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The Harsh Reality of Starting a Vape Shop in 2021
The vaping industry is a field that many entrepreneurs find absolutely irresistible. The profit margins in vaping can be excellent. It’s also rare to find an industry in which you can earn money by helping others improve their lives, and that’s exactly what the vaping industry is all about. Virtually every smoker who quits and switches to vaping smells better, looks better, feels better and saves a lot of money. What’s not to love?
Maybe you’re even a former smoker yourself. You’ve seen the amount of money that you’ve spent on vaping products, and you’re wondering if it would be possible to enter the vaping industry and earn some of the profits that the big players are getting.
So, is starting a vape shop in 2021 a wise business decision? While the potential earnings in the vaping industry are certainly impressive, you’ll also face serious challenges as a vape shop owner that business owners in more traditional industries don’t have to worry about. These are just a few of the financial, competitive and regulatory difficulties affecting vape shops.
COVID-19 Has Decreased Brick-and-Mortar Store Traffic
The first thing to consider about starting a vape shop in 2021 is that the COVID-19 pandemic has reduced traffic in brick-and-mortar stores in virtually all industries. Although vaccines have been widely distributed, many people are still reluctant to make unnecessary visits to physical stores when they could just as easily buy the same products online – and vaping products are readily available on the Internet. For that reason alone, starting a brick-and-mortar vape shop in 2021 is an extremely risky proposition.
Of course, you can get around that problem by starting an online vape shop – but selling vape gear online has its own challenges.
Online Vape Shops Face Regulatory Challenges in the United States
If you’re in the United States, you need to fully understand the current regulatory climate for online vape shops before you enter the vaping industry. If you’re outside the US, you’ll have an easier time getting started – UK-based vape shops like V2 Cigs are doing great, for instance – but regulatory compliance is far more difficult in America.
Starting an online vape shop in the US means that you’ll have to wrangle with four complex legal issues.
You’ll need to pay for an age verification solution to ensure that you’re only selling products to adults.
· Many states and cities have banned most e-liquid flavors or have banned all online sales of vaping products. Your website will need to show the correct products to customers in regions with flavor bans. It’ll also need to automatically decline sales to customers where online sales bans exist. You’re responsible for knowing the local laws in each of the regions in which you sell vaping products.
· Any company shipping vaping products across state lines needs to comply with the PACT Act, which requires you to register with – and keep sales records for – all state tobacco taxation authorities.
· You’ll need to find a private courier service to deliver your products because the 2021 federal omnibus spending bill banned shipments of vaping products to consumers via US mail. FedEx, UPS and DHL have likewise stopped carrying vaping products.
The Vaping Industry Has Higher Operational Costs Than Other Industries
If you’re thinking about starting a vape shop, it’s possible that you’ve spent a bit of time scouting the wholesale prices for vape gear. You’ve probably noticed that there are some significant differences between the wholesale and retail prices in the vaping industry, which means that your potential profits are quite large indeed.
What you might not realize, though, is that vape shops pay more for basic services than merchants in many other industries. You’ll need to store your products somewhere, for example, and you’ll want to take out an insurance policy to protect yourself from theft, fire and other disasters. You’ll be selling lithium-ion batteries, though, which means that the risk of losing your products to fire will be high. You’ll pay more for insurance as a result.
Likewise, you’ll also pay more for credit card processing services because all of the merchant account providers consider vape shops “high-risk businesses.” Even if the higher transaction fees don’t bother you, you’ll have trouble finding a payment processor at all. Let’s suppose, for instance, that you want to sell vape gear online and use Shopify’s hosting services. Shopify doesn’t process transactions for vape gear. You’ll need to find another payment processor, but you’ll still pay a fee to Shopify for each transaction.
Synergistic Products for Vape Shops Have Their Own Challenges and Regulatory Issues
Considering the legal challenges that vape shops face in 2021, you might decide that it would be a good idea to hedge your bets by carrying different types of products. That way, you’ll have multiple revenue streams and might be able to weather the storm if government regulations ever make vaping products more difficult to sell than they already are. Some of the products that have shown synergistic compatibility with the e-liquid vaping industry include dry herb vaporizers, CBD and kratom. The problem, however, is that many of those products have regulatory issues of their own. Although adding those types of products to your selection may solve some problems, other aspects of running your business will remain difficult.
Competition Is Intense in the Vaping Industry
The final thing you’ll need to consider before starting a vape shop is that, whether your business exists online or offline, you’ll be entering an industry with no shortage of existing competition. In nations where vaping is legal, all large cities have vape shops already. Most medium cities have vape shops as well. Are you willing to find a market that presents a real opportunity and relocate there?
If you’re planning to sell online, competition is even worse since it’s not limited by geography. You’re not just competing with vape shops in your city – you’re competing with every vape shop across your country. Do you have the SEO knowledge to get ahead when all of the major advertising networks won’t accept ads from vape shops? If you don’t know anything about SEO, do you have the budget to hire someone who does? Do you have the financial security to wait for weeks or months until your vape shop begins to gain some traction on Google?
Although it’s true that operating a business in the vaping industry has the potential to be very profitable, the road to profitability can be a long one – and while you wait, the regulatory landscape may change significantly. You’ll need to consider the challenges carefully and make sure that you’re ready for those challenges before starting a vape shop.
This article does not necessarily reflect the opinions of the editors or the management of EconoTimes