House nearly paid off, advice in starting my own p/c shop?

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Guys/Gals:
In March or so, I will nearly have my house paid off. I am interested in possibly starting my own pipe/cigar shop (lounge?). Any tips? I am also looking for anyone that may have shut down a store/shop/lounge. I'll take the negative along with the positive.

WWW FLT
 
As the former owner of the Village Smoke Shop in Scottsdale, AZ from 1995 to 2005, my advice is: Strongly reconsider the smoke shop idea.

In the ten years I spent in the premium tobacco business, I learned one thing. BE THE LANDLORD. He was the only person who got paid every month. On time. All he had to do was go to his mailbox, pick up my rent check, then go to the bank and cash it. Not once in ten years did he lift a finger to help me run my business. I worked 6, sometimes 7 days a week, 12 to 16 hours a day for ten years. Sometimes I made money, sometimes I didn't. But he ALWAYS got paid every month. Lesson learned.

Since I closed the shop in '05, I started buying rental properties. I own three now, two in Arizona and one in Colorado. I'm always looking for more. I hired a property manager that charges 8%. A bargain considering he takes care of everything from screening tenants to collecting rent. Now, I just go to my mailbox, pick up the rent check and take it to the bank. Simple.

Don't get me wrong, I thoroughly enjoyed the retail tobacco business, including the ups and downs. I had great customers and am still friends with most of them. It was a great decade long run. But times have changed drastically since then.

The looming FDA regulations will cast a dark shadow over the entire industry. From walk-in humidor bans, tobacco sampling bans, higher prices, less selection to basically telling you how to run your business. How you can or can't advertise to regulating window displays and signage. Not to mention the tobacco tax paperwork. Not good. The business will just not be enjoyable anymore.

Do your homework, research the coming regulations, and decide for yourself. Be logical and dispassionate.

But my advice still stands - Be The Landlord.

Good luck on your decision.

CACooper
 
Thank you for your honest input. I have a few years before I jump at something of the sort. What was the biggest job related hang up or issue that you ran into during your foray in the retail biz? Would a venue type outfit (like a cigar club that is also available for rent) a better fit than a standard retail store? (I also am flirting with the property idea due to one of my coworkers parlayed six figures into a larger amount).
 
I worked in retail for seven years. I was in a bicycle shop and a book store when I was in grad school and for a few years afterwards.

My observation is that the consumer is all about price. Our margins were razor thin, and to carry enough inventory to make it worth a visit to the shop, we could not really compete on anything but service. People would come to the shop to try on helmets and then mail order one to save a few bucks.

When we sold a new bike, it had been properly set up and not just thrown together. This took time and it took mechanics who knew what they were doing. There was another shop in town that had an adjustable wrench and a screwdriver as their only tools. They could beat us on price with a new bike, but the gears would not index correctly and the brakes would be out of adjustment. The wheels would be out of true. People would buy wheels from Nashbar and then be bittter with us because we charged $10 to true them.

The owner sold the place with all the Park tools and the Campy NOS and frame stuff. He went into social work.

I claim that pipe shops, bicycle shops and book stores are really hobby industries these days. The counsel about being the landlord is wise.
 
About customers being all about price...I found that cigar customers in particular, are the least loyal. Pipe guys are a little better. The cigar customer might have been a "loyal" customer for 5-10 years, then a competitor opens a mile away offering deep discounts and "freebies" and guess what, no more "loyal" customer. They'll leave you instantly to save fifty cents or less a stick.

With the growth of the internet throughout the '90's, my shop eventually became a "tasting" store. Customers would buy a few of these and a few of that, decide what they liked best and head home to click and buy from J.R Cigars, etc. Usually for much less because the internet guys aren't required by law to collect state tobacco taxes or sales tax. Very unfair competition.

I spent a ton of cash to provide a nice, comfortable store with a large walk-in humidor featuring over 10,000 cigars, over 400 pipes, 35+ bulk tobaccos, tons of tins and a spacious smoking lounge to enjoy your purchases. Basically, all the "customer service" goodies you don't get on the internet. All that didn't matter one bit. Fifty cents is fifty cents.

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The most maddening part is when a customer buys a few sticks from your store and later comes in and sits in your lounge to smoke his J.R Ultimates or La Fincas, which are only available online. His attitude is that he feels he bought his way in to the lounge by buying a stick or two. Yep, he is technically a customer, so you can't kick him out. But there were times I wanted to, believe me.

Suggestion: Buy a small (1000 +/- sq. ft.) industrial space and set it up as a man cave/tobacconist shop for yourself and friends. Smoke odors usually aren't a problem to other tenants in industrial space. You can build your "tobacco shop" the way you want. Of course you don't sell anything, so no business license, tobacco tax license, sales tax license, Weights and Measures license, alarm permit, federal tax I.D. number or 1 million dollar slip & fall insurance w/plate glass coverage, is required. Just stock lots of tobacco, cigars, and libations for anyone's use. Have a blending bar w/ scale, small cigar humidor, fridge and liquor cabinet. Also, install a big screen TV for football games, etc. It's the best of both worlds. You can enjoy smoking and drinking with friends in the ambiance of a tobacconist shop without all the hassles, worries, regulations and headaches involved in retailing.

After an exhausting day picking up your rental property checks from the mailbox and going to the bank, you can then retire to the "tobacco shop" for a nice relaxing smoke. No worries.  :D

As always...
BE THE LANDLORD.

CACooper
 
CA Cooper, I'm curious, what would proper etiquette for a customer be from a shop owners point of view be? How much allows one to sit freely in the lounge  and relax without being simply tolerated?

I been into several B&Ms and have never found the lounge aspect to particularly inviting. Even if I purchase something (say, a couple tins and cleaners) I've always felt like I'm just being tolerated for my short stay. Maybe because it's mostly the cigar crowd, and I'm a pipe guy. Tell me what everyone else seems to intuit but I can't seem to.
 
I agree the lounge is more cigar oriented. I did my best to cultivate a pipe culture in my store and make everyone feel welcome in the lounge. But cigar sales are the bread and butter of the business, so the lounge area is cigar dominate and a necessary evil. And it brings some problems.

As far as lounge etiquette, thankfully most customers understand the policy. In order to use the lounge area, BUY SOMETHING. But a few push the limits and bring in their own smokes. I even had one regular customer come into the lounge and hand out cigars to several customers that he bought from J.R. online! Then he gives me one and recommends that I stock them. He was completely oblivious to the notion that handing out a competitor's product in my store was extremely bad form. Amazing.

He obviously felt that my lounge was an extension of his living room and not a business. He also told me that because he occasionally purchased high-end pipes, he felt he had "bought in" to lounge privileges. I informed him of the policy of supporting the store, he complied for awhile, then eventually stopped coming in. Customers like him I didn't need and his absence was welcome.

This kind of attitude has prompted some shops to post signage with "lounge rules" to cut down on the freeloaders. The problem is worse now because of cheap cigars on the internet and fewer places to smoke. And free WiFi.

Ask Starbucks about freeloaders. Big problem.

CACooper
 
Thanks for you insights! It's a shame I never had the chance to visit your shop. I am originally from AZ, and usually hit the local establishments when I'm home for visits.
 
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