The Biggest Issue in Our Industry: Businesses Disrupting Market Balance by Selling Products with Low Profit Margins Using 30-Day Trade Credit.

The cigar industry has established itself as a prestigious luxury consumption segment globally, grounded in quality and expertise. However, one of the most significant issues facing this distinguished sector in recent years is that some businesses are using 30-day trade credit to purchase products from distributors and sell them at extremely low profit margins, disrupting the market balance. This situation poses a considerable threat to the healthy development of the industry and, in the long run, jeopardizes businesses that prioritize quality.

1. The Impact of Low Profit Margins on Market Dynamics

In the cigar and tobacco industry, product quality is shaped by years of experience and craftsmanship. However, some businesses, by leveraging 30-day trade credit from distributors, sell products at very low profit margins—ranging from 19%, 20%, to even 30%. These sales practices destabilize the natural balance of the market. While this pricing strategy may seem attractive in the short term, the long-term consequences can be much more damaging.

? Price competition and lowering industry standards: Sales made with low profit margins create unfair price competition within the industry. Businesses that focus on maintaining quality and customer satisfaction are forced to compete with price-cutting practices. Over time, customer perception of quality diminishes, and low-standard products become normalized across the industry.

? Long-term sustainability: While such aggressive pricing policies may help businesses quickly offload stock in the short term, they are not sustainable in the long run. Businesses that rely on short-term profits may eventually face cash flow problems, making it difficult for them to survive.

2. Misuse of Trade Credit

The 30-day trade credit provides businesses with a temporary cash advantage. However, when misused—especially in sales with low profit margins—it threatens long-term commercial sustainability. While businesses that respect market balance aim to foster customer loyalty through quality, those chasing short-term financial gains disrupt the market, almost as if engaging in “dumping.”

? Short-term gains, long-term losses: Selling products quickly using trade credit can temporarily improve cash flow. However, low profit margins hinder the long-term growth of businesses. Without a sustainable business model, these companies put both themselves and the market at risk.

? Pressure on the supply chain: The practice of selling products below market value adds pressure on the supply chain. Suppliers may struggle to cover their costs, which negatively impacts the entire industry from the ground up.

3. Risking the Industry’s Quality and Reputation

The cigar industry has long been associated with quality and prestige. However, aggressive pricing strategies driven by low profit margins risk tarnishing this prestige. As customers focus more on price rather than quality, the industry’s reputation suffers.

? Shifting customer perception: When product prices fall below a certain threshold, customers begin to question the quality. This undermines the overall image of the industry and diminishes trust in brands.

? Long-term customer loyalty: The cigar industry thrives on a loyal customer base. A price-focused approach weakens this loyalty and can lead to a loss of trust among customers. Low prices may cause customers to overlook the importance of quality.

4. Solutions and Strategic Approaches

To address this issue, all stakeholders in the industry must act responsibly in their pricing policies, keeping long-term sustainability in mind. Here are some strategic steps that can be taken:

? Establish industry standards: Businesses should adhere to certain quality and pricing standards. This can minimize practices that disrupt the market by selling products with low profit margins.

? Customer education and awareness: Educating customers about the craftsmanship and production processes behind high-quality cigars can encourage them to value not only price but also quality.

? Develop collaborative strategies with distributors: A more conscious use of trade credit can be achieved through long-term cooperation between distributors and retailers. Both suppliers and retailers should focus on sustainable growth to create a healthier market.

Conclusion

The damage caused by low-profit sales made with trade credit in the cigar industry cannot be overlooked. While such practices may seem appealing in the short term, they pose a significant threat to the long-term health of businesses and the overall industry. By taking responsibility and prioritizing quality, industry stakeholders can ensure that the cigar industry remains a prestigious and sustainable sector in the future.