Online Retail Business

[John]

Happy New Year everyone! With less than two years left until I retire from the Navy, I am constantly thinking of how I'll make a living after the service. I'm contemplating starting an online pipe tobacco website. While I still have a steady income, I could take a chance with this and still come out on my feet if it goes bad. I would only sell pipe tobacco and accessories. Kretek International (Phillips & King Intl) is just North of me and a wholesale supplier which I could hopefully get my supplies from. I'd have to start out with a very limited selection, but hope it would be enough for me to get a feel of the and day-to-day responsibilities and operation. My wife would be able to cover business operations while I'm away. She is the one who went to college anyways and earned her degree in business. By the way, she isn't too keen on this venture but supports almost anything I do. This idea is in its infancy, and I still have a lot to figure out. Please, if you have any suggestions, input, or concerns, fire away! Below are some of the things I will need to get smart on.

- Business license requirements. Will this change if I move to another state?
- State/federal requirements to sell tobacco online.
- Sales tax and states that prohibit tobacco shipments.
- International shipping.

Thanks for taking the time to entertain my idea and hopefully this can actually work out with your help.

[Kevin Keith]

Wow, those questions sound more like lawyer questions than a bunch of knuckleheads on a pipe forum questions. Admittedly, we are cheaper. I do know that some e-tailers ship to any state regardless of restrictions. Good luck to you and the missus!

ps Custom dictates a 50% discount for all PSF members. Just sayin'.

[MikeDennison]

Wow, those questions sound more like lawyer questions than a bunch of knuckleheads on a pipe forum questions. Admittedly, we are cheaper. I do know that some e-tailers ship to any state regardless of restrictions. Good luck to you and the missus!

ps Custom dictates a 50% discount for all PSF members. Just sayin'.

"knuckleheads"? Well, yeah. I guess yer right.
And I'm really glad you pointed out the PSF rule about the member discount...

[John]

Just had lunch with the wife and she is more accepting of this idea than I originally thought. PSF discount, of course! 50% is not sustainable

[sisyphus]

pipe smokers are generally cheapskates and there are existing businesses that sell at very low margins online, Volume is the only way to make a profit, and the competition is entrenched. Not to be dismissive of your idea, I just think it has a very low probability of success in this market, which is ever shrinking and faces an uncertain future due to fda regulation and state taxes.

[Mr Beardsley]

pipe smokers are generally cheapskates and there are existing businesses that sell at very low margins online, Volume is the only way to make a profit, and the competition is entrenched. Not to be dismissive of your idea, I just think it has a very low probability of success in this market, which is ever shrinking and faces an uncertain future due to fda regulation and state taxes.

This is probably the best statement on the subject. Also, the next 2 years are when the rules and regulations are going to be the most dynamic. Lots of change looming around every corner

[John]

pipe smokers are generally cheapskates and there are existing businesses that sell at very low margins online, Volume is the only way to make a profit, and the competition is entrenched. Not to be dismissive of your idea, I just think it has a very low probability of success in this market, which is ever shrinking and faces an uncertain future due to fda regulation and state taxes.

Thank you very much for being up front. I am skeptical of the new regulations that may come as well.

[Houtenziel]

pipe smokers are generally cheapskates and there are existing businesses that sell at very low margins online, Volume is the only way to make a profit, and the competition is entrenched. Not to be dismissive of your idea, I just think it has a very low probability of success in this market, which is ever shrinking and faces an uncertain future due to fda regulation and state taxes.

On the other hand, there is a growing number of people in the pipe community that are discontent with the current level of customer service provided by a lot of the low margin retailers. I know of at least a dozen or so other folks who, like me, shop exclusively at smaller independent shops like WV Smoke Shop, Milan, Mars, and would rather pay the slightly higher prices to know that they are going to get taken care of. Yeah, maybe they don't have a vast selection of bulks, or thousands of pipes to choose from.. but what they do, they do extremely well.
I'd say go for it, but you will need to figure out some way to differentiate yourself from the big boys. Specializing in something that all competition generalizes in is always a good way to find your niche. What that is, I can't tell you.. Maybe find a way to bring in a wider variety of brands like Parker, Hardcastle, Duncan, John Brumfit.. figure out how to bring in foreign factory pipes that are decent quality that none of the big boys are representing.
One last thing.. if I were you I would start with pipes and see where that takes you. If you later feel like it's a profitable venture, expand slowly in to tobacco. I suggest that because it keeps you mostly clear of FDA-BS, and I think that'd give you some time to figure out how things work in the industry and enough time to get a bead on looming regulations.

[John]

pipe smokers are generally cheapskates and there are existing businesses that sell at very low margins online, Volume is the only way to make a profit, and the competition is entrenched. Not to be dismissive of your idea, I just think it has a very low probability of success in this market, which is ever shrinking and faces an uncertain future due to fda regulation and state taxes.

On the other hand, there is a growing number of people in the pipe community that are discontent with the current level of customer service provided by a lot of the low margin retailers. I know of at least a dozen or so other folks who, like me, shop exclusively at smaller independent shops like WV Smoke Shop, Milan, Mars, and would rather pay the slightly higher prices to know that they are going to get taken care of. Yeah, maybe they don't have a vast selection of bulks, or thousands of pipes to choose from.. but what they do, they do extremely well.
I'd say go for it, but you will need to figure out some way to differentiate yourself from the big boys. Specializing in something that all competition generalizes in is always a good way to find your niche. What that is, I can't tell you.. Maybe find a way to bring in a wider variety of brands like Parker, Hardcastle, Duncan, John Brumfit.. figure out how to bring in foreign factory pipes that are decent quality that none of the big boys are representing.
One last thing.. if I were you I would start with pipes and see where that takes you. If you later feel like it's a profitable venture, expand slowly in to tobacco. I suggest that because it keeps you mostly clear of FDA-BS, and I think that'd give you some time to figure out how things work in the industry and enough time to get a bead on looming regulations.

Thank you! I'm like a roller coaster right now of indecisiveness. I just created a quick website with shopify.com and registered a domain to get a feel of how to manage such a site. It wasn't too bad. I'm only $12 into it so far I thought about the pipe idea for a while and wonder if these manufacturers would provide drop shipping so I wouldn't have to keep a stock of them which could be expensive. Only bad thing about drop shipping is the lack of control of shipments. All the government offices were closed today, so I couldn't get any information on licensing and fees. The wholesaler was closed today as well. Thanks again for the words of encouragement.

[Longshanks]

Exciting topic! I'm not a professional business, tax or legal adviser, but I enjoy discussing and drafting business concepts - it's a lot like building a house, but without all the sore thumbs.

Regarding your venture, I think the shrinkage of retailers flags a business opportunity rather than a "steer clear" warning. Our first green flag might be that we're not losing members on PSF; rather, we're gaining members on a weekly basis. Our second green flag is the reduction of competitors. If I manufacture a pipe or tobacco product and my retailers go out of business, I need new retailers to move my product or I go out of business. Right now they're turning to gas stations and drug stores, and I thought I read somewhere that a drug store (Walgreens?) decided to bail on tobacco? Anyway, we really need a well run pipe and tobacco retailer.

Yes, I would investigate why similar online businesses closed doors, but it could be they just didn't have time, like Dead Man's Pipes. Or may be they didn't know how to run a business in the first place. Or their business plan only covered the short term. Or their main financial partner wanted out. Or divorce was pending. Or they didn't know how to market their site. Or they were scared by new regulations and didn't know who to talk to for help understanding them. I read a post about poor customer service earlier. It doesn't take an FDA regulation to shut your doors if you have low quality product, slow order processing or poor customer service... and there's your niche.

Regarding a previous suggestion to sell pipes first, I'd have to agree that pipes should be a part of your offering. I won't bash online sites by name, but I've been to at least one where you couldn't pick which Dr Grabow pipe shape you wanted. You paid for the style and they shipped one of three different shapes in that style. We have several Dr Grabow fans on this site alone. If there is any profit to be had in retailing Dr Grabow pipes, offering each pipe individually (just like artisan pipes) would put you ahead of the aforementioned website from the get go.

Interesting side note: I offered to partner up with (or rent to own) the "Dead Man's Pipes" sales site from a guy in Seattle many years ago. I had a lot of ideas and hoped I could really get it kick started. When he finally contacted me several months later, I'd already started my vehicle escort service. Anyway, he said he didn't have time for it, was getting divorced, never checked that email, wasn't interested in partnering or leasing to own, and that he just wanted to cash out. I wasn't in a position to run it anymore so luckily I declined, because the site had been abandoned too long and already had bad reviews. The guy still had pipes listed for sale on it and a member of an online tobacco community purchased one that never shipped. Big no no. The member, obviously a dissatisfied customer, posted that no one could get hold of customer service, not even his credit card company, so the credit card company refunded his money. Moral of the story: Even if I had still wanted the site, the brand was as dead as the name because the owner just didn't have time for it.