Cigar shipments are up and some in the industry are hinting at a second Cigar Boom following the original boom in the 1990s. The U.S. economy, despite a global pandemic, has been in a decades-long bull market creating unprecedented wealth for many. Borrowed money is cheap and easy relative to historical norms. More Americans are working remotely, giving them greater schedule flexibility. Together, you have the perfect recipe for a lot of very green, wannabe new cigar shop owners to enter the market. If this sounds like you, then there are a few things you must know to reap rewards and create your own cigar shop success story. Here are six basic business fundamentals you need to know to stay smokin’ happy and in business.
Who Opens New Independent Cigar Shop?
The owner of a typical new, independent cigar store* is someone with a mid-to-high income full-time job that loves cigars and thinks it would be fun to own a place. Obviously, these operators want the store to be financially viable and don’t overtly go into it thinking about it as a hobby, but the reason they’re in the cigar business is because they want to be in the cigar business. Income from the cigar store is not typically what pays the family’s monthly expenses. Variants on this include several individuals, typically friends, partnering on a store or a recently retired mid-to-high income individual that opens a store as a retirement business. A commonality here is that while they love cigars, have spent a lot of time in humidors, and (may) have some business experience outside of cigars; most of them have never really been in the cigar business before.
Find a Cigar Shop Mentor
“Mentor” has become a buzzword or cliché over the last decade or so but find someone or a small group of individuals that have successfully run retail cigar stores/bars/lounges and will share with you some of the marketing and operational keys to success. This person may or may not be in your market and may or may not be in a competitive situation with you. Focus on individuals that have a track record of success, have run similar scale operations (e.g., transferrable lessons), and similar backgrounds (e.g., outside work demands, family demands, shared values).
This isn’t a formal “mentoring relationship” like you read about in big corporate America. Your mentors may not even know you view them as mentors, per se. You don’t run an ad or post on LinkedIn that you’re looking for a cigar mentor. Good mentoring relationships develop organically because the parties genuinely like each other. Mutual cigar friends might be very helpful in making introductions. Spending some time at national or regional events is a great way to identify potential mentors.
Keep Regular Shop Hours
Some of you will think this is obvious, and it doesn’t need mentioned. Yet, for too many cigar shop operators, not opening the doors happens too often. Anyone who has regularly visited different cigar shops will tell you they are no longer shocked when they arrive at a locked door. You can’t sell anything if your doors are closed. Nothing frustrates regulars and potential new customers alike more than arriving to find a closed store. The potential new customers won’t give you a second chance.
Despite our social media- and Yelp-driven world of round-the-clock feedback, most potential customers won’t admit you’ve lost out. You never hear about the sales you missed; you can only guess. Not only do you lose the direct sales you could have made that day, but the value of a long-term customer. Obviously, genuine emergencies rarely occur, but it shouldn’t be the norm that the store doesn’t open on time. The most likely reason for the store not opening is a staff call out or no show.
As a side note on your hours of operation, while you don’t technically own the posted hours for your store on Google, Facebook, and other online websites, your customers rely on them. You can always blame Zuckerberg, but listing the wrong hours costs you money. Task someone with checking listed hours on Facebook and Google at least weekly and correcting any mistakes.
Hire Cigar Shop Staff
As the new owner of a shiny new cigar store, you may think there’s nothing you’ll love more than spending much of the week in the store. Even if you’re used to spending over 20 hours per week in the lounge as a patron, everything changes once you step behind the counter. As a patron, you can get up and leave any minute. If you’re working, you’re there. Unless you decide you’d rather be somewhere else and you to close the doors, which isn’t a good idea either (see “Keep Regular Hours” above).
You’re a high-income earner in your day job. That’s how you got the money to buy the cigar shop! Your time is more valuable than what the prevailing wage is for most of the cigar shop jobs. So, hire staff where it makes economic sense, which is most of the time. You should know how to perform all the roles and be a substitute, but for your quality of life, don’t make yourself live behind the counter. If the only way your budget works continuously is with very low labor costs because your staff primarily includes you, your partners, or family members working unpaid, then you don’t have a business. Instead, you have a hobby. Hope you’re enjoying yourself!
Keep Cigar Shop Humidors Stocked
You’ll hear all kinds of excuses for a light humidor, most notably “It’s not our fault! Manufacturer is out of stock!” In reality, that’s often a partial truth. It’s not unusual for a couple of items on back-order. However, if most are out of stock in the store, it’s because they weren’t reordered. Out of stocks directly cause lost sales in humidor. They also send a bad vibe to your customer base. It’s a message suggesting you don’t care or that you won’t be here long. A light humidor is often a precursor to a store closing. According to A.T. Kearney, out of stock levels are a critical item for nearly all retailers.
Focus on Cigar Shop Location
You’ve heard the mantra, “location, location, location” all your life. So, there’s no need to beat it to death. You get the importance of location on the success of any brick and mortar retail establishment. Yet, there are a couple of things to consider. Be cognizant of any current or potential future legislation risk affecting tobacco or alcohol sales. Second, be wary of a location that’s too good to be true. These are often home to multiple successively failed businesses. Don’t let your ego get in the way. Remember, many other operators that came before you failed in that space. Some locations just are not good for retail.
Know Your Numbers – Invest in a Point-of-Sale System
Many small retailers will think they can initially get away without a point-of-sale system and they probably can on the productivity side. They think if sales volume is slow enough, then they don’t need the operational efficiencies generated by a POS system. Unfortunately, this initial thinking drags on. The loss you experience in going without a POS system is not knowing what’s going on in your business. Your inventory management and profitability at the unit level reflect that loss. The data is the difference between guessing and knowing.
*Author’s note: This description of a “typical” store and owner is an archetype. It represents insight from interviews with countless cigar shop owners. Obviously, all owners will not fit this description in background or mindset. It also assumes a small cigar shop composed of usually 1-5 employees. That includes the store owner and employees.
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