Brick & Mortar Vs Online – A David Garofalo Editorial

Brick and Mortar Cigar Retailers
The On-Line Discounters

Another editorial by David Garofalo

Graphic1I just saw the numbers from Black Friday in retail, down for yet another year. Small Business Saturday, down again for another straight year… and finally, Cyber Monday up however again for another record-breaking day and year. So it got me thinking…

For the past decade this has been a hot debate throughout the entire retail world, store shopping vs. on-line shopping, but most recently there has been a lot of talk about it in the cigar world. As of January 1, 2016 Fed Ex will no longer ship cigars, not only to consumers looking to buy them on-line but they won’t even ship them to the cigar shops, business to business. This is because of the threat of a lawsuit from the State of NY against Fed Ex, who conceded and will no longer deliver any packages that contain cigars or any tobacco product beginning the first of the year. If UPS and USPS follow this whole debate will be moot, as all on-line cigar companies will be forced to shut down but for now the debate continues. The question here is; Where should you be buying your cigars, online or and a cigar shop?

Let’s be honest here, there are pluses and minuses with both for you, the cigar consumer, some of which you may have never even thought about. An industry, the cigar industry was built and controlled by brick and mortar cigar shops across America, but has now crossed an invisible line in the past year. Today it is not only controlled by the on-line discounters but the majority of the sales come from just the very few at the very top, this is what concerns me most. The biggest players now control over 50% of all the sales and those biggest players are mostly manufacturers who sell directly to the brick and mortar retail shop owners and today to the end-user at the online sites they now own. Obviously this is bad for the cigar retailers, as monopolies are being created, but how can that be bad for you, the consumers?

This scenario of the manufacturers selling directly to the consumers is not just happening in the cigar industry but in lots of other industries, manufacturers competing directly with the very customers (retailers) they supply. These manufacturers make money selling to the retailers and now make even more money selling to their customers, you, the cigar consumers. The retailer cannot compete with them on their brands, it’s just that simple. But there are lots of brands, actually the majority of cigar brands that are not controlled by the few at the top so maybe there is hope for the mom and pop cigar shops vs. the on-line discounter, or is there? What are the plusses and minuses for you the consumer to buy at the cigar shop vs. the on-line discounter? Let’s dig in.

First is the obvious elephant in the room and the number one reason someone might buy cigars on-line as opposed to supporting their local B&M… price. The number one reason for migration from store shopping to on-line is unquestionably the price of the cigars. Deep discount prices are just that, selling products for far less because in most cases their costs are less. Cost for everything including the cost for the products they produce or buy in bulk, their overhead including low wages for their warehouse pickers and packers and their off shore call centers. Their rents per square foot are far less as their warehouses can be in secluded spots off the beaten path, virtually in the middle of nowhere. Then there’s the taxes, where the online site pays nothing… it’s simply not a level playing field. If it’s all about price, at first glance it might seem that the on-line folks have the retailer beat…but wait.

If you’re like most cigar consumers you love to try different cigars that you haven’t had before, cigars that might match your taste profile, price point and strength, but something a little different. We are all on the quest for the best cigar we ever smoked, and to someday find it we must sample many dogs. You may want one of these and two of that, but buying online you might be forced to try more than you really want. If you don’t like it, you are paying for many cigars you don’t like. If you only bought one or two before committing to 5, 10, 20, 25 or more, you would have saved money…its dollar cost averaging. And don’t forget the shipping, you may have bought way more than you wanted to because you wanted to reach the magic amount for free shipping, but when you finally realized you paid over $150 for 30 cigars you really don’t like, you now might think you have overpaid. You have to do some dollar cost averaging to really understand. How many cigars did you get that you really like divided by what you paid. If you paid $160 for 30 cigars and liked 5 of them, you paid $32 for each one of them. You can suffer through the others, give them away or continue to rotate them around your humidor like you’ve been doing over and over again and never lighting up. Sounds familiar?

Then there is the quality of the cigars you purchased on-line. Are they in perfect condition? The easy answer to that is a resounding… no. It’s almost impossible for those cigars to be in optimum smoking condition when you receive them because they have gone through hell. Hell is the UPS or USPS truck that delivered them. Was it hot anywhere this truck has been to? Do you know what happens to premium cigars after a major climate change? I promise you that you won’t like it. You may want to skip over the next couple paragraphs now if you have a week stomach.

Lasioderma serricorne, commonly known as the cigar beetle is a creature that comes alive at hot temperatures,Graphic3 just like the temperatures inside those UPS trucks. Have you ever stepped foot inside a UPS truck during a warm day? It’s not warm… it’s Hot! The beetles come alive, and they can fly, they may live just 2–6 weeks but they can do a lot of harm to those cigars in a very short time and any cigars that they come in contact with. The female beetle lays around 100 eggs at a time, so they multiply fast and furious. The larvae are active and will move around on and bore into cigars, feeding as they go. Freezing for 6 days will stop this problem as that is how the retailer receives their cigars from most reputable manufacturers, but that is not done from any on-line retailer to the consumer to my knowledge.

Graphic4But maybe you’re in a cold weather area and this should not be a problem. When you receive the cigars you are ready to smoke them right? Wrong. The change in temperature and humidity devastates the quality of the cigars and they need to rest and recover from either side of temperature and humidity changes. A good retailer will stock and rotate their cigars so that when someone buys a cigar from their retail shop, that cigar is in perfect, ready to smoke condition immediately. It must be because you, the consumer can physically see what is invisible on-line. The brick and mortar retailer must supply a ready to smoke cigar upon your request. Have you had over humidified cigars or overheated cigars from on-line? Soft cigars or ones with little drill holes on the wrappers, holes which were caused by the tobacco beetles. Do you do the dollar cost averaging and see how many you tossed or should be tossing and what you really paid per cigar? Is there still a cost savings?

Have you ever noticed some of the on-line players selling by five-packs and not in the boxes you see in cigar shops? Why don’t the retailers have those packs of five? They appear to have the same bands on them, but are they really exactly the same cigars? The answer to this can also be no in some cases. These can be apprentice cigars, made by other manufactures or rolled by trainees and banded and put in packs or bundles and sold to them and later to you at substantially better prices. It’s not always such a good deal… but sometimes it is. The question is, when is it a good deal and when is it not? Do you feel lucky… well do you?

Some will give the price debate to the on-line site but you really might not be getting the same thing, in the same condition or exactly what you were looking for, but you did pay less per unit but let’s move on, I think I made my point.

Now let’s talk Selection; you hear it from all the shops, we have the biggest and best selection around, but really do you? Talk is cheap but inventory is expensive. The biggest selection must be on-line because they stock so many brands and sizes you never heard of right? Ah… you know where I’m going here… you can’t see it. If you can’t see it and touch it, it’s not real…or is it? Well… I’ve seen it, its massive, it’s a warehouse, but it’s not a humidor. Actually the temperature and humidity is not correct but they “move” through the product so fast it’s probably fine… probably. If you go into a brick and mortar cigar shop, you can feel and touch and you can be certain. If I go into a humidor that is too warm, I will walk out… you guys do whatever you want. On-line you really don’t know for sure.

Next you have Customer Service; a phone operator from India is better than a button on a website but a live cigar expert who smokes cigars and is there to help you make a good choice or recommend a cigar based on what you have liked before sounds even better to me, how about you? Add a clean comfortable environment with a seating area with like-minded cigar smokers to add the lost art of social interaction and you got a party if you ask me. Enjoying a premium cigar with others is better than smoking alone for me in most cases. Don’t get me wrong, sometime sitting alone and enjoying and really paying attention to the cigar works fine sometimes, just like now. Both are better than texting… just my opinion.

Local financial impact; can be another plus for your local B&M. If you spend money locally, like buying your cigars at your local cigar shop, you can expect most of that being spent on their local help, and that money going to help support other local business, and the circle of funding goes around to maybe someone spending money on you or the company you work for. Spending on-line in lots of cases goes to overseas companies that use their money in their economy. It doesn’t sound like much but imagine 4,000 cigar stores selling 150 million cigars and that’s a billion dollars to local economies. That’s just in the cigar business. If we all supported local shops of all kinds it would be pretty dramatic. That is another plus for all brick and mortar shops, again in my opinion.

With full disclosure, I am a double agent. I have owned and operated 3 retail cigar shops for over 30 years now and I’ve operated a mail-order cigar operation before on-line even existed. Later, I was a pioneer on the early days of on-line cigar sales. I did it initially to be able to continue to service my customers who moved away. Even though they were moving away, I wanted to continue to supply them with cigars and I still do. Today I sell online to folks who have never stepped foot in our shops before but buy from us on-line. It’s a good business and certainly part of our business, so I am double dipping.

To be honest, I never went full-steam ahead on-line because as a cigar smoker myself I never thought the experience could ever match up to what you get in the stores. Cigar buying should be an experience to the consumer and part of the overall experience because without it you are only getting half of it… or maybe even less. The aroma in a cigar shop is sweet and intoxicating to me. The visual is very appealing, the colors of the wrappers and the beautiful artwork of the packaging. The taste of well-aged tobacco that is in optimum temperature and humidity is delicious, all which can’t be done on-line. Add to that the interaction of others who enjoy cigars and a knowledgeable staff to help guide you. And lastly a clean comfortable place to sit and meet new people, talking with them on current events… and there you have an experience, a cigar shop experience… the brick and mortar retail cigar experience. This experience is what separates cigars from all other products. This is what makes a cigar even more special to me… the brick and mortar cigar shop.

In my personal and professional opinion, I don’t think it even comes close, the brick and mortar cigar retailer wins. What do you think?

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