Here's the deal- I've worked in a B&M store for a year now to help out the owner when she was in a pinch and needed to head out of town or whatnot. Consequently, I've gotten a pretty candid view of the cigar industry from the small business perspective, and I have to say: it's impossible for a B&M to compete in pricing, especially in a small area like mine.
Also, I should note that the figures I cite are after a
now 52% state tobacco tax as well as the FedGov's SCHIP bullshite.
Typically, on smaller boutique cigars, a B&M can go direct (assuming they have their distributor's license) and get some very good deals. Most of the cigars in the humidor fall between $7.99 and $11.99, with the majority of those actually hovering between $7.99 and $9.99. That's after a 100% markup, so essentially the cost for us is $4-5 per stick. That's actually a reasonably priced cigar in California (eyes are popping at this point, I know, but for us, many cigars are $14-15 per stick).
The issue comes with the larger more known cigars. Arturo Fuente, Partagas, Romeo y Julieta, etc. With these cigars, even when we go direct we cannot get very good deals. Case in point: AF Short Stories. We retail them for $11.49, so effectively our cost hovers around $5.75 a stick. If you check out Famous, which doesn't necessarily have the best deal on the net, their price for a 25 count box is $130. Assuming you can wing free shipping, you are getting the stoges for $5.20 a piece.
Here's the link:
http://www.famous-smoke.com/arturo+fuente+short+story+cigars/item+7281?Nav=&Ne=
That means that any average American can actually buy those cigars for
less than our
direct cost, before retail markup and our shipping charges.
So now that we've settled that, let's focus on what a good cigar store
can do to stay in business. Cigars Ltd. in Fresno is a good example: they've got an amazing atmosphere to their store, they've got a tremendous selection and most importantly they have a certain camaraderie to the aspect of being one of the store's unspoken "preferred members". All shops have their regulars, so fostering this connection really helps. Unfortunately, even in our case, our regulars often times buy the majority of their cigars online and come in for one-here-one-there purchases. This makes business very tough.
Another thing to do is creative contests. Setup contests in which your members can walk away with something very nice for very little, but make it so you can make some serious cash in the process. For instance, if you purchased a Vanderburgh Humidor for $700 and held a raffle with $5 tickets, limited at 300, you can do the math to see that you just made $800 profit on a $700 investment.
Not that any of that is revolutionary, but all too often I see these cigar lounges slip into the doldrums of selling cigars- and that's about it. Figuring out new ways to excite your customers to keep them coming back is, I believe, the key to the business staying afloat. And consequently, that's the only tangible advantage Brick and Mortar stores have on big outlets like Famous or CI. They have the ability to bring a personal touch and an exclusive feel to the hobby... and for this reason, I don't see well managed, well run and well stocked B&M stores going out of business. It's the stores that still live in the early 90s that will likely take the hit and go down the tubes, thinking that their customers will still walk in off the street on their own volition.
