Electronic cigarettes and related products reached nearly $4 billion in sales in the United States alone, growing about 24% in 2018. It’s become such a rage over the past decade that Oxford Dictionaries chose it as their Word of the Year in 2014. And with most experts expecting the growth to only continue, it’s no wonder why so many entrepreneurs have eagerly moved into this retail niche. But opening a vape shop isn’t necessarily the easiest business endeavor. It’s an ultra-competitive field and is infamous for being in a highly regulated and volatile retail space. So if you’re thinking about the steps on how to open a vape shop, consider these factors during the process.
- Pick a Location for Your Vape Store
- Analyze the Costs of Opening
- Finance the Startup Costs for Your Vape Shop
- Get Insurance
- Educate Yourself on Tobacco Laws and the FDA
- Find the Best Vape Shop Point of Sale and Credit Card Processing
- Choose Your Smoke Shop Products
- Set Up Your Website and Social Media
1. Pick a Location for Your Vape Store
Like nearly every business, brick and mortar vape shops should be in a prime location. It’s important that they’re visible to passersby – either vehicles or foot traffic – and that they can accommodate a quick stop. Corner spots that can be accessed from different directions are almost always ideal, though harder to come by.
After visibility, consider the area for possible signage and parking. You’ll need more space than it might seem, but it’s important that your vape store provides your customers with a convenient experience. You need to set your store apart from the rest of the competition in your area.
Knowing your town or city is also an important intangible factor in the location equation. You know the areas of town that you like. And you know the people who also like that part of town. Think about where you’d want to shop and look for a similar space.
Finally, think about the size that you’d like. Generally, err on the side of being too small, especially if it’s your first vape shop. Retail spaces that are too big are hard to organize and decorate, and expensive to operate.
2. Analyze the Costs of Opening
The initial investment for opening a vape a store varies widely. There are a lot of factors to consider here:
Real estate – Are you buying the lot and building or renting? Most rent, but it might make more sense to buy the space if it’s within your budget
Design – How much time and energy will you put into the design of the exterior and interior? Most vape shops don’t invest too much into the overall store design, but it can get expensive.
Licenses – The proper licenses and permits from federal, state, and local governments are absolutely essential to have prior to opening. They will also cost money. Figure out how much they are in your city.
Insurance – Any business needs insurance. Vape shop insurance is more expensive than most, but you need to have it.
Inventory – Filling your shelves before opening might be the most expensive part of your opening budget. Glass, pens, parts, liquids, batteries etc. are not cheap. Vape shops are known for having high-profit margins, but that doesn’t mean that the initial investment is cheap.
Training and Labor Costs – How many people will you hire? How many staff will you need to pay prior to opening?
Overall, estimates for startup costs at across the country are about $50,000. For most stores, this should provide some padding for the first few months as well.
3. Finance the Startup Costs for Your Vape Shop
The first and most important step of financing any project is to put together a detailed business plan. And with so many entrepreneurs and business-minded people entering the market, it’s important that you keep up with other vape store owners and be prepared.
It’s not difficult to put together a business plan – most of the information is readily found online in guides like this one – but in the vape industry you must focus heavily on the details of local regulation and licensing. Make sure you’ve done your research carefully and can answer any questions on relevant laws.
Of course, overall, the business plan covers the costs discussed discussed above. Just be sure to record this information in a clear and concise way in the business plan. The details of plan vary depending on how you’re seeking your financing. Are you buying a franchise (check out the pros and cons of franchises while you’re at it)? Buying a single store from an individual seller? Opening your own spot? Is it a sole proprietorship or a partnership? Franchising will cost your more up front, but lower your risk down the road.
Also, do you have investors or will you be funding this entirely through bank loans for small businesses? All of this should be readily apparent in your vape shop business plan.
4. Get Insurance
Be prepared for high insurance rates for your vape shop. Smoke shops typically have a lot of capital tied up in product and equipment. These will drive up the cost.
And because many of the products are sold with possible health risks, there is more opportunity for lawsuits down the road. Though this rarely reflects the quality of ownership, it’s a part of the industry, a fact that is recognized by insurance companies.
There are various insurers that specialize in smoke shops and other higher risk business ventures. Don’t expect the costs to be astronomical, but typically they will be able 15-20% higher than the rates for an average retailer.
5. Educate Yourself on Tobacco Laws and the FDA
Pay attention to all federal, state, and city laws and regulations. The laws are changing all the time, especially with the recent introduction of cannabis to the U.S. market.
First, learn the local tax on vape and smoke products. Local taxes vary widely because some communities are still set on keeping vape shops out of the neighborhood. Others have fairer taxes but location regulation. For instance, many towns have laws against opening a vape store near a school or public park. Make sure that whatever the local regulations are, that they don’t put you at a complete disadvantage to eCommerce vape retailers.
Federal laws are more straightforward and apply to all U.S. smoke shops. Vape products are still considered tobacco so cigarette laws apply the same, even if your store doesn’t sell traditional cigarettes.
- Check photo ID of anyone under the age of 27.
- Customers have to 18+ to make a purchase
- No products can be sold from a vending machine unless the machine is located in an 18+ facility.
- Cannot offer free samples.
- Must have proper health warnings on the label of every product.
- Cannot display advertisements on any e-cig products.
Failure to comply with these laws will result in significant fines. The amount of the fines increase exponentially with each offense, so take these regulations seriously.
For more detailed information on the regulations unique to each type of product (cigarettes, e-cigarettes, gels, liquids, cigars, chewing tobacco, etc.) check out the FDA regulatory information for retailers.
See related: Understanding California’s Electronic Cigarette Excise Tax (CECET)
6. Find the Best Vape Shop Point of Sale and Credit Card Processing
Your vape shop POS system is an important decision to make. A modern point of sale can do much more than simply process sales.
With specific regard to smoke shops, your point of sale solution must have exceptional inventory management. The laws discussed above require meticulous inventory tracking. So you need a system that can easily automate and support that.
Additional features to look out for in your smoke shop POS include your customer relationship management tools, such as a loyalty program, email marketing, and electronic receipts. Many vape retailers also look for eCommerce platform integrations, accounting software, sales tax tracking, and payroll assistance.
For merchant services, or, credit card processing, choose a point of sale system that offers you a wide array of solutions. Be careful not to get locked into costly, long-term contracts.
For more information on what to look for in your smoke shop POS system, take a look at our POS System Buyer’s Guide.
7. Choose Your Smoke Shop Products
The most important first step is to choose a great supplier. Consult with other vape shop owners to get an idea of which suppliers are the most reliable.
- Once you have your vendors picked out, focus on wholesale discounts and bulk ordering. Take advantage of these discounts as much as possible, especially when you’re getting started.
- Make sure to carry an array of products that will attract both seasoned e-cig smokers as well as newbies. Carry starter kits for vaping and a wide variety of flavors and brands.
- Consider which, if any, traditional tobacco products you’ll carry. Fewer people are smoking cigarettes, but you may want to carry rolling tobacco, pipe tobacco, and cigars.
- Choose products that will clearly compete with the price of cigarettes. In many states, cigarettes are over $10/pack. Make the health and financial benefits obvious to your shoppers.
- Make sure you have a great variety of accessories. These items serve as easy impulse purchases and can be paired with more expensive products to use for promotions or rewards programs.
8. Set Up Your Website and Social Media
Even if you don’t sell your product online, maintaining a basic, curated web presence is vital.
- Create profiles on all major social media sites and any industry-specific social platforms. Make sure your tone and branding are consistent between each.
- Design a basic website. If you’re selling products in a webstore, make sure you are integrated with the eCommerce platform of your choice. Keep the design modern and clean. Creating an attractive website is easier than ever.
- Research your search engine optimization (SEO) to drive more traffic to your online or brick and mortar store. Write a blog and update your site often.
- Consider any paid advertising on Facebook, Instagram, Google, etc. that you’d want to budget for and set up campaigns.
- Register your business with Google so that it shows up in location-based searches and makes your hours of operations readily apparent. Do the same with major review sites, such as Yelp.
How to Open a Vape Shop with KORONA POS
Sign up for a free demo and access to KORONA’s vape shop POS software. See for yourself how KORONA is built with features designed just for smoke shops. From inventory management to incredibly fast transaction speeds, we’re here to make your vape shop business better. Take a look at the list below for more guides on starting small businesses and click the button to learn more!