How the E-Lite corporation broke the tobacco category
14 Mar 2012
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KARACHI: Despite growing concerns and negative consequences associated with electronic cigarettes, usage of the battery-powered vaporiser, which has a similar feel to tobacco smoking, is on the rise.
CEO of E-lite Corporation Daniyal Farouk speaks to The Express Tribune about the challenges and opportunities of this growing category in the tobacco market.
Q. What inspired the name and your drive to start this business?
A. Numerous studies point towards the harmful effects of various tobacco products, some addictive and other consumed for pure relaxation such as sheesha. I found a niche between the handheld advantage of a cigarette and then a couple of puffs bare minimum consumption that sheesha users enjoy.
Q. What did you do in the first 30 days after launching?
A. Locking in deals with retailers was very exciting, even more so to see my products on the counters. I visited markets to see the performance and engage potential buyers like a brand ambassador would.
Q. This was no doubt a tough pitch to retailers given the hefty margins in play and the education gap. How did you attract initial retailers and what obstacles did you face?
A. In the beginning I faced many problems with retailers as their mindset was against new-comers and new products in the market. The doors were sealed for us and they were hesitant to put our products on their shelves and counters as they believed the product wouldn’t do well at all and was a waste of time. After a few pilot outlets and education-focused marketing, the customer trials and approval only strengthened our holding and the re-orders justified the value created.
Q. Why not start with a direct channel like e-Commerce to prove the category and evolve to retail at a different stage?
The risk to reward ratio was too high for e-Commerce when I started in 2008. Our research in customer journey mapping reflected that the primary touch point for the target customer was the counter at convenience stores they frequented. Often times, traditional cigarettes are displayed behind the cashier, so we went for the impulse buy at the counter. While the promise of e-Commerce and its overall ROI impact is great in fashion and, more recently, food, I have yet to see the results in my category. Sure, retailers are earning huge margins, but the volumes are limited at the moment.
Q. What type of risks and issues have you encountered thus far on the retail channel?
A. Our mystery shopper initiatives revealed that cashiers were unable to explain and pitch our products when they were inquired about at the point of sale. We fixed that with a re-education camp. Another issue has been the slow cash flows. In one instance, we cut out a large retailer for failing to pay on time as per agreements. It wasn’t personal, just business.
Q. While you’ve proven the category, other players are emerging with similar offerings. Why will your brand beat them?
A. I’m a fan and follower of Professor Peter Fader of the Wharton School at the University of Pennsylvania. In his book, Customer Centricity, he notes that it’s important for brands to identify the most valuable customers and do everything in their power to make as much money from them as possible. Being customer centric means that, unlike my competitors, I oversee quality assurance and manufacturing of my product and deliver impeccable service that has resulted in year-on-year growth of sales.
Q. How will you market and grow the business in 2015?
A. Our research shows that add ons to inventory lead to improvements in conversions and increase the average order value. That said, we’re on track to introduce two well-known international home appliances brands this year and are opening our own online store which will facilitate customers to import products they desire, that would otherwise not be available in Pakistan.
CEO of E-lite Corporation Daniyal Farouk speaks to The Express Tribune about the challenges and opportunities of this growing category in the tobacco market.
Q. What inspired the name and your drive to start this business?
A. Numerous studies point towards the harmful effects of various tobacco products, some addictive and other consumed for pure relaxation such as sheesha. I found a niche between the handheld advantage of a cigarette and then a couple of puffs bare minimum consumption that sheesha users enjoy.
Q. What did you do in the first 30 days after launching?
A. Locking in deals with retailers was very exciting, even more so to see my products on the counters. I visited markets to see the performance and engage potential buyers like a brand ambassador would.
Q. This was no doubt a tough pitch to retailers given the hefty margins in play and the education gap. How did you attract initial retailers and what obstacles did you face?
A. In the beginning I faced many problems with retailers as their mindset was against new-comers and new products in the market. The doors were sealed for us and they were hesitant to put our products on their shelves and counters as they believed the product wouldn’t do well at all and was a waste of time. After a few pilot outlets and education-focused marketing, the customer trials and approval only strengthened our holding and the re-orders justified the value created.
Q. Why not start with a direct channel like e-Commerce to prove the category and evolve to retail at a different stage?
The risk to reward ratio was too high for e-Commerce when I started in 2008. Our research in customer journey mapping reflected that the primary touch point for the target customer was the counter at convenience stores they frequented. Often times, traditional cigarettes are displayed behind the cashier, so we went for the impulse buy at the counter. While the promise of e-Commerce and its overall ROI impact is great in fashion and, more recently, food, I have yet to see the results in my category. Sure, retailers are earning huge margins, but the volumes are limited at the moment.
Q. What type of risks and issues have you encountered thus far on the retail channel?
A. Our mystery shopper initiatives revealed that cashiers were unable to explain and pitch our products when they were inquired about at the point of sale. We fixed that with a re-education camp. Another issue has been the slow cash flows. In one instance, we cut out a large retailer for failing to pay on time as per agreements. It wasn’t personal, just business.
Q. While you’ve proven the category, other players are emerging with similar offerings. Why will your brand beat them?
A. I’m a fan and follower of Professor Peter Fader of the Wharton School at the University of Pennsylvania. In his book, Customer Centricity, he notes that it’s important for brands to identify the most valuable customers and do everything in their power to make as much money from them as possible. Being customer centric means that, unlike my competitors, I oversee quality assurance and manufacturing of my product and deliver impeccable service that has resulted in year-on-year growth of sales.
Q. How will you market and grow the business in 2015?
A. Our research shows that add ons to inventory lead to improvements in conversions and increase the average order value. That said, we’re on track to introduce two well-known international home appliances brands this year and are opening our own online store which will facilitate customers to import products they desire, that would otherwise not be available in Pakistan.
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