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Opening a B&M Tobacco Shop

This is a discussion on Opening a B&M Tobacco Shop within the General Cigar Discussion forums, part of the The Cigar Lounges at Puff category; It may sound crazy, but my son and I are considering opening a small (at first!) B&M tobacco shop in ...

  
  1. #1

    Young Fish


     

    Opening a B&M Tobacco Shop

    It may sound crazy, but my son and I are considering opening a small (at first!) B&M tobacco shop in a riverfront community in our area specializing in fine cigars and tobacco products. The town has a population of about 10K and is close (45 miles) from the StL metro area. Located along the Missouri river it is an upscale community having a lot of shops, restaurants and wineries. There is no competitive retailers within about a 40 mile radius.

    Does anyone in the group have any experience in a small retail operation, and can anyone recommend cigar wholesalers to contact? I have a fair amount of experience in retail... just not stogies.

    Many Thanks!

  2. #2

    Nee "Tashaz" Mante's Avatar


     

    Re: Opening a B&M Tobacco Shop

    Quote Originally Posted by mikesimsr View Post
    It may sound crazy, but my son and I are considering opening a small (at first!) B&M tobacco shop in a riverfront community in our area specializing in fine cigars and tobacco products. The town has a population of about 10K and is close (45 miles) from the StL metro area. Located along the Missouri river it is an upscale community having a lot of shops, restaurants and wineries. There is no competitive retailers within about a 40 mile radius.

    Does anyone in the group have any experience in a small retail operation, and can anyone recommend cigar wholesalers to contact? I have a fair amount of experience in retail... just not stogies.

    Many Thanks!
    First of all, if you decide to go ahead with this venture, Good luck to you & yours as I wish everyone in small business success.

    Sounds on simple terms like you have a good market but the population is way to small to support a B&M unless you have massive tourist traffic. That being said, if you have a good market of smokers in your area you may survive if you offer almost everything the B&M's 40 miles away do, at a competitive price point.

    Believe it or not, I and many others will happily drive the 40Miles to walk into a well stocked humidor if they are friendly & offer me service. You are also competing with the online market.

    Another way of supplementing your business is to offer high grade accompaniments like Coffee beans & Chocolate. Like I said, best of luck but these are purely my own thoughts as I have been weighing up a similar idea with a much larger population base.
    Refuses to remain the Droid they were all looking for.

  3. #3

    Puffer Fish with many spikes Jenady's Avatar


     

    Re: Opening a B&M Tobacco Shop

    Mike I assume you are talking about Washington. I will volunteer to be your first customer if you decide to take the plunge. I will even volunteer to help with the heavy lifting to get a place ready to go.

    I have yet to find a good B&M in the St. Louis area.
    "If I cannot smoke in heaven, then I shall not go."
    --Mark Twain

  4. #4

    Young Fish


     

    Re: Opening a B&M Tobacco Shop

    Quote Originally Posted by Jenady View Post
    Mike I assume you are talking about Washington. I will volunteer to be your first customer if you decide to take the plunge. I will even volunteer to help with the heavy lifting to get a place ready to go.

    I have yet to find a good B&M in the St. Louis area.
    Jim:

    Yup! It's Washington. I realize it is a small town but it has a lot of potential. On the riverfront there are many boutique shops that do a fair amount of business, locals and tourist. We are envisioning a small shop that would include a smoking lounge with the appropriate atmosphere... i.e hardwood floor, well-stocked bookshelves and magazines, rugs, fireplace, leather chairs... you get the idea. We are also considering offering some local wines and perhaps brandies as an accompaniment. Mu son likes the idea of a big screen TV to use in major sporting events, but I'm not sold on that idea yet. Of course we would offer fine pipe tobaccos and some upscale cigarettes. Oh yeah, we gotta have a cigar store Indian.

    We could do "cigar events" where we feature a specific brand and offer folks a chance to try 'em out. I kinda have an idea of something similar to a Tupperware party for guys (and gals so inclined) 'cept we could call it a "Pufferware" party.

    Lot's of possibilities, but we need to put pencil to paper and see if it's enconomically feasible.

    I would certainly appreciate anyone's input, negative or positive.

    Mike

  5. #5

    ghe
    ghe is offline
    Leading Puffer Fish


     

    Re: Opening a B&M Tobacco Shop

    I would strongly recommend you make your first step a friendly tobacco shop owner in your state to discuss the procedures for getting the necessary federal and state licensing to be a tobacco dealer. It can be an extremely cumbersome and time-consuming process. You also need to find out exactly what your locality does and does not allow with regard to sales of alcohol -- setbacks, with or without tobacco sales, zoning, etc. Dealing with cigar manufacturers is often no walk in the park, either, as you'll find if you talk to a number of shop owners. All in all, I think most cigar store owners would tell you that setting up the shop -- the TV, furniture, etc. -- is the simplest part.

  6. #6

    Incoming Opinion!!! Magnate's Avatar


     

    Re: Opening a B&M Tobacco Shop

    I also wish you the best of luck with your endeavors! I decided to do some simplified market analysis based on what little I know of your area (your post) and some stuff I found on the internet to support my research.

    According to Cancer.org (ACS :: Cigar Smoking) 4.8 billion cigars & cigarillos were consumed in the US in 2007.

    According to the census (Population Estimates), there were 301 million Americans at the time.

    Assuming your population base is statistically similar to the entire US, we're looking at an average consumption of 16 (15.94) cigars/cigarillos per person in your population. And a total of 717,608 cigars/cigarillos.

    Unfortunately, the statistic includes cigarillos... and swishers... and white owls... etc... but let's see what you'd have to do at 16 per person to make money. And while you don't have a real B&M in 40 miles, you do have gas stations competing for these 16 smokes per person in this statistic.

    Let's try some scenarios - even unrealistic ones.

    You sell 50% of the all cigars/cigarillos consumed at an average price of $5 per stick. Revenue = $1.8 million

    You sell 25% of the all cigars/cigarillos consumed at an average price of $5 per stick. Revenue = $900k

    You sell 25% of the all cigars/cigarillos consumed at an average price of $3 per stick. Revenue = $540k

    You sell 20% of the all cigars/cigarillos consumed at an average price of $2.5 per stick. Revenue = $360k*


    I think saying that you will sell 1 out of every 5 cigars/cigarillos in your area is an over-estimate. I also think saying the average per-stick price of $2.5 is high. Many people on this forum like to stick to the $2 - $3 range, which means they average $2.50... mix in a pile of cigarillos and backwoods at far less than $1 per stick, and your average really gets hit. I don't you'll have enough Opus sales to put a hug increase on that.

    So, let's look at a generous $360k in revenue. And it looks like your cigar tax is 10% of wholesale cost: Cigarette and Other Tobacco Product Tax Rates

    Well, if you have a 100% mark-up on your cigars, that means the invoice was $180k and that you'd pay 18k in tax for a total of $198k in inventory costs. Leaving you $162k to run the store.

    I have no idea what your commercial real estate prices are, but you certainly need a store-front and you want it to be nice, though small is ok. I'm guessing $1500 a month or $18k per year. Now we have $144k to run the store with...

    I assume you and your son can run the operate the business without an employee. I also assume you'd like (or more) to take home at least $3000 per month, or $36k per year. To do this, you'll pay out 72k in salaries, $3000 to Missouri income tax, $9400 in Income tax, and $11k in social security and medicare tax. So about $85000 in salary costs... now you have $59k left. That's using a very generous model... And here's some more bills!

    Health Insurance
    Property Insurance
    Liability Insurance
    Loan Interest (
    Tax filing fees
    Utilities
    Lost/damaged stock
    Office supplies
    etc, etc, etc...

    I know you'll also have some revenue from selling humidors and cutters and so on... but I think the estimates used were overly generous already.

    On top of that, we have to look at traffic. To make the $360k scenario *you need to sell 394 cigars/cigarillos per day and be open 365 days a year. Open 10 hours per day, you need to sell about 40 cigars an hour - that's 1 5-pack every 7.5 minutes for 10 hours straight for 365 days per year. If it takes you 2 minutes to ring up a sale, you have 5.5 minutes between each customer. I know you'll have 2 people working, but you also have to be open 70 hours per week, so you aren't both going to be working all the time. So, with that 5.5 minutes you can: help the customer decide, stock shelves, do the bookkeeping, do inventory, order more cigars, plan advertising campaigns, talk to your accountant or attorney on the phone, eat lunch, etc. etc. etc...

    This sounds like a TON of work for very little money all tied up with a bunch of risk in a volatile market.

    Thanks for helping me figure out that I don't want to do this... But good luck to you sir! I hope all this stuff was helpful. I'm a small business owner, and one of the businesses I run is a small business formation and consulting company (the other is risk management consulting, ie: insurance) - my work is usually more organized, but it's Sunday morning and I'm working for free LOL! Happy to help a BOTL every time. Shoot me a PM if you have questions you think I can help with.
    Last edited by Magnate; 06-20-2010 at 01:16 PM.
    This Space For Rent

  7. #7

    Don't Thread On Me asmartbull's Avatar


     

    Re: Opening a B&M Tobacco Shop

    Chris
    Nice work !!!!!!!

    I ran similar numbers when thinking of opening a shop
    in the Ocean City area of Maryland. I am still thinking about it,,,,,
    In my old life I used to do "Business Valuations" as one of the financial
    services I provided and the numbers can be depressing.
    Years ago I made the statement to a buddy in the business...

    "Opening a cigar shop in these days is like starting a
    typewriter company as the computer age was kicking in."
    An "oath" has no expiration date......

  8. #8

    Elder Puffer Fish Leader Evonnida's Avatar


     

    Re: Opening a B&M Tobacco Shop

    I'll be your 2nd customer! I would think a key would be to carry a wide variety of brands and maybe even samplers. Those are a good way to get "new" smokers into the hobby. A few of the B&M's around me have kind of a "stodgy" reputation and only carry the well established, older smokes. Just a thought though.

  9. #9

    Puffer Fish with some spikes saigon68's Avatar


     

    Sick Re: Opening a B&M Tobacco Shop

    A fellow here in Pearl River, New York opened a B&M with all the fixins': flat panel tv's, nice leather arm chairs & leather couches etc... He opened this past Spring & was closed down in May. Notice on his door stated that he had been closed for operating as a cigar lounge. The town apparently sent an undercover police officer into the store and the rest is history. How in God's name does one become a small business owner with this kind of oppressive government intrusion on everything? Sooner or later cigar/cigarette smokers will have a bounty on their heads. FWIW.
    Common sense is rarely common.

  10. #10

    Don't Thread On Me asmartbull's Avatar


     

    Re: Opening a B&M Tobacco Shop

    Quote Originally Posted by asmartbull View Post
    Chris
    Nice work !!!!!!!

    I ran similar numbers when thinking of opening a shop
    in the Ocean City area of Maryland. I am still thinking about it,,,,,
    In my old life I used to do "Business Valuations" as one of the financial
    services I provided and the numbers can be depressing.
    Years ago I made the statement to a buddy in the business...

    "Opening a cigar shop in these days is like starting a
    typewriter company as the computer age was kicking in."
    I went back and took a look at some notes I made in past valuations and
    my potential endeavors.

    1. If possible own the realestate, which must have potential to be operated as something else.

    2. Open air seating or access to outdoors,,,Can double or triple square footage...also many will drive further for that kind of environment

    3. If there isn't a business in the area like your,,why not. Get to know the folks at the local chamber of commerce. Usually the secretaries can tell you everything that has happenned in the area for the past 10 yrs

    4. Make others businesses in the area, satellites for you. A local shop
    keeps small hummis in several Mom and Pop grocery stores with his name on them. He takes care of them and gives them a % of what he makes.

    Hope this helps...
    An "oath" has no expiration date......

  11. #11

    The slope is steep SmoknTaz's Avatar


     

    Re: Opening a B&M Tobacco Shop

    Quote Originally Posted by mikesimsr View Post
    It may sound crazy, but my son and I are considering opening a small (at first!) B&M tobacco shop in a riverfront . . .
    Good luck to you and your son Mike.

    Quote Originally Posted by Magnate View Post
    I also wish you the best of luck with your endeavors! I decided to do some simplified market analysis . . .
    Very helpful Chris! Reps sent your way my friend.

  12. #12

    Puffer Fish with many spikes BTcigars's Avatar


     

    Re: Opening a B&M Tobacco Shop

    Quote Originally Posted by mikesimsr View Post
    Jim:

    Yup! It's Washington. I realize it is a small town but it has a lot of potential. On the riverfront there are many boutique shops that do a fair amount of business, locals and tourist. We are envisioning a small shop that would include a smoking lounge with the appropriate atmosphere... i.e hardwood floor, well-stocked bookshelves and magazines, rugs, fireplace, leather chairs... you get the idea. We are also considering offering some local wines and perhaps brandies as an accompaniment. Mu son likes the idea of a big screen TV to use in major sporting events, but I'm not sold on that idea yet. Of course we would offer fine pipe tobaccos and some upscale cigarettes. Oh yeah, we gotta have a cigar store Indian.

    We could do "cigar events" where we feature a specific brand and offer folks a chance to try 'em out. I kinda have an idea of something similar to a Tupperware party for guys (and gals so inclined) 'cept we could call it a "Pufferware" party.

    Lot's of possibilities, but we need to put pencil to paper and see if it's enconomically feasible.

    I would certainly appreciate anyone's input, negative or positive.

    Mike
    The TV is a excellent idea. At my B&M we were watching the NBA playoffs. The laker fans were in the lounge and the Celtics fans were in the front of the store. It was something to hear one room cheer while the other groaned and vice versa....good times!
    Be sure to check out my blog http://www.BTcigars.com

  13. #13

    Full grown Puffer Fish Wild 7EVEN's Avatar


     

    Re: Opening a B&M Tobacco Shop

    Quote Originally Posted by BTcigars View Post
    The TV is a excellent idea. At my B&M we were watching the NBA playoffs. The laker fans were in the lounge and the Celtics fans were in the front of the store. It was something to hear one room cheer while the other groaned and vice versa....good times!
    I agree, the tv is a great idea, at our local lounge for the superbowl, seating was filled up by noon. and a large part of the crowd were not regulars, or never been there before, so it definately a huge draw.

    Also, I like the idea of selling coffee and chocolate and wine. I think it would bring a larger customer base, and appeal to tourists and passersby.

    Good luck with your venture, and its good to see some people with business knowledge able to chip in some advice too.

    Maybe you could pm some of the retailers, and manufacturers in our meet the retailer section for a little help too?

  14. #14

    Puffer Fish with many spikes Jenady's Avatar


     

    Re: Opening a B&M Tobacco Shop

    Having suffered the B&M shortage in our area I would love to see two things. First, a decent assortment of cigars is crucial. Second, there needs to be a comfortable place to relax and smoke. One of our "local" B&M's has a large smoking room. I can not say much about it because I could not see across the room. I don't think they had any ventilation. I did not hang around.

    You are getting a lot of great feedback in this thread. Good luck.
    "If I cannot smoke in heaven, then I shall not go."
    --Mark Twain

  15. #15

    THE MAN WHO LOVES TWANG! TonyBrooklyn's Avatar


     

    Re: Opening a B&M Tobacco Shop

    Quote Originally Posted by mikesimsr View Post
    It may sound crazy, but my son and I are considering opening a small (at first!) B&M tobacco shop in a riverfront community in our area specializing in fine cigars and tobacco products. The town has a population of about 10K and is close (45 miles) from the StL metro area. Located along the Missouri river it is an upscale community having a lot of shops, restaurants and wineries. There is no competitive retailers within about a 40 mile radius.

    Does anyone in the group have any experience in a small retail operation, and can anyone recommend cigar wholesalers to contact? I have a fair amount of experience in retail... just not stogies.

    Many Thanks!

    Two of your biggest hurdles are the internet and tobacco taxes.
    As has already been said unless you have a large walk buy tourist market in this economic climate its going to be rough.
    I wish you luck.
    “When the power of love overcomes the love of power, the world will know peace.”
    Jimi Hendrix



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