is retail juice a sustainable business?

[zoiDman]

It's not a problem for me. I see nothing 'wrong' about it.. but i think it will be a dilemma for vape shops one day.. That's all..

But here's the Deal.

There Isn't going to be a "One Day" in the USA. Because 8-8-18 will come before Everyone gets Hip to Mixing their Own e-liquids. Why things work right Now is because Most People who Vape are Clueless about what the FDA is Doing.

And Many/Most Vape Shops don't want to Tell People what is Going On because they Need the High Markups on e-Liquids to Make a Profit.

Telling People what is Going On would only promote people Trying/Doing DIY.

And People doing DIY is Bad for anyone who Sells Retail e-liquid.

 

[sofarsogood]

Supposing that things go on as they are there will be a place for vape speciality shops but may be fewer of them than I find in my area. The business model would probably evolve. A lot of the business might be absorbed by shops that sell other products besides vape stuff, especially tobacco speciality shops which are already selling vape stuff and mixing in house. Then there is the challenge of understanding the very wide differences between vapers and their reasons for vaping. Which of those groups will grow, which will decline. We know very little about that.

If the trend is in the direction of vapers like me it's going to be a trivially small industry. I have a good job, low personal expenses and love my vape. I can buy anything I want, so what do I want? My favorite mod costs $26. My favorite atomizer costs $7. The only liquid I care to use is my DIY which costs 1.2 cents per ml, $30 a year. If it wasn't for stockpiling my vape might cost $100 a year after some initial upfront cost. My annual cost to smoke was $3,000. Compared to that vaping is free. How does a retailer make out bucking that trend, if that's a trend?

I started a brother of mine vaping 2 years ago right after I started. I got him an iStick 20 and N mini for Christmas. To this day that's what he uses. I can't interest him in anything else.

 

[retired1]

There are other markets - like here in Canada, and there's free trade and all so they can export it here, and people will likely find ways to send it back to you

We're lucky here (i think). It seems like our gov might be taking a more measured approach..

However, regardless of who they sell to, any US based e-liquid manufacturer is going to have to play by the FDAs rules. They only way for them to circumvent them is to move the entire operation out of the US. That's not going to happen with the majority of businesses.

 

[Tee_Jay]

However, regardless of who they sell to, any US based e-liquid manufacturer is going to have to play by the FDAs rules. They only way for them to circumvent them is to move the entire operation out of the US. That's not going to happen with the majority of businesses.

It's a sad state of affairs for you guys wrt vaping.. I hope some common sense gets injected into the process..

 

[DaveP]

Some of these shops if they are serious will reach out to a bottling service that covers all of that so they don't have to mess with it. Then they would just have the cost to produce the juice for them. But who knows. We will see when the FDA and big tobacco try to tear apart vaping for good. Sad thing. If they concentrated this much energy towards tobacco that business would be handicapped but when you make your money off of it....who cares (sarcasm)

Sent from my Nexus 6P using Tapatalk

The only local shop I've ever done business with has juices from several well known juice makers. As I've posted before, they all seem to have that same underlying taste that turnbs me away. It may be that they don't change coils often enough to keep the flavors crisp. It's one of those juice bars where you use a throwaway plastic drip tip on your own mod, using one of their Kanger style tanks.

 

[DaveP]

However, regardless of who they sell to, any US based e-liquid manufacturer is going to have to play by the FDAs rules. They only way for them to circumvent them is to move the entire operation out of the US. That's not going to happen with the majority of businesses.

The FDA has some sort of agenda that's being pushed by an unknown force. Does anyone believe that the FDA thinks vaping is bad for health and smoking is OK, all the while taking money from the tobacco lobby? It's a political war between tobacco companies' profit loss and the vaping industry that's cutting into tobacco company profits. The FDA is trying to protect the bottom line of a cash cow that's pumping billions into states that fought for the tobacco settlement. There are forces within the government pushing vaping regulation. The FDA is a pawn in that game.

 

[jambi]

The fact that vape shops sell zero nic flavourless for same price as flavoured 24 mg is the delemna that's built in to the business model. It's a 'secret' that the zero nic is just the same vg/pg you get at a drug store for next to nothing..

With or without nic, the cost of the raw materials alone has only a small impact on the (wholesale) price of the finished product. It's the associated costs of setting up and running a manufacturing operation... permits, licencing, insurance, machinery/infrastructure, employee wages, accounting, legal fees, rent, and now, regulatory fees, that impact the price. Whether or not it includes nicotine (or how much nicotine), is irrelevant. The bottom line for that one ingredient is small enough not to make a difference either way. It's those associated costs that hit much harder.

Now you want to buy your (whatever level) nic or non nic juice at a retail store. Add in packing and shipping fees, b&m overhead (basically a repeat of the associated costs above), and the retailer's profit margin, which is his only incentive to be in business. Add up all those costs and $11.99 for a 15 ml bottle of juice starts to look like a pretty good deal. You will not get rich owning a typical B&M vape shop, and will only do well as a manufacturer if your volume is high, but the higher the volume, the higher your costs for everything. More needs more, simple as that.

Yeah, at the prices I'm paying for raw materials I can make 30 mls of 3 mg liquid for around $1.25, including the cost of the bottle. I don't even need to do the math, my calculator is set up to do it for me. I could complain...a manufacturer's cost to make the exact same 30 mls is probably around 35 cents, based on their lower cost of bulk-bought wholesale raw materials. But I don't incur any of the associated costs that they do. By the time all those costs are added in, it probably costs a high volume manufacturer more to produce the same bottle of liquid.

If you look at the whole picture, current retail prices for finished eliquid are near a steal.

Is it sustainable? If regulatory fees don't kill off the profit margins, and if hyper-taxation doesn't kill off the growing demand, definitely. But those are two monolithic "ifs".

 

[jambi]

The FDA is a pawn in that game.

Exactly.

 

[jambi]

To buy plain old vg in a vape shop, you pay 10 to 20 times the price as you pay at a drugstore.

The VG is free. It's the bureaucracy you're paying for.

 

[zoiDman]

The FDA has some sort of agenda that's being pushed by an unknown force. Does anyone believe that the FDA thinks vaping is bad for health and smoking is OK, all the while taking money from the tobacco lobby? It's a political war between tobacco companies' profit loss and the vaping industry that's cutting into tobacco company profits. The FDA is trying to protect the bottom line of a cash cow that's pumping billions into states that fought for the tobacco settlement. There are forces within the government pushing vaping regulation. The FDA is a pawn in that game.

I agree with the Overall Premise of what you are saying. But I Don't see the FDA as a Pawn in all this.

More of a White Bishop.

Because in Many Ways, the FDA is using it's own Power to shape Policy and Opinion. And are Operating, in some ways, Outside the Realm and Norms of a Government Agency.

 

[DaveP]

I agree with the Overall Premise of what you are saying. But I Don't see the FDA as a Pawn in all this.

More of a White Bishop.

Because in Many Ways, the FDA is using it's own Power to shape Policy and Opinion. And are Operating, in some ways, Outside the Realm and Norms of a Government Agency.

Agreed, but you don't kill a cash cow. You also protect it from the wolves.

 

[zoiDman]

Agreed, but you don't kill a cash cow and you protect it from the wolves, too.

Absolutely.

And that is why I Disagree with people who say the Goal is to Eliminate e-Cigarettes completely in the USA.

 

[DaveP]

Absolutely.

And that is why I Disagree with people who say the Goal is to Eliminate e-Cigarettes completely in the USA.

I think the tobacco settlement agreement runs out around 2025. After that, if it's not renegotiated we'll see support for vaping increase. Right now, we are cutting into the profits of big tobacco and someone in government is helping to prop them up by attacking the competition.

This article shows who voted for and against the bill that would have stopped the FDA action in 2007. Only one Republican voted against vs lots of Dems.
Who is the best candidate for vapers in the election?

 

[zoiDman]

I think the tobacco settlement agreement runs out around 2025. After that, if it's not renegotiated we'll see support for vaping increase. Right now, we are cutting into the profits of big tobacco and someone in government is helping to prop them up by attacking the competition.

We are Also cutting into a Taxation Stream.

Every time that you see one of those User Signatures here that says that an ECF Member Hasn't Smoked xxxx Cigarettes since DD/MM/YY, we see it a Good Thing! And an Improvement in Public Health.

But when Many/Most Lawmakers see it, they just see a Ginormous Amount of Tax Monies that they Didn't Get. And Won't Get in the Future.

Take 5% of the US Population. Then Multiply that Number by $1.01

That is how much Cigarette Tax Money the Feds are Not getting per DAY when that 5% Vapes instead of Smokes.

When e-Cigarette use is Taxed at the Same Rate per Day as Smoking is, that is when people like the HHS, CDC, FDA, etc. will embrace e-Cigarettes.

 

[DaveP]

We are Also cutting into a Taxation Stream.

Every time that you see one of those User Signatures here that says that an ECF Member Hasn't Smoked xxxx Cigarettes since DD/MM/YY, we see it a Good Thing! And an Improvement in Public Health.

But when Many/Most Lawmakers see it, they just see a Ginormous Amount of Tax Monies that they Didn't Get. And Won't Get in the Future.

Take 5% of the US Population. Then Multiply that Number by $1.01

That is how much Cigarette Tax Money the Feds are Not getting per DAY when that 5% Vapes instead of Smokes.

When e-Cigarette use is Taxed at the Same Rate per Day as Smoking is, that is when people like the HHS, CDC, FDA, etc. will embrace e-Cigarettes.

Managing taxation streams is something that government does effectively. They'll eventually get around to putting their hands into our pockets. I'm surprised that they haven't yet. The Tobacco settlement gets renewed in perpetuity until there's insufficient profit to continue making cigarettes. By that time the taxation target will already be shifted.

 

[zoiDman]

Managing taxation streams is something that government does effectively. They'll eventually get around to putting their hands into our pockets. I'm surprised that they haven't yet. The Tobacco settlement gets renewed in perpetuity until their's insufficient profit to continue making cigarettes. By that time the taxation target will already be shifted.

A Lot Easier to Tax something if it is Standardized and Regulated.

A Pack of Smokes is Easy to Tax. Cause they all have 20 Cigarettes in them. And the Average Smokes goes thru 1 per day.

How do they Tax e-Cigarettes? Or more precisely, How do they Tax e-Liquids?

 

[DaveP]

A Lot Easier to Tax something if it is Standardized and Regulated.

A Pack of Smokes is Easy to Tax. Cause they all have 20 Cigarettes in them. And the Average Smokes goes thru 1 per day.

How do they Tax e-Cigarettes? Or more precisely, How do they Tax e-Liquids?

They'll pull numbers out of the air and establish a percentage on top of local and state sales taxes. It doesn't have to be fair. It's just a transitional revenue replacement stream. Maybe they'll start with a revenue tax on flavorings and nicotine. I really don't see tax on hardware.

 

[IDJoel]

Jumping in here (just played catch-up with the entire thread to this point) and one thing that I haven't seen discussed is a Brick and Mortar shop's overhead.

@Tee_Jay I gather from your prior posts that you are in Canada. I am in the U.S. and completely ignorant of all things Canadian; so forgive me any omissions, errors, and non-parallels.

If your initial question is "Is $20/30mL sustainable (read: reasonable)" then you need to look at what costs are actually required to operate a brick-and-mortar storefront.

Real Estate - Buy, lease, purchase viable property that will support/encourage business traffic (Mom's basement doesn't work unless you are talking on-line only... and you were asking about B & M).
Staffing/Personnel -
--Payroll - remember experience, performance, retention, and competion
--Benefits
--worker's comp.
Utilities-
--Gas
--Electric
--Trash
--Sewer
--Communication
Insurance -
--Property
--Theft
--Liability
Inventory - Keeping adequate bulk product on hand that permits you to remain in stock AND accommodate expected future growth.
--Purchasing
--Financing?
--Shipping
Equipment -
--Vessels
--Measuring
--Printing
Other
--Expendables
--Storage
--Packaging
--Waste/Loss
--Advertising

Factor all this in with the $0.012/mL cost of the actual ingredients and to survive $20/30mL doesn't sound quite so outrageous. Divide that potential profit by the number of competitors in your potential market and it feels downright a bargain. Subtract further those of us who would be potential customers but are too cheap (myself included) and therefore DIY. Now it looks like they are all but giving it away.

Honestly, in my small market (Boise Idaho) I have seen quite a few shops come and go because they couldn't figure out the magic formula; others have survived, thrived, and even flourished... and now have as many as 8 shops in the immediate region... and they don't make their own "house" juice (to my knowledge).

If you're looking to go into the business; all I can say is "Best wishes." It isn't as easy/cheap as it looks.

 

[kiba]

I try not to mention that I diy when I go to my b&m, they seem to make most of their profits from juice with the margin on mods and things so low, (I've actually seen people try something out in there and then use their WiFi to order it from china).

I have had them ask me what kind of juice this is etc. after trying it, and then I'll sometimes mention it, one of the guys there wanted to trade or buy my recipes but selling juice is not something I'd ever do, especially with the FDA. But yeah, for right now it is sustainable and how they make most of their moneys. Most people who go to b&m's have no interest in mixing their own or even any idea that it's possible.

 

[Tee_Jay]

Jumping in here (just played catch-up with the entire thread to this point) and one thing that I haven't seen discussed is a Brick and Mortar shop's overhead.

@Tee_Jay I gather from your prior posts that you are in Canada. I am in the U.S. and completely ignorant of all things Canadian; so forgive me any omissions, errors, and non-parallels.

If your initial question is "Is $20/30mL sustainable (read: reasonable)" then you need to look at what costs are actually required to operate a brick-and-mortar storefront.

Real Estate - Buy, lease, purchase viable property that will support/encourage business traffic (Mom's basement doesn't work unless you are talking on-line only... and you were asking about B & M).
Staffing/Personnel -
--Payroll - remember experience, performance, retention, and competion
--Benefits
--worker's comp.
Utilities-
--Gas
--Electric
--Trash
--Sewer
--Communication
Insurance -
--Property
--Theft
--Liability
Inventory - Keeping adequate bulk product on hand that permits you to remain in stock AND accommodate expected future growth.
--Purchasing
--Financing?
--Shipping
Equipment -
--Vessels
--Measuring
--Printing
Other
--Expendables
--Storage
--Packaging
--Waste/Loss
--Advertising

Factor all this in with the $0.012/mL cost of the actual ingredients and to survive $20/30mL doesn't sound quite so outrageous. Divide that potential profit by the number of competitors in your potential market and it feels downright a bargain. Subtract further those of us who would be potential customers but are too cheap (myself included) and therefore DIY. Now it looks like they are all but giving it away.

Honestly, in my small market (Boise Idaho) I have seen quite a few shops come and go because they couldn't figure out the magic formula; others have survived, thrived, and even flourished... and now have as many as 8 shops in the immediate region... and they don't make their own "house" juice (to my knowledge).

If you're looking to go into the business; all I can say is "Best wishes." It isn't as easy/cheap as it looks.

Hi.. All good points.. I own a retail store (not vape related) so i have a good grasp of the overhead, and of the costs buried in all of the processes you're speaking of.. and if supply/demand, etc. I also have a keen interest in understanding retail business models. I'm not at all saying that what vape shops are doing with juice pricing is 'wrong', bad or unfair. I know that the price has nothing to do with the cost of the ingredients and there's nothing fundamentally wrong with that.

Some people vape 24 mg and other people vape 3 mg. both cost the same at retail. vg/pg costs at retail is pennies per ounce. Vapers are generally ex-smokers like me. We vape so that we can get the nic we need to function. This - more so because we like the taste.

Flavourless pg/vg (especially vg) tastes fine. Put some nic in it and that's all you need. strong or weak flavouring is a 'nice to have' whatever it is is fine as long as it's not horrible. It's not DIY to buy 24 mg juice from the vape shop and a bottle of vg from the drug store and shake it all up together.

I'm not making a moral judgement by saying that the model that the shops employ to price juice has this flaw. It might take longer in the US for vaping to become main stream due to your FDA issues, but everywhere else, vaping is becoming mainstream. Nobody wants to smoke, and now nobody has to smoke. When it's mainstream, that basic knowledge (pg/vg is pennies per ounce and commonly available) will become common knowledge (because collectively, people are smart enough to figure these things out). At that point, the pricing model that vape shops use is going to stop working because very few people will be willing to pay 20 times the price for their nic fix just because it tastes a bit better than the unflavoured or diluted flavour they get from cutting the 24 (that buy from the vape shop) down to 3. Eventually i think that the business model will need to adapt to accommodate this and it will be interesting to see what they do.