Thinking of starting up an online store

[cristos]

Hello all,
Cristos here. I've been lurking around the forums here and at various other places for a while now, but this is my first official post on the pipes magazine forums. I'm posting here to ask for advice. I don't know if this line of questioning is welcome in the forums, so if it's not then let me know and I'll take it down immediately. I'm a single guy in my mid 20's and for a long time now, I've been kicking around the idea of starting up my own business. I've looked into various businesses such as coffee shops, wine bars, etc., but my real passion is for pipes, cigars and tobacco. Now, I know I'm not the only one who visits forums like this who has daydreamed of owning his/her own B&M, and as anyone who has done a little serious research knows, starting a B&M from scratch is a bit of a pipe dream (no pun intended). However, I've read that internet business is on the rise and now is a great time to get into the online business.
I'm doing my best to come at this idea from all angles and gather as much research as possible, and I figured the best place to do that was to ask my fellow tobacco enthusiast what their thoughts on the idea are. I'm not naive enough to think that I will get rich by doing this, nor do I want to. I would be happy enough to be able to earn a decent salary working for myself in a business that I'm passionate about. Can anyone give advice? Any business pros out there who can give me some guidance? I'm open to any constructive criticism of course, but please don't just say something like, 'It's a bad idea.'. Please provide a reason.
Thanks in advance for any responses! I look forward to meeting new people on here!
Cristos

 

[anglesey]

Unless you were thinking of opening a shop that also catered to the cannabis market, or you were in a particularly high interest area, such as notting hill etc, I can't see it being that profitable. My two local tobacconists where I grew up have now become smoke.co.uk and smoke-king.co.uk, while holding brick and mortar premises and catering towards the cannabis market.
I think you could slap a tobacconist on the end of another business, for example, you mentioned wine sales. Lots of good wine retailers I know sell cigars and such on the side, I can't see why pipe tobacco should attract a drastically different market. Of course this is coming as someone who knows the british market, I can't speak if you're a foreigner particularly.

 

[sallow]

cristos - I would love to see another tobacco store, competition is good for the consumer. I also think more people should buy tobacco.
However, I think you would have to do a ton of research to find out what your startup costs would be and how you would set yourself apart from the other online retailers, as there are some very good ones, our site sponsors for example.
Another option would be to call an online retailer and ask for a job. Then you could find out how the business is run and if you have a talent for it.

 

[onepyrotec]

Cristos, I sold tobacco for years online. Online buyers want the cheapest price they can get, that is why they shop online. You would be entering a market that is saturated by huge volume e-stores with no established customer base for yourself. If you have a day job, don't quit it until you can get an average monthly profit higher than what you are making now. And then, make it pay for at least 12 months straight before you would even think about leaving a perfectly fine paying job. You will have to put huge amounts of cash out of pocket and wait until someone happens to find your site and want to buy from you, a total stranger, instead of their long time e-tailers they use now. THEN you will have a ton of monthly reports to file and taxes to pay to stay legal. It can be done, I was making pretty good money when I quit, but it didn't come over night and I never quit my day job.

 

[cristos]

Wow, you guys are quick on the replies lol! Onepyrotech, I was thinking that, if I did move forward with this, it would only be a part time gig. I have a part time job right now that pays decent for what it is, but I need a supplemental source of income. My best friend is a graphic designer who has offered to design and lay out the website free of charge, so at least part of the startup cost has been cut already. Sallow, the wine and cigar/pipe bar is definitely something I have entertained. However, I'm afraid that I wouldn't attract the kind of customer that I would want to deal with. In other words, I'm afraid that it would either 1.) become just another bar and have to deal with drunks all the time, or 2.) be such a niche bar that sales would plummet and the bar would go belly up.
Ideally, I would like something like a coffee bar where you could come in, get a high quality cup of coffee and have a smoke inside. It's still legal to smoke in bars and restaurants here in my town. I just think that the start up cost and overhead would be much cheaper if I worked online and started out in my garage and just see where things went.

 

[Perique]

There comes a time in every enthusiast's life where he ponders getting into the business side of things. My advice is don't. A few reasons:
1. You turn a hobby into a job. This has been the downfall of many an enthusiast's happiness.
2. Specific to tobacco, you're entering a highly regulated business. Lots of record keeping, lots of forms, lots of tax collection.
3. See onepyro's post above regarding e-tailing.

 

[gray4lines]

Just some ideas.
I think you have the wrong idea to not have a physical location/bar/whatever supplemented by an online retail site. As mentioned above, a pure retail site is getting into price-wars big time, and if you don't already have the customer base, warehouse, scale of operations... you're sunk. Not to mention inventory in the $100's of thousands.
So, if you can't go low cost, go differentiated.
You need a unique product, great service... anything that sets you apart and will demand a higher price (higher than a low cost model). One model that has worked (a local cigar guy i know) does his own blends...good blends, not "Oh this is our B&M house blend" and it's crap... He started out selling them online, and then located a store in his hometown (Now actually may be closed), along with another in FL (still open) where some operations were. He is majorly into the blending and production of cigars though, so this would be hard unless you can get into this side of the business. Look up Jameson cigars.
So, try and think of something which you can model a business around that you can possibly start online and supplement with a physical location (or the other way around) that others can't do

 

[cristos]

Good advice guys! I love hearing all these different opinions and ideas, so keep 'em coming.
What about doing something on ebay? Is there still a profit to be made by selling through them? I know I get on there, and so do most of you probably, to check out what's available. Maybe I'm wrong but most people that sell on there seem to be selling refurbished estate pipes. I wouldn't know the first thing about selling through an auction site for profit. Anyone know if it's something I should look into?

 

[woodsroad]

Cristos,
Do you have any retail experience? Any experience running a freestanding business and what that entails? Liability insurance, sales tax, investment in inventory, taxes? There is no free lunch. I have been self-employed on and off for over 30 years, and continually since 2006. I now run a sole-proprietorship. I have looked in to running a government-regulated business (either firearms or tobacco) and came to the conclusion that you need to be an exceptional businessman FIRST, a knowledgeable aficionado...seventeenth or so. And if you really want to ever be comfortably profitable, you will also need to be an employer. THAT my friend, is a #10 sized can-o-worms.
Don't be discouraged. I'm just talking reality here. Lots of folks succeed fantastically in starting and running their own business, But the greater majority fail within the first year, because they are not prepared. Get prepared, work in a B&M for a year ot more. Maybe get some more schooling, maybe find a really good mentor, preferably both (and more)then re-evaluate.
And don't forget, when you are out-selling P&C, that I gave you this incredible, insightful, life-changing, motivational sage advice. Send me a tin or two every now and then!
PS: Where are you located?

 

[cristos]

Woodsroad, pretty much my whole adult working life has been in retail of one form or another. I haven't had that many jobs but I guess that attests to my ability to hold a job for long periods of time. I have never experienced the stresses and ins and outs of running a business...I've always been on the associate level. Having said that, I feel like my experience with everything from department management to cash office work should count for something. It certainly is a lot to absorb and a lot to mull over.
And to answer your second question, I'm on the Gulf Coast. Currently residing in Gulfport, MS. There really isn't any market saturation around here B&M wise. We have one shop in the local Mall and another that is exclusively a Cigar shop/lounge that happens to carry Davidoff and Drew Estate pipe tobacco. I can see benefits and flaws in both shops. The cigar lounge has a very upscale feel to it, and keeps a pretty steady flow of customers, offers memberships to its club with an exclusive lounge separate from the shop itself, etc. The drawback to them is, obviously, that they don't cater to pipe smokers saleswise.
The other B&M that's in the mall is a very small operation that caters equally to both pipe smokers and cigar smokers. Problems that I see with them is that they have a very small selection of pipes, their humidor seems to be over humidified (I stepped in there today and it was hard to breathe), they offer only blended tobacco (some they blend there in house and others are popular blends on the market that they are renaming i.e. Lane's 1Q=IQ 140, etc.). No tins. I know this is not the case, but it seems like I am the only one that darkens their door to check out their pipes and sniff their tobacco jars. I really don't see how they are still open. Most that come in there are workers in the mall that duck in for a cigarette and a cup of coffee so they don't have to step outside. I think that a well built, open floor, well stocked, clean B&M MIGHT have a chance. I'm just afraid that there just isn't enough of a market down here to sell to.
That's why I was playing around with the idea of combining the coffee shop with the B&M. A quality coffee bar would do well down here. Starbucks has the monopoly in that business. And if I can somehow combine the two, I would have the ONLY shop in miles where patrons could smoke indoors.

 

[gray4lines]

On a side note. I totally wish there was a cigar/coffee joint here... Unfortunately, smoking indoors where other food or drinks are sold is complicated. Something like 80% of sales have to be from tobacco...
That's a plus not to have those laws to deal with. The trouble is, no one else does either and you're wide open for competition. What if the upscale B&M starts selling coffee? You gotta be able to stomp em on either the tobacco or coffee (or both).
You're wise to be skeptical of the market. Even though 2 stores doesn't seem like a lot... it's more than lots of towns have, and it may be enough... If you are serious about a coffee type thing, look into marketing data. Get the demographics and figure out what the area lacks.

 

[cristos]

The way I understand it, business owners in the Gulfport city limits have the freedom to allow patrons the option of smoking. If I were to go an hour north to, say, Hattiesburg (the next decent sized town/small city going north), the combined coffee/B&M wouldn't be an option because all smoking indoors is banned regardless of the establishment. That being said, there is a greater potential for market up there because there is no B&M at all. And Hattiesburg is a decent sized place. New Orleans is also an option I have looked at. As far as legal leniency goes, you would be hard pressed to find a city that is as loose and free as they are. No smoking in restaurants and government buildings, but anything else goes. The problem is, of course, there are already a few well established B&M's in the Big Easy...alas, frustrations abound. I can see why so many in the hobby just look at this idea as a daydream. It's enough to make you go grey early.

 

[woodsroad]

Be vewwy, vewwy careful starting a business that has a good chance of being legislated out of business.

 

[deanp]

be an exceptional businessman FIRST, a knowledgeable aficionado...seventeenth or so.

This.

 

[gray4lines]

Woodsroad has a point... Overall, it's a tough industry, and it will not get any easier thanks to gov't legislation. I am planning on working for a while and then opening a B&M later as more of a hobby and not a livelihood. I hope that's still a possibility in 20-30 years!!

 

[sfsteves]

A cursory Google search shows that the competition for your dream B&M in Gulfport is a bit stronger than you have said, though it may be that you don't realize it ...
You should carefully consider what woodsroad and onepyrotec have said ... particularly as regards working in the business for a period of time first ... you've got a part-time job now, get another ... The Cigar Shop would be my first thought, based on what a glance at the Internet shows ... consider what Henryk's is doing ... they've got quite a bit more than cigars and pipe tobacco going on there, probably for a good reason ...
Right now, you've got a dream, and that's great ... first step in the direction of that dream is to learn what you're talking about ... that means working in that biz for someone else ... again, I urge you to re-read what woodsroad and onepyrotec have said ... I couldn't possibly give you better advise than they have done ...

 

[bigvan]

I would think to be successful in an opportunity like this, one would need experience owning a business, running a business, a thorough understanding of laws as they pertain to selling tobacco, and finally a DEEP product knowledge of both tobacco and coffee.
Oh yeah, and money. It takes lots and lots of money to start a business.
If you're in your mid twenties and have all (or even most) of all that, I say go get 'em.
But then again, do you know who Sykes Wilford is?

 

[zekest]

Oh boy...

 

[gray4lines]

But then again, do you know who Sykes Wilford is?

Hell yeah. He certainly started young and had a fantastic idea and ran with it. Makes the company that much cooler

 

[sfsteves]

bigvan asked:

... do you know who Sykes Wilford is?

Excellent question ... if the answer is 'no', start your education there ...