Sometimes smoke shops struggle, even when business is booming and customers love them. Why? Because without a healthy profit margin, it’s hard to achieve long-term success.
Every smoke shop owner wants to boost their profit margins, but it’s not always as easy as it seems.
We’re here to help. This article will provide you with a better understanding of your smoke shop’s profitability. We’ll also highlight the top methods and tools to help bring in more money for your business.
Profit margin looks at how much you earn from sales. Put simply, it’s looking at what money you get to take home after buying and selling your products.
PROFIT MARGIN = [ (Net sales - Cost of goods) / Net Sales ] x 100
Profit margins can be viewed as a whole or for individual items. The profitability of your smoke shop depends on various factors, and the average profit margin can range from 20 to 80%.
While it might seem intimidating and time-consuming to dive into the sales numbers, getting a handle on your smoke shop profit margins can help you:
With a solid understanding of smoke shop profit margins, you’ll be better equipped to expand your business with confidence.
If you ignore your profit margins, you’re leaving money on the table. But by using the right tools and following these best practices, you can maximize your profits and deliver better customer experiences.
Modern point of sale (POS) systems do more than process transactions. They track all of your sales and inventory, allowing you to create custom reports that help you maximize profits. By leveraging the right POS software, you can gain actionable insights into things like:
Most importantly, a smoke shop POS system lets you make business decisions based on data, not on a hunch.
Keeping your shelves well stocked with their favorite items is the foundation of happy customers and repeat business. To do that, you need to track your stock effectively. Optimizing your inventory management is a great way to maximize your profits and reduce holding costs.
A POS system with robust inventory tracking will help improve your profit margins by reducing overstock and understock situations. Software that supports carton-pack breaking lets you split packs of cigarettes or cigars, allowing you to accurately track inventory.
Last, use your POS system to set automatic reorder reminders when stock levels on particular items drop below a certain threshold to make sure your most popular items are never out of stock.
Regularly negotiating costs with suppliers is an important aspect of boosting your small business’ revenue. However, you can’t just ask for a discount with no information to back up why you deserve one.
Track the profit margins of products from each supplier. This will let you see:
A deep understanding of each supplier and their products gives you a better way to visualize and share revenue numbers, which can be helpful when negotiating. It also lets you understand which relationships are financially beneficial and which aren’t.
You can also use your POS system to find your bestsellers and try to save money by ordering them in bulk.
Within the last decade, new products like vapes, kratom, and CBD have upended the smoke shop business. Keeping ahead of emerging trends is an important way to stay relevant and attract a broader customer base.
You might consider offering more high-margin items like accessories and vaping products. Try out different brands and keep track of sales to see which products your customers prefer.
Expanding your services is another area that can bring in extra revenue. Smoke shop services can range from offering curated selections to setting up a cigar lounge. Be creative and tailor your services to your unique clientele.
Without a unified view of your sales numbers, expenses, and staffing costs, it’s hard to figure out where to make cuts. Cutting costs randomly isn’t an effective way to reduce your overheads, and you might end up hurting the customer experience in the process.
Instead, use your POS system to find areas to trim down.
Customer loyalty and discounts are a great way for small businesses to better connect with customers and increase revenue.
Create curated bundles to capture customers’ attention and upsell them on high-end items. Customer loyalty programs that offer points for purchases also help retain customers, which is a huge source of revenue for small businesses.
Related Read: Boost Sales With These 6 Smoke Shop Advertising Tips
Once you have your customers’ information, you can look at their purchase history to offer tailored promotions, like birthday discounts, free items, and more. While discounts might not seem like a great strategy for making more money, they help build positive relationships with customers — and that will pay off in the long run.
Whether you’re starting up a smoke shop or looking to expand, maximizing your profit margins is always a good idea. Remember, the best ways to boost your profitability are:
A POS system built for smoke shops makes it easier than ever to improve your profit margins. Cigars POS is built specifically for smoke shops and comes loaded with the analytics and reporting features you need to boost your revenue and improve the customer experience.
Want to learn how to maximize your smoke shop profit margins? Schedule a free demo today.