No Smoking Jacket Required

There is a new kid on the tobacco retailing block, and if recent trends continue upward as some predict, vape shops are here to stay.

Need proof? As of May 9, vapor shops became their own category on social media site Yelp.

?Now, vape shops everywhere will have the option to use this as a marketing tool for building and properly promoting their business,? Jim Root with the California Vapor Association wrote in a blog. ?This is just a first step toward legitimizing the industry and creating the separation that vape shops need to become successful.?

According to his blog post on the Smoke Free Alternatives Trade Association (SFATA) website, the push to separate vape shops from tobacco shops on Yelp began in March. The campaign of emails and phone calls intended to educate Yelp included studies showing the difference between vapor and smoke; studies about the lack of any secondhand effects of vapor; data on the dramatic rise of retail shops during the last three years; public opinion polls showing confusion between vape shops and smoke shops; and testimonials from ex-smokers.

In a world where more people are turning to social media before making any decision ? whether it?s what to buy and where, or what hotel to stay at when traveling ? this accomplishment can seemingly go a long way with the vaping community.

According to SFATA, there are as many as 15,000 vape stores currently operating in the United States and that number may just be the tip of the iceberg.

Bonnie Herzog, managing director of beverage, tobacco and convenience store research at Wells Fargo Securities LLC, has been vocal with her opinion that vape shops are a growing trend to watch. She remains bullish that vapor consumption (electronic cigarettes and vapor/tanks/mods) could surpass consumption of combustible cigarettes in 10 years. Adding vape shops and online sales to Nielsen-tracked channel data, Herzog puts vapor category sales at about $2.5 billion.

After visiting the Henley Vaporium in New York earlier this year, Herzog called vape shops the ?Starbucks of e-vapor,? a ?third place? experience where vapers can hang out, work, socialize and vape. The retail component is also an important factor: vapers can not only buy hardware and accessories, but also sample different e-liquids and test the equipment.

VAPE NY

Someone who has seen the evolution of the vapor category and its products is Spike Babaian, co-owner of Vape NY, a chain of vape shops.

?I have been doing this for six years. It?s funny; it?s almost like we went forward, then backward, then forward, then backward again,? she said. ?The product evolved and then people who hadn?t heard of them stepped backward to products we were already passed. So, the new people are always stepping backward to the older products.?

The best way to explain it, Babaian said, is that vapor products sold in convenience stores are ?last generation.? New people turn to older generations because the newest products tend to be more complicated, she explained. However, newer models are more functional.

Educating users on vapor products is where vape shops have the edge over convenience stores, or any other retail channel that enters the category.

?Being able to try different flavors and different tank systems is what gives vape shops an advantage over convenience stores. Mixing and matching is what fine-tunes the product to work for a certain person,? she said. ?In a convenience store, you are buying a kit so you are stuck with that tank and that battery. You can change the flavor, buy a different liquid to put into the open tank, but you really can?t change much else.?

Vape NY has three locations in New York City ? Queens, Manhattan and Brooklyn ? and Babaian and co-owner Phil Roseman are hoping to open No. 4 by the end of the year.

When they first began vaping in 2008, Babaian and Roseman started a club where other vapers could come together and try different flavors, tops and batteries. The Long Island Vapers Club eventually grew to become the National Vapers Club.

?It grew pretty fast and we realized it was lacking shops where you could try the different stuff,? she recalled.

Through fundraisers, the National Vapers Club raised money to do research on e-cigarettes. Clarkson University in Potsdam, N.Y., conducted a study on whether e-cigarettes were toxic and the results found the vapor was non-toxic, according to Babaian. Once the results were in, she and Roseman decided to open their first vape shop.

STEP INSIDE

There are different approaches to vape shops. Some reflect that Starbucks feel Herzog observed in her visit to Henley Vaporium. Vape NY takes a more no-nonsense approach to retailing vapor products and catering to vaping consumers.

?There is a social aspect to it. People come in and talk with us because you don?t walk down the street and see 100 other vapers in New York like you do in California,? Babaian said. ?We have some chairs and tables and little lounge areas in our stores, but other vape shops are different than ours.?

Some other shops focus on the hobbyist aspect, the rebuilding of atomizers and how to make e-cigarette coils. ?They have a different type of people that go there. We cater mostly to heavy smokers. A lot of them are hobbyists, but most of them are not into building their own e-cigarettes or blowing giant clouds. They are really more into just not smoking. Their purpose is to not smoke. We have a different focus than other vape shops,? she added.

As for product lineup, Vape NY offers approximately 30 different flavors, five different nicotine strengths and more than 200 different combinations of tops and bottoms ? 75 to 100 different types of tanks (tops) and about 80 to 100 different types of batteries or devices (bottoms).

?Customizing which top and which bottom is one of the most important things for people,? Babaian said. ?We do have a basic kit in the store for people who just want a simple kit. But fine-tuning for exactly what will work for that person is more of what we do.?

It?s important to note, she said, that although there are different styles of vape shops, most of the shops are owned by people who personally use the products.

?They understand what the customer wants. The people in the convenience store just hand the customer a product and get the money. They don?t have the ability to explain what?s wrong with it, how to fix it,? Babaian said.

In fact, up to this point, Vape NY has not hired anyone who does not vape.

?If you don?t use the product, you cannot teach someone else how to use the product. And if you don?t know how to use the product, you cannot fix the product,? she noted. ?A very big part of employment at a vape shop is not just understanding how the product works and being able to explain it, but also being able to figure out what may be wrong with it.?

TOTAL VAPOR

Further south along the East Coast, Davie, Fla.-based Vapor Group Inc. started out as a developer and manufacturer of vaporizers and e-cigarette brands in 2012. The company entered the scene through online sales. Then, recognizing the importance of an outlet dedicated to vapor products and their users, the company branched out to retail stores.

?We started with online sales, but have moved to brick-and-mortar sales in order to interface directly with consumers. We learned that the interaction in brick-and-mortar helps sustain the legitimate brand.

It is better to be face-to-face with the customers. They believe in your product more,? explained Michelle LaBarbera, director of marketing for Vapor Group.

While continuing to work with wholesalers and distributors to get its products into c-stores like 7-Eleven, Vapor Group opened its first Total Vapor stores in Florida this summer. Its latest location in North Miami Beach held its grand opening Aug. 13.

Vapor Group plans to have five to seven locations up and running in Florida by the end of this year ? some company owned and perhaps some franchised. The concept will move beyond the Sunshine State?s borders in 2015, LaBarbera said, adding that the company will probably move more toward franchising the Total Vapor brand next year.

To that end, Vapor Group engaged Harold L. Kestenbaum of East Meadow, N.Y., as its franchise attorney to represent the company in the franchising of its brands.

?As I have said previously, we are about to begin the franchising of our Total Vapor store concept in the Northeast corridor, North Carolina, Washington D.C., Texas and other places over time. Each of these geographical markets represents tremendous sales potential and we are excited by what franchising can mean to us long term,? CEO Dror Svorai said.

FACE-TO-FACE

While Vapor Group does sell its products online and in some other retail stores, its Total Vapor locations sell different products such as bigger mods and more state-of-the-art products.

?We can?t sell everything online because it?s better to test the products and have them in your hand. It?s hard to tell, sometimes, online. Our online sales are for people who really do know the products. The stores help consumers learn the new technology that is out there in the industry,? LaBarbera said.

Total Vapor employees go through extensive training and have the chance to test products.

?At the store level, they are able to use and test any product so they can sell them, especially our liquids and how to mix the liquids,? she explained, noting that the stores offer 19 flavors that can be mixed and matched to create new ones. The stores also have free taste testing and samples so customers can determine what flavors they like and what vaporizers they want.

Unlike Vape NY, Total Vapor stores are similar to those vape shops that have more of the lounge-type Starbucks setting. ?The stores have couches for customers to hang out. They have free Wi-Fi. It is kind of like Starbucks; you can hang out there all day. You can listen to the music or watch sports on TV,? she noted.

With more vape shops popping up around the country, LaBarbera believes convenience stores will be able to compete in this emerging category to some degree.

?Convenience stores will compete to some extent, but the products will be basic. They will have the kits that have a USB charger, a typical battery and an atomizer that a consumer can pick up quickly. Convenience stores will carry some liquids, but you are not going to have the variety like you do in a brick-and-mortar vape store,? according to LaBarbera.

Vape stores will also offer more high-end products than c-stores and a different type of customer service, she added. ?We offer expert assistance in product selection as opposed to a c-store where employees don?t really know anything about the products unless they are a vaper,? she said.