004, tobacco retailers saw the tide turn for the better, with a majority of stores polled in our latest tobacco shop survey reporting sales increases.
Staff Report

It’s been two years since the publication of Smokeshop magazine’s previous Industry Report, which analyzes the compiled results of a detailed survey querying retail tobacco shops on a variety of sales indicators of their business. This 2005 report presents information surveyed from tobacco shops nationwide for the period of January 1, 2004 through December 31, 2004.

Every effort is made to solicit the widest response to our survey as possible to ensure a viable cross-section of tobacco shop performance in our tabulated results. The result is not only a snapshot of the state of tobacco retailing in any given year, but - by comparing results from year to year - a bigger picture of changing trends over time.

All in all, the news in this latest survey was quite good. More retailers posted gains in sales for the year than losses. Among our surveyed sample, 63% reported business was up in 2004, with an average gain of 14%; 17% reported no change in sales over 2003; and 20% reported sales were down, with an average loss of 16%. Overall, the entire surveyed sample reported a collective 7% gain in business in 2004.

For this report’s pool of respondents, 79% of the participating retail shops classified themselves as traditional smoke shops; 12% as tobacco outlets; and the remaining 12% as other types of retailers carrying tobacco products. A solid 94% of revenues were derived from in-store sales among our respondents, with only 5.8% coming from the Internet and less than 1% from mail-order sales. p> Weekly transactions remained up over the past two survey years at an average of 869 in 2004, down about 5% from our 2003 average of 914 transactions per week, but remaining 34% higher than our 2002 average of 647 transactions per week. Overall, these transactions broke out as 84% tobacco, 16% non-tobacco.

MERCHANDISE OVERVIEW
Sales of premium cigars accounted for 45% of total store sales among the current survey participants, similar to 2003 (47%) and a good distance above 2002, where they accounted for 38% of total sales. Total tobacco and tobacco-related merchandise accounted for nearly 97% of total store sales, compared to 95% in 2003 and 87% in 2002.

For the first time, we broke out several new categories in our analysis of store sales by merchandise type. In addition to domestic cigarettes (12% of total sales) and imported cigarettes (4% of total sales), we polled retailers on sales of discount cigarettes, which accounted for 6.6% of overall sales, as well as rolling tobaccos, which totalled 3.2% of store sales.

Among cigars, non-premium (mass market/machine made) brands accounted for 1.7% of store sales among our survey pool, while flavored cigars accounted for 2% of total sales.

While sales of pipes (5.2%) and pipe tobaccos (4.6%, or 9.8% combined) dipped ever so slightly from our past survey, where they collectively accounted for 10.4% of total store sales, two major categories of tobacco accessories were up. Lighters (4.1% in 2004 versus 3.7% in 2003 and 2.3% in 2002) and humidors (3.8% in 2004 versus 3.3% in 2003 and 1.2% in 2002) both edged ahead, while all remaining accessories (other tobacco-related merchandise) has fluctuated in recent surveys, falling to 2.3% in 2004 versus 5.7% in 2003, but remaining up from 1.9% in 2002).


Non-tobacco merchandise among the current survey respondents only accounted for 3.3% of total store sales compared to 5.3% in our prior survey for 2003 and 13% in our 2002 survey. Nearly all of that difference is attributed to the sale of unidentified merchandise classified as “Other” in our survey.


The average total annual store sales among our respondents in 2004 was $519,753 compared to $428,663 in 2003. This average is heavily dependent upon the specific retailers who respond to the survey in any given year, but which does tend to reflect known trends among retailers.

Continued...