Abrignac wrote:I used to patronize 3 different shpos. One was a small unit in a strip mall. It had a decent sized walkin humidor. The proprietor had 4 lazy boys and a couple of chairs squeezed into a small area between the cash register and the wall near the front door. I would stop by a few times a week for cigars and have a smoke. He probably sold a box or so worth of cigars a day. Once all his credit cards were tapped out buying inventory he sold his shares to his junior partner. He hired a blonde with big hooters to run the store while he went to school full time. The broad knew nothing about cigars, whined about her bad luck and watched soaps all day. The shop went under less than 6 months after the buyout.
Another shop I frequented was run by a husband and wife team. It was much larger. It shared a building with a Circle K and was about as big. They had a larger seating area with a couch and 4-5 easy chairs. She ran it during the week. Him on the weekend. There was always 3-5 guys hanging out smoking. They barely break even.
The other shop is in an upscale town center type shopping center. It's huge, probably over 4000 square feet. They have a well stocked humidor big enough to park a semi in. They have a large seating area with six couches and two big flatscreens. My guess is they gross at least 1/2 million or more a year.
Basically, unless you have very deep pockets so you can stock a humidor properly, have a great location and have patience; fuggitaboutit.
Well said. The first outfit never stood a chance ... only question is what would kill him first -- lousy sales or lousy cash flow. He either goes broke fast or slow, depending on whether he could make rent and payroll. If he could, he'd hang in until he ran out of inventory and couldn't afford more. Otherwise the landlord (or tax bureau) would just padlock his shop for non payment.
The second guy is like a lot of shops ... the classic Mom and Pop model. Owner staffed, which holds down the payroll hours. Figure they're open 70 - 80 hours per week. The owners take the majority of that and maybe hire a part-timer or two. Rent isn't ridiculous and the store footprint is manageable. They get enough foot traffic to keep the cash flow healthy. Nobody is getting rich, but they do OK.
The third operation is high risk, high reward. Humidor and lounge are large footprint. Most stores like this are prestige outfits in big cities, or part of multi-store chains. The multi-site outfits leverage volume to get better pricing from manufacturers. They still need big volume and fast turnover on a lot of their humidor to cover slower-moving boutique stuff, but can absorb cost better than the little guys. They're also likely to have higher overhead (rent, environmentals, payroll, etc) than the little guys. That said, they often have more and better events and promotions, and will get first dibs on limited production stuff.
Anyway, you hit the nail on the head regarding cost of inventory. My back-of-the-envelope estimate is at least 5,000 cigars for a decently stocked humidor in major brands (General, Altadis, Fuente, Perdomo) and a couple second tier players (Alec Bradley, Rocky Pater, Drew Estate). Double that to be taken seriously, and that's with a smallish walk-in humidor. For a big humidor, you're going to be upwards of 20,000 cigars; neither the inventory nor the engineering is cheap.
That third shop you mentioned, with the big lounge? I don't know what the cost of square footage is where you are, but I wouldn't be surprised if they're looking at 300 - 500k a year in overhead alone. Figure on similar numbers for yearly cost of goods, and they need a seven-figure gross to stay in the black. Not hard to do, but it takes enough population, steady customer flow and loyal regulars.