If you’re thinking about opening a new business, there are a ton of factors to consider — where to set up shop, what to sell, and how to turn a significant profit.
And if you’re interested in a complex, tightly-regulated industry like tobacco, you might wonder if it’s worth it.
So, just how profitable is a smoke shop?
Let’s break down the basics.
How Much Does it Cost to Open a Smoke Shop?
First things first: If you want to know how profitable a smoke shop can be, you need to know how much it costs to open one. Depending on factors like the size and location of your store, and what types of products you’ll be carrying, you can expect to pay anywhere from $50,000 to $150,000 — this number includes everything from rent to inventory to equipment. And because the tobacco industry is tightly regulated, you need to make sure you acquire the appropriate licenses and permits (which vary depending on the state in which you open up shop).
When planning on opening a smoke shop, consider these costs:
- Location
- Licenses and permits
- Inventory
- Marketing
- Point of sale (POS) equipment
Let’s dig deeper into each of these factors.
Location
One of the most important factors to consider in determining the profitability of a smoke shop is its location. A smoke shop located in a high-traffic area with little competition has a much better chance of success than one located in a less desirable location. You might consider an area that has a nearby college or university, which could bring in a steady stream of customers.
Remember to check zoning laws, too. Some states limit the number of tobacco retailers within a given area.
Licenses and Permits
The tobacco industry is tightly regulated, so you need to make sure you have the appropriate licenses and permits in place before you even open up shop — most states require you to have a Retail Tobacco License (RTL). You’ll need to renew your license either annually or biannually depending on your state, so make sure to factor these fees into your budget.
Take into consideration that you’ll need a license for each of your locations, if you choose to expand your business.
Inventory
The inventory you choose to carry makes all the difference in your smoke shop’s success. Make sure you have a good mix of high-margin products, like premium cigars and tobacco, and lower-margin products, like cigarettes and accessories; this helps ensure that you're maximizing your profits. Plus, carrying a wide variety of tobacco products, pipes, and accessories at different price points can attract a wider customer base and boost your bottom line.
You might also consider creating your own private label cigars or accessories to increase your profit margin even further.
Marketing
The right marketing tactics can significantly increase the profitability of your smoke shop. Host events like cigar tastings or poker nights to attract new customers, or offer memberships that’ll provide a steady stream of income and create a loyal customer base.
Customers love a good deal, so take advantage of social media platforms to engage with potential and return buyers — and offer exclusive promotions and discounts through SMS and email marketing.
And don’t forget the importance of providing a welcoming atmosphere, knowledgeable staff, and excellent customer service — this can lead to repeat business and positive word-of-mouth advertising.
Point of Sale Equipment
The most powerful tool you can use to support your smoke shop business operations is a point of sale system made for the tobacco industry. Keep track of inventory to understand what’s selling and what’s not, so you can make informed decisions on which items to restock and which to cut back on. This will prevent lost sales and increase customer satisfaction.
You can also use your POS to support pricing strategies like bundling products or offering discounts on bulk purchases to encourage customers to spend more — and if your system has an e-commerce integration, you can offer online sales to boost your bottom line even further.
Remember, it’s important to find a point of sale system that’s made for your industry and has an age-verification feature. The federal age of sale for tobacco products is 21, so you want to make sure you’re keeping your business and your customers’ safe.
How Profitable Is a Smoke Shop? Learn More With Cigars POS
The decision to open a new business can be a daunting one, which is why you need to do your research before you begin.
Make sure you have a solid business plan in place, and go from there. And once you’re ready to get started, you want to have the right point of sale system in place to maximize your profits.
For more information on a POS designed specifically for smoke shops, schedule a demo with one of our Cigars POS specialists today! Or use our build and price tool to create your custom quote.
