Dollar Stores Put a Squeeze on Tobacco

CHICAGO -- Convenience-store retailers are examining the threat that dollar stores are posing to their tobacco sales, and with good reason. Numbers released at a recent tobacco trade show indicate that while c-stores still hold a dominant share of tobacco business, dollar stores are coming on strong in key areas, including cigarettes and other tobacco products (OTP).

Once a dollar store enters a market or upgrades to stocking tobacco, it will affect market share within a mile radius of that store, said Don Burke, senior vice president of Management Science Associates (MSA), Pittsburgh. “From what we’ve seen, 50% of that [hit] will come from the convenience business, then it will hit grocery.”

C-stores still have a commanding lead in tobacco volume, according to Burke, whose firm tracks shipment data to stores in various retail channels. For the 52-week period ending September 2017, the c-store channel held on average 70% of total nicotine volume. Dollar stores averaged only 2%, he said. During that same period, however, c-stores saw their volumes of nicotine products dip 0.5% year over year, whereas dollar stores rose 12.5% in the same time frame.

Burke also tracked shipment numbers for different tobacco subcategories for a 13-week period ending Sept. 30, 2017, and compared them year over year. He presented the numbers at a NATO workshop held in Las Vegas from Jan. 30 through Feb. 1. Here’s some of the c-store vs. dollar-store comparisons he shared ...

Cigarette volume for the 13-week period ending Sept. 30, 2017, was down 4% year over year in c-stores but up 14% in dollar stores.

In that same 13-week time span, c-stores lost 3% in little and filtered cigar volume while dollar-store volume of the same products rose by 42%.

C-stores did better with electronic cigarettes vs. dollar stores. C-store volume rose 32%, and dollar-stores volume declined 20% during the 13-week period. Similarly with vaporizers, c-store volume grew a whopping 635%, while dollar stores were flat.