Between stricter laws, higher tax rates, and changing trends, running a smoke shop can seem daunting, and many aspiring smoke shop owners wonder if it’s worth it financially.
The short answer is yes, but how much a smoke shop makes a month can vary drastically. However, you can maximize your monthly earnings by understanding the key factors that affect profitability and taking a strategic approach to running your business.
Let’s dive in.
How Much Does a Smoke Shop Make Per Month?
The average monthly revenue of a smoke shop is about $33,000 (or about $400,000 per year).
A small smoke shop selling mostly staples might make closer to $50,000 to $100,000 per year (or $4,000 to $8,300 a month). However, a larger, well-established smoke shop can earn upwards of $83,000 monthly (or about $1 million in annual revenue).
Smoke shop profit margins typically range from 20% to 80%. So, a shop owner making an average monthly revenue of $33,000 can expect to take home between $6,600 and $26,400 a month in profits.
Smoke Shop Monthly Revenue: 5 Key Factors That Affect Profits
In times of economic uncertainty, finding ways to keep your monthly revenue steady is essential.
However, it’s important to remember that long-term success is a combination of higher revenue and higher profits. That means finding areas to optimize and improve your shop's operations to reduce overhead and bring in more customers.
Here are the five key factors to keep in mind.
1. Location Costs
If you’re thinking of starting a smoke shop for the first time or expanding with a new store, your location will have perhaps the biggest immediate impact on your monthly revenue.
The average commercial rent in the U.S. is about $29 per square foot/year. Even for a smaller store with a footprint of only 1,000 square feet, that will cost you about $2,400/month on top of utilities and any subscription costs you’re paying.
More popular areas with higher foot traffic have the potential to bring in more customers, but you’ll also have much higher leasing or rental costs. That could turn a dream location into a nightmare.
When choosing a location for your smoke shop, keep these points in mind:
- Size: Find a floor plan that’s the right size for your needs so you don’t pay for square footage you don’t use.
- Foot traffic: Look for locations near other shopping centers and stores to maximize the amount of foot traffic you get.
- Competition: Know the competition in your area. Unless you have a very specific niche, you’re not likely to attract business from a well-established shop in the same location.
- Contract terms: Pay close attention to the terms of your lease or rental agreement, especially if you’re in an up-and-coming area.
Last, don’t forget to check your local zoning rules, as some cities don’t allow tobacco shops in certain areas.
2. Product Selection and Niche
A smoke shop won’t generate much revenue if it doesn’t stock the products customers want. Take some time to understand your customer demographic and the industry trends that affect them the most to create a winning product list.
For example, while cigarettes still make up the most significant market share, e-cigarettes and vapes are more popular with younger customers or people looking for smokeless alternatives.
While it’s important to appeal to a broad customer base with a wide variety of items, as time goes on, you should use the sales reports on your point of sale (POS) system to home in on customer favorites and define your niche.
Smoke shops that offer a unique selection of specialty products will ultimately bring in customers from outside their neighborhood and stand out from the competition.
3. Customer Retention and Marketing
A new smoke shop won’t survive if no one knows it exists — and an established smoke shop won’t survive if it can’t keep customers coming back for more.
Because of all of the rules around tobacco marketing, it’s harder for smoke shops to build their brand — but it’s not impossible. Investing in smoke shop promotions and marketing strategies will help establish your business as a welcoming expert.
Here are a few basic marketing tips:
- Update your Google Business Profile to show up in local searches and Google Maps.
- Create an appealing (and mobile-friendly) website that tells your story and showcases your selection.
- Post on social media (but avoid product promotion).
- Send out a newsletter to customers with new product arrivals, current sales, and other information.
- Run regular discounts and promotions to upsell new and old customers alike.
- Host events to celebrate product launches or for special occasions.
- Use signage, displays, and visual merchandising to draw people toward popular products.
Remember, while new customers are great, returning customers are even better. Returning customers spend over 60% more than new customers, making customer retention extremely important for small smoke shops.
A customer loyalty program is highly effective for encouraging repeat visits and can be managed directly from your smoke shop POS system. To get the most out of your customer loyalty program, remember to:
- Advertise your loyalty program using signage and from your staff
- Make it clear to customers exactly how they can earn points and how to redeem them
- Create redemption tiers that encourage higher purchases (e.g., get $15 off for every 1,500 points or $35 off for every 3,300)
If your POS system supports it, include the number of points a customer has at the bottom of their receipt as a reminder to come back and earn more.
4. Inventory Optimization
Inventory will be one of your most significant ongoing expenses, and the less optimized it is, the more it will cut into your profits. What do we mean by “optimized?” Optimized inventory means you:
- Are well-stocked with items customers are looking for
- Do not have an excess of dead stock
- Are reordering at the right time and in the right amounts
- Understand shifts in seasonal demand
When you manually track inventory, it’s much harder to minimize costs and pick up on trends. Instead, take full advantage of the inventory management software on your POS system to streamline inventory processes and improve visibility.
With a modern inventory management system, you can:
- Set low stock alerts and automatic reordering based on supplier lead time and sales history to optimize stock levels
- Streamline vendor management and purchase orders, and automate receiving
- Use reports for demand forecasting, daily sales reports, inventory turnover rates, and shrinkage sources
- Spot slow-moving inventory to include in sales or product bundles
- Understand the profit margins on different types of items
Mastering your inventory is key to cutting costs and meeting customer demand, so use every technological advantage you have.
5. Staffing and Customer Service
Staffing will be another one of your top expenses and will eat into how much your smoke shop makes a month. However, the value of hiring and training excellent staff can’t be overstated.
Experienced and friendly staff help create a welcoming atmosphere in your shop, help keep things running smoothly, and can upsell customers with tailored recommendations. The better customer service you provide, the more people are likely to shop with you.
Related Read: Protect Your Business With These 7 Tobacco Store Security Ideas
So, long story short, don’t skimp by understaffing or not paying your staff — you’ll pay for it in bad reviews or even an increased risk of theft. That said, there are some things you can do to minimize staffing costs.
- Use your POS reports to know your peak hours so you’re not overstaffing when you don’t need the extra manpower.
- Change up your inventory counting methods and technologies so you aren’t relying as much on manual processes to reconcile stock.
- Use technology to streamline processes like invoicing, product lookup, and more.
Reducing staffing costs isn’t necessarily about reducing the number of staff you have; it’s about finding ways to use your staff more efficiently.
Boost Monthly Sales and Make Smarter Business Decisions With Cigars POS
With the introduction of tariffs, the rising cost of living, and other economic trends, running a profitable small business can feel like a long shot. However, with enough passion, a smart approach, and the right tools, small smoke shops can still find success.
Boost how much your smoke shop earns a month with a POS system built specifically to handle common challenges in the tobacco industry. Cigars POS was built for small smoke shops, cigar lounges, vape shops, and more, with specialized features that help:
- Optimize inventory levels
- Take advantage of tobacco scan data and other manufacturer promotions
- Manage customer loyalty and promotional pricing
- Manage multiple SKUs including carton-pack inventory tracking and custom SKUs
…and more.
Schedule a custom demo today to see how Cigars POS can help you maximize profits and boost your monthly revenue.
