Across the country, small storefronts shuttered during the downturn are reopening. The brand new occupants aren't coffee shops or dry cleaners: They're small stores catering to the fastgrowing electronic cigarette industry. Called "vape stores," because e-cigarettes dispense vaporized nicotine as opposed to tobacco smoking, their products supply "a wonderful business for us with excellent margins," says Sam Bahhur, who in June expanded his 10-employee U Smoke Shop in Miami, including another location in Coral Gables dedicated completely to e-cigs.
While he can mark up conventional cigarettes by 10 percent to 20 percent, the figures soar to 200 percent to 400 percent on e-cigarette dispensers, nicotine cartridges, and accessories, he says. Bahhur expects to bring in $1.3 million in earnings this year from the two shops. Vaping, he claims, is "costeffective for our customers."
There are more than 3,500 independent vape shops around the country, based on Aaron LoCascio, chief executive officer of Vape World, a provider located in Boca Raton, Fla. E-cigs' production and sale are not controlled or taxed generally in most states, making them much more rewarding than tobacco products. Even though a 2009 U.S. Food and Drug Administration prohibition on sales of the devices was overturned by a federal court in 2010, business groups the Smoke-Free Alternatives Trade Association and also the Tobacco Vapor Electronic Cigarette Association expect the FDA to propose regulations in the devices since this month. These regulations could cause taxes on sales and production.
BLOG: The Party of Business, How Sausage Is Made, E-Cigarette Shops: Oct. 4
Some regulations, including a ban on Internet sales, could help brick - and - mortars. The TVECA estimates that physical stores will sell over $ 1 billion in this year vaping equipment and products. If online sales - - estimated at about $ 500 million in 2013 - - go offline next year, a lot of those independent retailers could gain, the team states.
Most vape retailers are independent ventures assembled by owners of conventional tobacco stores and little groups of investors, such as five business partners and selfemployed advertising consultant James Ting, most of whom are smokers. To date, they've come up with $90,000 and strategy to open Ja'Vape in about a week in El Monte, Calif., near L A .
A neighboring town "already has 10 or 11 vape stores which have popped up within the last three months," Ting states. "That's how crazy this market is now--the demand is really high." He and his fellow traders have refitted a 1,500-square-foot movie shop that went out-of business a few years back. No special licenses or permits were necessary for the store, and the city had no concerns about it, Ting states. The companions are waiting on inventory and shop furnishings to get there before they are able to open Ja'Vape.
STORY: The Secrets of Bezos: How Amazon Became the Everything Store
E-cigarettes stay contentious, as well as their health effects are still being studied. Proponents tout them as being a safer, cleaner alternative than inhaling tobacco smoke's risky compounds and an effective strategy to stop cigarettes. Because they supply nicotine and mimic the physical action of smoking, e-cigs are emotionally fulfilling in a way that nicotine gum or patches aren't, they say.
Opponents worry that because e-cig cartridges are unregulated, there's no quality-control on what goes into the mix of nicotine, propylene glycol, and flavorings which are included in them. There are also worries that e-cigs' sweet flavors, such as cherry and bubble gum, may get adolescents who wouldn't have begun smoking hooked on vaping, and also that these new products may make the application of nicotine glamorous in a sense it hasn't been for many years.
The large tobacco companies have latched on to the disruptive technology recently, getting proven e-cigarette brands or starting their own. Reynolds American (RAI) estimates electronic products account for approximately one percent of U.S. cigarette sales and jobs e-cig revenue will reach $3 billion within five years. Other predictions show e-cig sales reaching over $10 billion by 2017.
Collin Spencer is hoping to get a slice of this marketplace. His two OG Smoke Shops in Los-angeles County will make combined revenues of $750,000 this season; he'd like to top $1 million in 2014 and predicts a quarter of that'll come from vaping customers. He says about half of these customers smoke traditional cigarettes and are looking for ways to quit smoking or to at least cut-back. The rest are only curious or have smoked hookahs as a social encounter and "need a number of the same effects in a mobile manner," Spencer says.
Vaping attracts lots of young people, he says, although he's banned customers under 18 from his stores, which utilize seven. "There is actually a non-nicotine option, so if individuals don't smoke, there's a flavored propylene vapor they may use," he says.
