by Grace Barone
Tobacco shops are becoming increasingly popular within communities. The combination of increased sales of e-cigarettes and vapes, the legalization of cannabis both medically and recreationally in many states. Also, there is the new phenomena of Delta 8 products. The need for tobacco shops have increased tremendously. In the past, tobacco shops really only sold tobacco related products; cigarettes, cigars, chewing tobacco, etc. But, this shift in society has given tobacco shops the opportunity to expand and broaden their customer reach as well as their target market. This has caused many aspiring business owners to look into the idea of opening a tobacco shop.
What is a Tobacco Shop?
A tobacco shop or a smoke shop is a business that sells a variety of items. They specialize in selling smoking-related products and accessories. These include traditional tobacco products like cigarettes, cigars, and pipe tobacco. As well as other smoking alternative products like e-cigarettes, devices for vaping, and smokeless tobacco. On top of smoking-related products, these shops usually carry a range of accessories like pipes, rolling papers, water pipes and hookahs, etc. Some shops may sell items like candles, incense, and décor to compliment a smoking experience. Tobacco shops can also serve as a social hub for smokers and may even offer educational resources and advice on smoking related topics.
Why Business Owners are Interested
There have been a lot of advancements in the smoking world. A number of variables, including shifting societal views against smoking and the rising appeal of non-traditional smoking products, have contributed to the popularity of smoke shops.
First off, a lot of people are now using smokeless tobacco, e-cigarettes, and vaping equipment instead of regular cigarettes since they are more aware of the health dangers involved. These items, which are frequently viewed as a safer and healthier alternative to traditional cigarettes, are frequently available in smoke shops in a broad variety.
Secondly, smoking has improved in some social groups, particularly among young adults. Smoke shops frequently offer a sociable and entertaining setting where individuals may congregate and exchange stories about various smoking products.
Lastly, many states have legalized either medical or recreational cannabis products. On top of that, there has been a rise in Delta 8 legalization among the states. The Delta 8 market has blown up recently and some states were cannabis is still illegal, Delta 8 is legal. Regular cannabis products have the Delta 9 compound and come from the marijuana plant. Delta 8 comes from the hemp plant, hemp products are legal in most states. Here's a resource where you can see which states Delta 8 is legal.
The typical annual earnings of a successful smoke store is around $300,000 and the industry as a whole is now worth $14 billion. It can be a great business decision for entrepreneurs to open a tobacco shop.
How Much Does it Cost to Open a Tobacco Shop?
Opening a tobacco shop can cost between $50,000 and $100,000, depending on your area, the state of the economy, and the size of your business. Compared to some other businesses like restaurants, the cost to open a smoke shop is relatively low.
What to Consider
There are few things you'll need to consider while you ponder opening a tobacco shop. Of course, like any business, you'll want to think about location and the size of the space. You want to pick a budget friendly spot and think about the different licenses you'll need. I'll go into all the specific licenses in the next section.
Other things to think about is what other accommodations you'll offer at your shop. Some tobacco shops offer a smoking area inside where customers can smoke. If you want to sell cigars, you'll want to consider a humidity control room to store them. Cigars require specific humidity to stay fresh, you don't want to ruin your inventory by not investing in something to control the humidity.
You also want to think about what other products you want to offer and how much. If you're just starting out, you should get the staple items and see how they sell. Track the sales and then make the decision to get more of something or less of another. Depending on the competition around you, your customers may be seeking out specific items, make sure to engage with your customers to see what they are looking to purchase.
Just like a liquor store, tobacco and smoke shops need a tobacco license to legally sell any tobacco related products (this includes vapes and e-cigarettes). There are a few different kinds of tobacco licenses, so make sure you're obtaining the right one. A retail tobacco license allows business owners to sell cigarettes and tobacco products. This is a legal document issued by the specific state department, it may also need one from your specific city or county. This document shows that the business is in accordance with the state law and are legally allowed to sell these products to consumers who are of age.
To get the license, the business owner must apply for it and pay a one time license fee. In most states, these licenses are valid for 12 months and must be renewed annually. If your business has multiple locations, you need to get a separate license for each. As a tobacco license holder you have certain responsibilities, first of all your license must be clearly visible, business owners usually have it posted in the window or by the register. They also have to keep a complete and legible list of all purchase invoices for cigarette and tobacco products for 4 years. As well as keeping all invoices at each licensed location for the first year after purchase.
Owners of tobacco shops should also keep in mind all the special taxes that come along with selling these products. This is probably the most costly part of opening a tobacco shop. Here are the taxes you need to know about that are connected to selling tobacco products.
- Excise Tax
These taxes vary by state, this website outlines the price for each state. Governments at the federal, state, and occasionally local levels levy excise taxes on the sale of tobacco products. These taxes are imposed on goods and services on a per-unit basis, and are often added to the price that the consumer pays. The types of tobacco products and the jurisdiction have an impact on the excise tax rates.
- Federal Import Tax
A federal import tax may be imposed on tobacco goods imported from foreign nations. U.S. Customs and Border Protection is in charge of collecting this tax. This is based on the price of the imported tobacco products. This usually comes into play with cigars.
- State and Local Tobacco Surcharges
Some states and communities charge additional surcharges or taxes on tobacco products. These fees, which are distinct from excise and sales taxes, are sometimes used to pay for particular public health or anti-smoking initiatives campaigns.
- Sin Tax
Sin taxes are a particular kind of excise tax imposed on goods believed to be harmful or socially unacceptable. This includes cigarette products, alcoholic beverages, and sugary beverages.
Making a Profit when you Open a Tobacco Shop
If you want to make the most profit from your tobacco shop, you should consider all the tools to help you. Having the right POS system can do wonders for your smoke shop. The Clover POS systems can be a great asset to your business.
First of all, these devices have very in-depth sales tracking capabilities. This feature can help you make educated inventory decisions and help you comply with the responsibility of keeping accurate and legible invoice records.
Another great feature of the Clover devices are their automated inventory options. If you want to learn more about automated inventory software, I wrote a blog all about it. If you're worried about all the extra taxes involved in selling tobacco products, you should start a cash discount program. Products are priced in a way where customers pay the credit card processing fees. When a customer pays with cash, you give them a discount because there are no processing fees involved in cash transactions.
Having a customer loyalty program will also drive your profits up. People usually return to certain smoke shops and if you have a customer loyalty program set up, more people will return to your business.
Scan Data Program
If you want to open a tobacco shop you need to be taking advantage of a scan data program. This is a program where you send your sales data to the major tobacco brands, in return, business owners get a rebate for each pack of cigarettes they sell. At VMS we offer the Velocity Pro Pack. This is the ultimate tobacco shop POS system. It makes having a scan data program at your smoke shop extremely simple.
If you're interested in learning more about the capabilities of the Clover devices or the Velocity Pro Pack, fill out the form below or visit us at getvms.com. We can help your tobacco shop get set up with the perfect POS system that is sure to drive profits up.