Inventory Control Pays

Where the alternative is chaos, control wins every time.

We know you’re out there—tobacco-shop owners and managers who, even today, resist bringing your inventory control into the 21st century with newfangled point-of-sale (POS) and inventory software.

It’s understandable. Not many of us relish the thought of having to learn another computer aid, let alone making our business slave to its quirks. After all, you know your shop and your customers, and their wants and needs; you’re already happy enough with your take-home profit. Things are good. So why complicate life with the expense of digital inventory tracking, let alone the chore of mastering its use and retraining your employees?

We grant that some merchants are possessed of a savant-like talent for managing inventory entirely in their heads, or on paper. Maybe they’ve just got their operation streamlined, stable and humming, and they perceive risk in change. Even still: One of the lessons repeatedly learned by the majority of new technology adopters is that digital aids enhance life in myriad and surprising ways. (How many resisted smart phones before surrendering to their charms?)

It is a stubborn fact that the right software can help retailers identify strengths and weaknesses in a business’s product flow—bottlenecks in your supply chain, weak performers that gobble up shelf space only because you personally admire a product, sleeper items whose popularity you underestimate, leaving you short of stock often enough to annoy customers and drive them to the competition.

A POS system speeds check-outs and product look-ups, and improves customer experience. For the merchant, the database working with your POS system can train a unique kind of lens on the business, suggesting possible improvements that might otherwise go unnoticed. Just a tweak here or there in your inventory practices can boost profits. Inventory software is like a truffle hound for uncovering those nuggets of obscure or counterintuitive info you can leverage.

Why is inventory control so important?

Randy Silverman, owner of Klafter’s Inc. in New Castle, Pennsylvania, puts it this way: “Inventory is the lifeblood of running our businesses. Without it we lose sales opportunities. With too much of the wrong products, we lack the capital to invest in more profitable and more liquid inventory.” Silverman’s family owns 17 retail tobacco outlets and a premium cigar distribution firm, so he has put a lot of thought into inventory control, the result being a comprehensive list of issues he takes into account for existing items:

Historical movement of the item:

• How long does it take to sell through a box?

• How many different customers are buying it?

• If only one customer is purchasing this item, are you vulnerable to be stuck with it if the customer discontinues purchasing it?

Availability of the item:

• What is the lead time from the manufacturer?

• How long does it take to receive the product once an order is placed?

• Is it a seasonal item?

• Is it often placed on backorder?

• If products are placed on backorder too long customers will look for alternative sources for the product or will switch to another product.

Order minimums or promotional buying opportunities:

• Is there a minimum order to purchase?

• Are there any promotions that would entice increasing our purchase amount?

Continue to carry?

• Does it sell well enough to justify continuing to reorder?

• What is a desirable turnaround to justify continuing to carry the product?

• Are there better items to try to carry?

• Better margin items.

• Faster selling items.

• How much to bring in at one time?

That’s a lot of information to digest without aid of software designed for the task. Most readers of this page will not need to consider all of the matters listed above. But most do need to consider quite a few of them, and keep control of them.

Whether your business is large or small, cash flow is key. Craig Cass, owner of three Tinderbox stores in Charlotte, North Carolina, and one in Myrtle Beach, South Carolina, says, “Many people focus on net income when evaluating their businesses. However, the most important driver is cash flow. Poor cash flow strangles an inventory-centric business. The most important thing my team and I do daily, weekly and monthly is manage our inventory levels to generate the maximum cash flow. Doing more volume with less inventory will spit out cash. Identifying slow movers and flushing those slow SKUs through your retail business is critical. Equally critical is identifying the high-volume items to manage inventory so out-of-stocks are minimized.”

PCA Inventory Control PCA The Magazine

Computers Are Labor-Savers

Silverman relates a couple of commonly encountered inventory-control scenarios: “Say we sell 6 boxes a week of ABC Robusto Natural 25-count. We currently have 3 boxes on hand and 10 boxes on order. On average, we stock up to 5 weeks’ worth of inventory for a premium cigar. Our calculation would be 6 boxes per week times 5 weeks to stock to equals 30 boxes required. So, 30 boxes required minus the 3 boxes on hand and the 10 boxes on order equals 17 more boxes needed to cover 5 weeks’ sales.

“Or,” Silverman continues, “say there is an offer for an additional 10 percent off. We may want to stock up to a higher level, say 8 weeks’ inventory. Our calculation would be 6 boxes per week times 8 weeks equals 48 boxes required. So, 48 boxes required minus 3 boxes on hand and the 10 boxes on order equals a recommended order of 35 boxes to cover 8 weeks’ sales.”

These are easy examples to follow, and you may be thinking you don’t need any machine to aid those decisions. But if you’ve got a store full of such calculations to keep track of, all of them in constant flux, it can be a big load off your mind to have a computer always tracking the math for you.

Cass adds that, for most tobacco shops, the large majority of products are consumed, which he calls “a gift.” As he puts it, “Hard goods like humidors, accessories and giftware have a much slower turn. Typically one to two turns per year is all you can hope for with those, whereas, with the cigar segment, inventory-focused operators can turn their products four to five times per year based on how tightly their controls are managed.” He points out that inventory software can allow the merchant to print a “top 100 SKUs” report on demand. However, he says, an equally critical report can be your bottom 100. “Don’t just focus on the sales; focus on your dinosaurs that are taking up space. If you do both, you may just have a little more cash to spend keeping your business on top,” says Cass.

About those occasional items, however, Bart Gerber, owner of Churchill’s Fine Cigars in Phoenix, adds a cautionary note: “You may know that a particular customer only comes in once a year so you better have what he wants, whereas a POS system might tell you to discontinue that item because it sells so infrequently.” This means it really helps to have an intimate feel for your customers and their buying habits. Gerber adds, “Being in the specialty retail business means that, for tobacconists, inventory control is really more of an art than a science.”

The Right System for Your Shop

There’s no shortage of vendors standing in line to sell you an inventory control package. They range in cost upwards of a couple thousand dollars for a starter terminal/cash drawer to somewhat more for larger installations. Some of the companies that are practiced in servicing tobacconists specifically include FasTraxPOS, Lightspeed and POS Nation—but again, this list is far from complete. Your cost to get started will depend on the size and needs of your operation (number of store locations, number of needed terminals, specific desired capabilities, etc.). You will probably want the ability to print your own barcodes for products whose manufacturers have not yet adopted single barcoding, so expect to add a few hundred dollars more for such accessories. And take into consideration any monthly subscription fees.

Integrating a new inventory-control system can seem daunting, but millions have done it and never looked back. Take it slow and do your homework. You can begin by running an internet search using the search string tobacconists “inventory control” POS. Scroll through the many pages of returns. You will find a wealth of articles, reviews and comparisons of competing systems of all prices and capabilities, and links to inventory software vendors. Familiarize yourself with their claims, costs and (always important) the availability of technical support. Look for customer testimonials on vendor sites, and phone those customers up to ask if they still stand by their glowing remarks. Is a system you are looking at easily scalable to your own operation? Can it store information on the internet (“the cloud”)? Cloud-based management makes your data accessible even when you are offsite, and it is secure even if disaster strikes your neighborhood or your store computer.

Finally, call up some friendly tobacconists you know who are running operations similar in size and scope to your own. Ask them whether they have gone with inventory software and what packages they use. Ask about costs, options, pitfalls, lessons learned—and benefits.

Gerber points out that making a software package work seamlessly for your operation requires that you understand the business you are trying to equip. “My recommendation,” he says, “would be for a new or smaller retailer to eschew buying a POS system either altogether, or at least until you have a feel for your customer base’s buying habits.”

But if you do have that feel, or if your business is starting to grow past the limits of comfortable paper bookkeeping, or if you sense that you are poised for rapid growth in the foreseeable future, then there is no time like the present to start exploring your digital options. You are probably sitting on some golden nuggets of optimization just begging to be detected.


A Selection of POS Providers

Premium Tobacco Processing (PCA member)

nuvocompany.com

mitch@nuvocompany.com

Contact for pricing

Premium Tobacco Processing (PTP) is powered by Nuvo Merchant Services. PTP provides special low processing rates for PCA members. The processor fees offered are guaranteed to be locked in as long as you use PTP as your provider, which means you will never receive processor rate increases. PTP does not require long-term contacts. All agreements are made on a month-to-month basis.   

Catapult

ecrs.com

Windows-based. Contact for pricing.

Supports automatic age verification at POS, extensive reporting capabilities, inventory management, automatic buy-downs and customer membership management. Complex and feature-rich. (Complexity implies power, but also a learning curve).

“I have used Catapult for over 10 years. I like the way it tracks my inventory, and it’s easy for getting financial reports.” — Lisa Grossenbacher, manager, Smoker’s Paradise in Uhrichsville, Ohio

FasTraxPOS

fastraxpos.com

Windows-based.

$3,000 one time per machine, then $150/month. Cloud hosting, 24/7 live support. Supports barcodes, customer account profiles, loyalty programs, multiple retail locations, automated management of returns, commissions, discounts, gift cards.

“FasTrax works pretty great for us. The POS system is easy to learn, but the back end is a little more difficult.” — Will Porter, purchasing manager, Indian River Tobacco Traders in Newaygo, Michigan

Lightspeed

lightspeedhq.com

Windows, Mac, iPad or Linux.

One-time purchase price of $509 for Basic, $638 for Standard, and $1,009 for Premium; then select from five subscription packages ranging in price from $69 to $229/month 24/7 support. Cloud hosting lets you “access your point of sale from any device, anywhere.” Supports customer loyalty programs and a rich set of reports. Product cataloging allows direct purchase from suppliers.

“Lightspeed works pretty darn well for us. It has a lot of product-control strengths, and they have a great help desk. It is internet-based, though, so if your internet goes down your POS system is down.” — Amanda Nold, manager, Just For Him in Springfield, Missouri

POS Nation

posnation.com

Windows, Mac, cloud, SaaS, web, iOS Native, Android Native mobile. Call for pricing.

Serves “hundreds of tobacco stores.” Customer tracking and history, barcode printing, customizable cigar label printing (even for singles), sales and financial reporting. Supports cloud data storage. 24/7 support.

“My team loves the intuitive Cash Register Express software with touch-screen capabilities. It is easy for each level of employee to quickly get up to speed on the POS process. The main challenge of the software for us is the online portal to connect our stores. As a multiple store operator, I like to see daily detail of each location but upgrades are needed to improve the portal interaction and reporting detail.” — Craig Cass, owner, Tinder Box in Charlotte, North Carolina

Revel

revelsystems.com

iPad-based.

Software starts at $99/month, billed annually with a 3-year contract required. Flat transaction processing fees are additional.

Cloud-based, supports single- or multi-location businesses. Generates reports with filters, charts and graphs. Comes set up to support all commonplace charge cards, EMV and Apple Pay. Revel Systems offers a full complement of hardware items including iPad, iPad kiosk or stand, printer, barcode scanner, cash drawer/till and card-swipe payment device. System has a reputation for being intuitive and easy to use—a good entry-level POS system.

Shopkeep

shopkeep.com

iPad-based.

$49/month subscription, plus transaction processing fees. 24/7 support. Offline redundancy—keeps working if internet connection is lost. Compatible with iPad Air or Mini, running on iOS 7.0 or higher. Back office accessible from any web browser running on any OS. Automated inventory management, bookkeeping, employee time tracking and customer data management.