A leading Glasgow-based independent retailer has issued a stark warning over what he describes as “unsustainably low” tobacco margins at a time when convenience stores across the UK face escalating operating costs and weakening business confidence.
Retailer Shahid Razzaq, owner of Premier Mo's@Blantyre in Glasgow and a long-standing voice within the sector, said his latest update of cigarette and tobacco prices on his EPOS system highlighted an increasingly one-sided commercial relationship between tobacco manufacturers and independent retailers.
Razzaq revealed that under current recommended retail prices (RRPs), margins were “as low as 2.4 per cent, with an average of around 4 per cent”, a figure he argues is nowhere near sufficient to cover the reality of running a modern convenience store.
“In a convenience store, you generally need a margin of around 18 per cent just to clear your costs,” he wrote on a social media platform. “For such an expensive product, this is an incredibly poor return.”
While Razzaq has opted to build in a margin of around 8 per cent, which he describes as “still not great, but a balance between viability and fairness for customers”, he urged fellow retailers to review whether sticking to manufacturers’ RRPs is financially sustainable.
He stressed that the issue lies not with field representatives, whom he praised as “proactive and professional,” but with manufacturers’ pricing structures, which he believes no longer reflect the economic pressures on independent convenience stores.
The recent post closely follows a similar one detaiing the wider cost pressures squeezing retailers and eroding profitability across multiple categories.
Energy bills, once a manageable overhead, have climbed to "£5,400 per month for his store", he stated. Labour costs, historically one of the largest expenses for convenience operators, have forced his business to reduce staffing levels from 26 to 21 as wage inflation continues.
Even basic operational tasks such as refuse collection have become more expensive due to new guidelines, while retail crime has spiked sharply. Razzaq reported a 15 per cent rise in incidents this year, saying the decline in visible policing has left stores increasingly vulnerable.
Margin erosion, already evident in tobacco, is spreading elsewhere.
“Margins were better before, but now POR on price-marked products is being squeezed,” he said, noting that even the traditionally reliable newspaper category is no longer immune. Titles such as The Herald and The National, which once offered steady returns, now deliver only 16.7 per cent margin, below the break-even threshold.
The accumulation of rising costs and shrinking margins has resulted in what Razzaq describes as record-low business confidence among small retailers, who he says feel “like punch bags for all governments.”
“Suppliers and government need to understand that we are reaching point of no return,” he cautioned. “There is a perception that small retailers are making millions, but that is simply not the case.”
He called for a fairer distribution of responsibility and reform, urging policymakers to crack down on companies “managing to avoid paying their fair share of taxes” while offering meaningful relief to local businesses that keep high streets functioning.