The two largest suppliers of cigarettes for the market of Bosnia and Herzegovina have informed the retail chains that a new increase in the prices of tobacco products will follow.
It is yet another in a series of price hikes over the past few years, a burden retailers can no longer bear.
According to the data we obtained, the current earnings of traders per pack of cigarettes amounts to nine pfennigs.
However, the minimum margin in practice is almost completely offset by the costs that accompany the sale.
Specifically, on the example of a pack of cigarettes whose price is 6 KM, the trade margin is about 1.85 percent, which is significantly below the level that would enable sustainable sales.
When paying by card, the bank commission per transaction is approximately the same as the merchant’s entire earnings, so about nine pfennigs per box. This reduces the earnings to zero.
If additional taxes and operating costs are added to that, the sale of cigarettes pushes retailers into the red.
In the last few years, due to constant price increases and growth in business costs, rather than changing margins, this has led them to a situation where they are in a real loss on this product.
After all, by increasing the minimum wage, the calculation is that any margin below 5 percent is unprofitable. Everything else creates the appearance of large turnovers from which retailers do not benefit, on the contrary, they come to a stage where they start doing business in the red when it comes to cigarettes, and only distributors and manufacturers profit in the entire chain.
With the new price increase, the sale of cigarettes becomes completely unprofitable. Traders have no room for calculation, and every additional cost directly means a minus.
Although cigarettes are still among the products with high turnover, the economic calculus for retail is becoming unsustainable. It is quite clear that the problem cannot be solved without a serious review of margins, bank fees and the overall fiscal burden, because otherwise the sale of cigarettes will remain a business without profit or with a direct loss, which will sooner lead to their disappearance from the shelves, he writes. Biznis.ba.
