The vaping industry has provided cigarette smokers with a healthier alternative, one that many smokers view as an aide to quitting cigarettes. As a result, vape shops have become highly popular over the past decade. Starting a vape shop of your own can be a rewarding business opportunity, but you’ll also need to be aware of the changes and regulations that are currently affecting the industry.

Business Overview

Vape shops are specialty retail stores that sell electronic cigarettes and related products. These shops typically offer a wide variety of products that they’ve strategically chosen for their quality and reputation. This wide array of products gives customers plenty of choices and helps them explore and learn about new products. Vape shops typically don’t sell tobacco products. Instead, it’s more common for these shops to sell e-cigarettes and e-liquids.

Customers choose to buy from vape shops for many reasons. These shops can help them to discover new products. While shopping in person, customers may have the chance to test products before buying them. Well-informed shop owners can serve as a source of valuable information, and retailers offer convenience and instant gratification over buying products from online stores.

Industry Summary

According to Grand View Research, the e-cigarette and vape market has been growing steadily, and that growth is expected to continue. In 2019, the global market reached a value of $12.41 billion. Grand View Research predicts that the industry will continue to experience a compound annual growth rate of 23.8% from 2020 to 2027. Increased demand from millennials should drive the market’s growth, and the increased availability of different e-cigarette products should also drive consumer spending.

In 2019, vape mods were more popular than other products, significantly driving sales. North American consumers also accounted for the majority of the vaping market. Vaping supplies and e-cigs are sold online and in retail stores, including drug stores, convenience stores, and specialty stores. These retail stores often help users to test out different items before purchasing them, a definite advantage for consumers who are new to the industry or who are looking to explore new products.

Industry Trends

The vaping industry has experienced rapid growth, and many trends have evolved that are currently shaping the industry. According to The Green Fund, certain products have become particularly popular in 2020. Smaller vaping devices are in high demand, with consumers preferring more compact devices. This preference is reflected in manufacturing, as vape pens become smaller and smaller rapidly.

There’s also an increased demand for nicotine salts and flavored e-cigarettes. Nicotine salts have high levels of nicotine, but they remain a safer alternative to smoking cigarettes. Flavored e-cigarettes have been in high demand for years, and they’ve proven to be particularly appealing to younger consumers.

Even smartphone technology is playing an important role in the vaping industry. Now, it’s possible to control new vape devices with Bluetooth technology. While this technology comes at a price, these smartphone-compatible vaporizers are fast and user-friendly.

This industry has also been affected by vape-related illnesses and the legal response to these threats, reports Vice. As vape-related illnesses and deaths rapidly occurred in the United States in 2019, vaping became highly politicized. While some of the illnesses were linked to black-market vape products, states and major cities began taking action to ban or restrict the sale of e-cigarettes and vaping products.

The FDA stated on December 20, 2019, President Trump signed legislation that increases the minimum age to buy tobacco products from 18 to 21. This legislation includes the sale of e-cigarettes and e-liquids.

Target Market

Vape shops market to vaping enthusiasts. These are often consumers who are already smokers and are looking for a healthier alternative, depending on the products that a shop stocks, it may cater to different target markets, like younger consumers seeking flavored or novelty products.

Skills, experience, and education useful in running a vape shop

Starting a vape shop doesn’t require a business degree, but certain skills and experiences can help the business to become a success.

Vaping experience. A shop owner who also vapes will be well-prepared to choose quality products, make product recommendations to customers, and develop the shop to be attractive to its target market. A shop owner who can make personal recommendations is also more valuable to consumers.

Knowledge of vaping industry trends. The vaping industry can change quickly, and a store owner needs to stay aware of current trends to keep the store relevant and appealing to its customers.

Customer service skills. Customers often go to vape stores to learn about new products, which is harder to do when ordering products online. A shop owner who has excellent customer service skills will be able to ensure customers have positive experiences, encouraging them to return to the store.

Attention to detail. From choosing the right inventory to managing employee schedules, attention to detail is important in successfully starting and managing a vape shop.

Costs to Start a Vape Shop

Starting a vape shop is relatively affordable, especially when starting a smaller shop. Plan to spend between $35,000 and $75,000 to start a small shop, with larger shops that cross into other types of inventory costing $100,000 or more.

Some of the startup costs for a vape shop include:

• Inventory such as replacement coils, tanks, e-liquids, vape batteries, chargers, etc.

• Shelving and displays

• Security system

• Computer and cash register or point of sale system (POS system)

• Signage

Steps to Starting a Vape Shop

Step 1: Write your Business Plan

After coming up with the idea, the next step in starting your business should be to write a business plan. Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.

Related:
How to write a business plan
Free sample business plans

Step 2: Form a Business Entity

A business entity (also called a business structure or legal entity) refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.

Related: Comparison of Business Entities

Step 3: Name the Business

Finding the perfect business name can be challenging. Not only does the name have to resonate with your customers, but it also has to be available to use.

Step 4: Select your Location

Rental costs will vary with the size of the space, location, and amenities. Spaces in high-traffic retail areas are preferable for vape shops. While these locations will cost more, the walk-in traffic will be beneficial. A shop in a high-traffic area can also help to generate public awareness of the business.

Related: Choosing a business location

Step 5: Apply for Business Licenses and Permits

A vape shop owner will need to abide by the FDA regulations that govern tobacco sales, which include:

• Checking the photo ID of any customer who looks under 27 years of age

• Selling only to customers who are of age

• Not giving out free samples of products, parts, or components

Individual states also have their own rules regarding the sale of e-cigarettes and tobacco products, so be sure to research those as well.

There will also be general local, state, and federal business registrations such as a sales tax permit, Employer Identification Number, and Occupancy Permits.

Related: Common business licenses, permits, and registrations by state

Step 6: Find Financing

Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a vape shop is another. In order to get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs.

Related: Finding the money to start a business

Step 7: Open a Business Bank Account

Keeping your business and personal finances in separate business bank and credit card accounts makes it easier to track the business’s income and expenses.

Step 8: Get your Marketing Plan in Place

Marketing is important both in promoting a new shop and in continuing to help that shop bring in new customers. Many vape shops use social media marketing, review sites like Yelp and Google, online advertising, print advertising, and even radio advertising to reach their target audiences. Marketing costs depend on the type of activity performed and the volume of marketing, too. A shop owner can help to keep costs down by doing some or all of their marketing themselves.

Related: Low-cost ideas to market a new business

Step 9: Get Business Insurance

A vape shop needs several types of insurance for full coverage:

• General liability insurance protects the businesses from expenses that could result if a customer is ever hurt while on the property.

• Commercial property insurance protects the business against financial losses if the shop and its inventory are ever damaged or destroyed by an event like a fire.

• Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were hurt while working.

Insurance policy cost will vary depending on the business’ size, location, and the value of its inventory and equipment. To get the best idea of insurance costs, request quotes from multiple providers. When comparing the quotes, pay attention not only to the differences in premiums but also to the differences between plan exclusions, coverage limitations, and deductibles too.

Related: Common types of insurance a business may need

Step 10: Hire Employees

A shop owner may be able to initially staff the store in its early days, but eventually, a shop owner will need to hire at least a couple of employees. Indeed reports that vape shop sales representatives earn an average of $9.00 per hour, though that can range from $7.25 to $13.50 per hour.

In addition to employee salaries, a vape shop will need to cover other expenses like workman’s comp, unemployment insurance, and paid time off.

Related: Hiring your first employee

Step 11: Set up an Accounting System

Setting up an accounting system is critical to the long-term success of your business.

Staying on top of taxes not only keeps the business out of trouble with the government, but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.

Related: Setting up accounting for your business

How much can you potentially make owning a vape shop?

Vaping business profits will depend on many variables, including the shop’s size and specialty, profit margins, years in business, and location. These shops can be highly profitable. According to Vapor Vanity, brick and mortar vape shop sales amounted to $26,000 per shop in 2015. Sales totaled more than $300,000 per year. This is before accounting for store expenses and employee salaries, but it is evidence of the demand for these products and the potential sales that a store could see.