Editor’s note: This article was first published in November 2014; it describes the Spanish e-cigarette market at that time, and the franchise numbers, the ANCE shop-closure figures and the other circumstances it reports were current then.
In 2013 we wrote about e-cigarette shops as a new retail boom. Franchises even appeared that, within a couple of years, had more than 200 franchisees across Spain. It was unprecedented growth in the country, driven not so much by the short-term business opportunity as by the desperation of many people who did not know what to do and decided to start something “safe”.
Even Goldman Sachs recommended investing in this industry for the long term, while renowned scientists praised the e-cigarette as something that would save millions of lives around the world.
It was the new business of the century: with more or less know-how, anyone with a bit of money could open their own shop and it would work. Because they all worked.
But what some of our readers expected has happened: 95% of e-cigarette shops have shut their doors, according to Spain’s National E-Cigarette Association (ANCE).
Now people are trying to explain such a rise and fall.
Some think it is due to the campaigns against e-cigarettes and the doubts that come from not knowing their effects on health. And although we saw how people tried to spin the case of a man who “vaped” five cartridges a day, I think everyone knows that however bad the e-cigarette may be, it will never be as harmful as a conventional cigarette.
The first reason so many shops have closed is something as simple as many users losing interest. We assume they have gone back to traditional cigarettes, although I imagine some of them will have achieved their goal and quit the habit for good.
Second, it is clearly neither normal nor logical, commercially speaking, to have up to five e-cigarette shops on the same street, as happened on some streets in the province of Granada.
An e-cigarette shop can be a profitable business. But 100 shops in the same city may be too many.
We should also remember that many entrepreneurs opened these shops without doing a proper break-even analysis of sales, costs and profits. Between rent, electricity, Social Security contributions, self-employed fees and taxes, you have to sell a lot of e-cigarettes to cover your costs, so in the end only a few shops will survive.
And this reminds us that in business, as in investing, you should not follow the herd: what made money for the pioneer may not work for the sheep.
Further reading
- 9 ideas whose technologies could change the world
- 5 business trends for the new economy
- How to start your business idea with no money and make it work
- 20 profitable business opportunities in 5 or 10 years
Featured image: Lindsay Fox, CC BY 2.0, via Flickr.
