How do we stay competitive and ahead of the market as we face a new business environment like none we have ever seen? As little as a year or two ago it was easy to capture some market share. The only requirement…Just show up! Those days are gone. Some predict as much as 80% of the vape businesses in existence today will be gone in the next two years. Whatever the actual number, will you be one of them?
Why are some shops making $20,000 a month and easily hitting their sales goals while others are wondering when their doors will close?
The question is loaded, and perhaps there is not an easy answer, but there is a straightforward solution brought to you by the E-Myth Method of business management.
In 1986, Michael Gerber’s wrote a book called “The E-Myth”. Its concepts dealt with the differences between so-called “technicians” and actual business owners.There is a HUGE difference, and the ideas are just as accurate today as they were back then.
The vape industry is crawling with “technicians”
And why the hell does my city care so much?
This report is updated in May 2015 since this issue is has become significant after attending city council meetings for clients to overcome that designation. Some of those results are modified in this updated report.
We’ve identified four “watchdogs” or entities that you need to be mindful of and to keep in your view:
- The FDA: the baddest of the Big Boys right now, since regulations are pending which will decide whether vaping products and e-cigs are:
a) tobacco products
b) A medical delivery device
c) Neither of the above d)
Or in a new category that may have its own set of rules Make no mistake, they will render a (new) decision soon and depending upon where you live and how you’ve set up shop, it may change or defeat your current business model. Be warned…
2) Your state. How do they view vape shops?
So far most have not reached any decision or consensus but you may be in a state that has.
3) Your competition. This is addressed in much more detail in other reports, so we’ll move on to the 800 pound gorilla in the room:
4) your city. Cities are under a lot of heat right now regarding Vaping and the two biggest areas of controversy are
1) Under age sales and
2) Vaping “in public”
And what is considered Public, after all? Another conversation that they have to deal with which goes into #1 is the increasing number of students (usually high school) that have smoking devices confiscated in school. Sometimes they are smoking juice, sometimes cannabis, but the teachers and school board want answers and solutions and cities are somewhat powerless to provide them, so they do what they determine is best: They restrict the sale of vape products to anyone under 18, which we support, and they stop vaping outside and in parks and malls and city owned property, etc.… and that part pisses us off. They also may require a tobacco seller’s license and stop all sales from kiosks and similar outlets. Back to the city’s dilemma.
We have spoken to many city council members and mayors and even if they privately approve and agree with Vaping and all that goes with it, they won’t say that on record. We have seen literal Vape Shop explosions in certain cities and they must pass out licenses and permits like candy on Halloween. If you got the money, you get the approval. That has been biting them in the ass as we have seen many cities become overly saturated with Vape Shops and now they (cities) are seeing the folly in their decisions. One of the sticking points that cities are using as justifiable criteria is:
“Is your Vape Store a Lounge?”
Why should they care and more important, IS your store a lounge, too? Does it have a couch? Any chairs to comfortably sit in? Seems bar stools and such don’t qualify. Do you have free Wi-Fi to keep your customers there longer? How about a TV? Pool table? Video game consoles? Soda machine? With all these questions come few answers as to what constitutes a lounge. But here’s the issue. If you are just and solely a retail business, you will probably get less flak from the city about staying in business in case they need to backtrack their lenient ways. If you have a couch and more square footage than you “need,” you could be getting a letter or visit by the city. In California, many cities are requiring special permits, called “Conditional Use Permits” which allow you to operate as a “lounge” whether you are one or not. You can see that one incentive is part of their weeding out process but the other is revenue generation. Here’s the problem: if you apply for a Conditional Use Permit (CUP) and are denied, you are out of business. You can fight city hall and we can teach you how.
How do you protect yourself?
Before you open your doors, find out the guidelines and criteria and if there is a distinction between a lounge and not a lounge. I always advocate you be proactive and be forearmed since it will be a more defensible position. Any questions?? Send us a note to norm@VapeMentors.com.
You probably know what a “Smoke Shop” is, but just in case, here’s a brief definition: it’s “a store selling tobacco products and smoking equipment.” Glad we cleared that up, sorry if it was overly complex.
They have been around for decades and have specialized in specific and obvious markets. In many states cigarettes were harder to purchase than in others and smoke shops became as much a social setting as a business establishment. They have become havens for cigar smokers and in many cases they have morphed into “head shops” where marijuana is sold. We’ll not spend much time there since that’s another special report, but instead focus on the world of smoke shops today. Did you know that Wikipedia has a reference for “head’ shop, but not for smoke shops.
These two stores are some times commingled and that can make statistics harder to obtain. If we want to know how many smoke shops are not Head shops, it gets a bit muddy. Per industry magazine publisher Ted Hoyt, with SmokeShop magazine, the numbers say there are about 2500-3000 smoke shops nationwide, surely down from years past. That obviously does not include cigarette and cigar retailers.
You may have some knowledge of Vaping and e-cigs and possibly smoke shops as well. “Old Timers” probably recall that many stores had “cigar store” (American) Indian statues in front and this was a man’s den, a place they could smoke and have a drink without women.
Today, as vaping has become a juggernaut industry and exploding at a pace we have not seen in many other product lines, many smoke shops are “transitioning” into offering Vape products in addition. Some are going so far as to abandon tobacco products almost completely and stick with what the market wants more of.
I spoke with Liz DePietro, a smoke shop owner that attended the Vapetoberfest workshop where I spoke in Long Beach, CA. Liz owns three smoke shops in the Atlanta area after buying her first in 2010. She ventured into a hookah lounge and that one became so successful she grew outside Atlanta proper and until about a year ago all was well, which is when she starting researching the “vape space.”
“I went to a conference and was blown away at the energy and the variety of products available. I thought it would be smart to get ahead of the curve and start integrating non-tobacco with my regular line. The vape products easily surpassed my tobacco sales and now I’m transitioning all stores in the same way.”
When people came in and asked “Do you have e-liquids?” she knew she was leaving money in the table. Liz shared that her vaping sales area takes up about 50% of her floor space, yet generates more revenue per foot. When asked how much her income may increase, she guesstimated that it would grow higher. A consummate entrepreneur, she also has an on-line store (www.VapeSpot.com) which carries exclusive vape products and for her tobacco sales are now a cushion as they do not hold strong margins, which was another incentive to look elsewhere and expand.
So the question on the table is:
“Should you transition to vaping products as well?”
We have interviewed and worked with many smoke shops since starting VapeMentors in 2013, and have seen many businesses that refuse to change and adapt. They usually close. So we say yes to expansion and here’s why:
- It’s profitable.
- Vaping is not going away. It is controversial, contentious and generates a lot of publicity and public outcry as well as support.
- The sales of tobacco will continue to decline and the prices will continue to increase. The number of smokers will also decline as those that have smoked for decades die off in higher numbers. Whether they pass from smoking related causes is immaterial.
- They make a lot of money.
- Be cognizant of the “perception” of consumers to smoke shops. As much as you (may) love the industry, in many states smoking and smokers are looked down upon and vaping is “cool.” Which side of that equation would you rather be on?
- Can you say “Reinvention?” How many businesses since 2008 have had to do that else they would die? More than I can count. IMHO I think the Smoke Shop is due a face-life, a do-over and come out with a new image and coat of paint.
- Young people, and I’ll use those under 40, are more likely to vape than smoke.
- And finally, the main reason: they make money. Yes, I know I repeated that one but I wanted to be clear you knew.
We get reports and I talk to people everywhere abut vaping. They can be as young as 18 (the legal age) and I recently met a woman recently that was 76 who smoked for fifty years. That’s five decades and she candidly admitted she did not actively try to quit smoking until after her husband passed. She tried conventional methods, the patch and the gum, but neither stuck, but when I spoke with her and her daughter (in a vape store) she said that even after just a few weeks she decreased her smoking by 75% and was on the way to complete withdrawal. That is your demographics, folks.
Do you agree? Disagree? Have a conflicting point of few? Love to hear back, send me a note to norm@VapeMentotrs.com.
Since starting VapeMentors in July 2013 these seven questions have not changed that much. Many of these questions motivated us to create the Vape U programs, which now cover brick and mortar shops as well as e-liquid companies.
Many aspiring vape shop owners want to open a store based on excitement and a desire to “change the world,” and have good intentions. In most cases they lack any type of business plan or model, have no idea where to start and may have unreal expectations.
They think “if I build it they will come.”
That’s just a movie cliché and couldn’t be further from the truth.
Most businesses fail not because of a lack of demand or too much competition, (or because they “didn’t build it”), but because they haven’t taken the time to understand themselves, their market or their own business.
- Know thyself
- Understand what you want to accomplish
- Execute and deliver
Becoming a Vapreneur and running a successful store is simple, but it is not easy. The following guide will help start you off right.
1: Why Open a Vape Shop?
Do you know what you’re getting in to? Do you fully understand what you are up against? Do you have all the tools and resources you need?
Going into business for the wrong reasons is one of the worst things you can do as an entrepreneur.
Take this seriously and really think about it. Why do you want to open a vape store?
- Because you love vaping?
- Because you just want to start a business?
- Because you want to help people stop smoking cigarettes and “change the world”?
- Because you want people to enjoy themselves?
- Because you can’t get a job?
2: What Are Your S.W.O.T.S. (‘s)
“Most businesses are about 80% the same” is what I was taught by my mentor and have shared with many.
Every one wants more revenue, more net income, less expenses, better employees, etc… A tire store has the same goals as a florist shop, a restaurant… or a vape shop.
That last 20% is all that separates one from the other. It’s the reason there are hundreds of McDonalds Restaurants that all have a identical menus but don’t necessarily deliver the same experience.
The same is true for vape shops.
This 20% is also the foundation where you begin to differentiate yourself from others and is known as your “Competitive Position.” In my world there is no competition, though there are competitors . I suggest you adopt that perspective.
It’s what makes you, you, and your shop like no other. The personal touch and connection that reflects you, your city and the area and customers you serve. And it’s the reason your customers will choose you over your competition.
How do develop a stand-out strategy? You begin with a SWOT analysis.
SWOT stands for:
Being able to address these 4 ideas will start you on the right path and help you develop your competitive position
Own that 20%; Make it yours
It’s the only way to truly know thyself.
3: What is Your Startup Budget?
Do I have enough money to find a location and pay the rent, get the necessary permits and licenses required at the local, city, county, state and federal level? What about inventory, signage, marketing material?
In a recent interview Mark Cuban (from Shark Tank) stated “If you are starting a business and take out a loan, you’re a moron”.
He went on to say that 99% of small businesses can be started with little or no money. Probably. Maybe…
Based on feedback and reports from hundreds of shops nationwide we have good insight on how much to spend on what and what you can bypass at the beginning. Do not trust your gut, but compile solid data and metrics based on proven techniques.
4: Where Do You Get Help?
When I was young(er) our generations’ goal was to be a “success” before you reached age 30. At the time it seemed a long, long way off.
In my twenties I knew everything! I had all the answers. Or not.
In my thirties I started getting a bit smarter and learned from some of MY mistakes as well as the mistakes of others. I had energy! I had
Optimism! I had a Positive Attitude!
But what I lacked was guidance…
I had more ideas, some of them good, most of them bad, that cost me more time, money, relationships than I care to admit. But I also had time. Time to try. Time to fail. When you are young you think you have lots of time…until you don’t.
It took me almost five decades to recognize that I needed a mentor, and finally found one. Actually I found several.
A mentor is someone that tells you your ideas suck. Or that you are wasting time or not focused. A mentor helped me recognize my own weaknesses, worked on ways to fix them, and his ass-kicking made me better, smarter. It’s a shame it took me too many years to learn. If I had guidance and focus when I had energy and excitement I would have succeeded sooner and to a greater extent.
“You can fail by yourself, but you cannot succeed alone,” is one of my mantras. You need people around you; like-minded people. You don’t need an MBA or conventional academic knowledge. Many entrepreneurs never went to college.
5: Do I really understand this industry?
Every day some media report smears the vaping community about kids ingesting a vial of e-Juice or speculates and questions about “what’s in it?”. Other reports incite controversy over FDA and state or local politics.
Some of it is true and warranted. Most of it is self-generated media controversy since, like the Don Henley song asks, “who doesn’t like ‘Dirty Laundry?’”
Regardless it’s a huge distraction for any Vapreneur.
Government agencies from the FDA to your governor’s office to your local city hall have made future planning for vape stores highly unpredictable.
I have personally worked with several cities and local governments on these issues. In one instance a vape shop owner was granted all the necessary permits and licenses from his city to open a vape shop and even committed to a lease with a local property owner.
Weeks later the city council rescinded his business license and stopped his shop from opening. Even with advocates from the community showing their support the city put him out of business before he began. And cost him almost $50,000.
He was still liable for his rental agreement and was stuck renting space for a business he could not legally open. He is not the first to be victimized here and will not be the last. Do your hmework! Before you venture too far, let us help you clear the tracks.
We have structured letters to landlords and to zoning and permit departments, attended several local hearings, city council meetings and met with many Mayors and city councilmembers over these issues.
Where are you getting education about the industry? From the media and from following very bad examples of cities that preceded them.
6 + 7: What If…
What if “stuff happens” that is unforeseen? Do you have money in reserve? Are you spending all your life savings? Have you borrowed from friends, family or partners? What if you lose it all? These are questions not designed to scare you but to help make a logical, rational, and conscious decision. Hope for the best, but plan for the worst…
What if…You Succeed?
Where it came from; were it is and where it is going.
The term “early adapters” may not come to mind when you think about e-cigarettes or vaping, but the world of technology is not that much different. For those that may be unfamiliar with that term, here is a picture, since it speaks 1000 words:
In the world of technology, from radio to cars to television, then computers, VCRs, DVDs and every alphabetic combination you can think of, there are those that are curious and lead new products to market until it becomes a commodity and eventually falls off. The best real life scenario that we are witnessing TODAY is laptop computers which were once a luxury, then a requirement and soon will be more or less obsolete due to Ipads and tablets. It is the way of the world. Music CDs have fallen into that same empty hole.
Vaping is following that same pattern and in just a few years it has become not just an early adapter curiosity and toy, but is now becoming mainstream. The arrow above shows where we are currently in this adaption process. I do not foresee any technology replacing e-cigs and vaping so they will probably not follow this pattern till the end, but should show steady rise until who knows when. There should be no DROP at all. Currently we see the Innovators and Early Adopters tapping into the movement and now we are getting close—but not at—Early Majority.
Just a few years ago e-cigs were difficult to find, now they are at Costco. Vape Stores, once a rarity, have increased ten-fold in Southern California over the past two years and are creeping across the country, going very strong in the South east and East coast and now circling back into the Midwest. The Bible Belt. The land of Wal-Mart, soon to carry juice as well as e-cigs. Can you say mainstream??
Here is the breakdown of where the demographics of the Vape market was,where it is and where it seems to be going.
WHO is vaping…:
Millennials 60% of the market
Gen X 30%
NOTE for future reference:
The Millennials will lead the overall market, grow in SIZE, but drop in percentages as the older demographics start tapping into the movement. Currently this industry is at $2B annual revenue and Big Tobacco predicts it will outpace tobacco sales—currently at $35B—in the next ten years. Conclusion: the balloon will swell in size, but proportions will change.
WHY are “they” vaping?
Millennials: It’s cool/ fun/ hip 60%
Gen X : want to smoke (probably) but don’t wish to create second hand smoke (possibly because of children) or offend 20%
Boomers want to quit smoking, may have been trying to quit for decades 20%
E-cigs 60% Boomers
30% Gen X
Note: Millennials don’t consider e-cigs as cool as mods so they are not as popular due to the lack of variety and novelty.
Vaping (and the future)
30% Gen X
NOTE: Millennials will continue to dominate this sector since Gen X and Boomers do not have the patience, visual acuity, manual dexterity and curiosity to get heavily into the vaping line.
Where there’s NO SMOKE, there’s Vape!
The map shows the direction of Vape Shop growth. Starting in California and immediately hitting the East Coast, it has become very heavy in the Southeast and is now coming back to Middle America.
Questions? Comments? Always like to get feedback and your thoughts.