A recent Bloomberg opinion article suggested that “Big Tobacco Is Morphing Into Big Vape.” The contention is based on the entry of major tobacco companies into the vaping industry; and granted, those big tobacco companies have both money and legislative power behind them. Nonetheless, the vaping industry is decidedly not the same as “big tobacco” – and will continue to be led by smaller, more entrepreneurial and more innovative market leaders.
“Entrance of these major players notwithstanding, the big difference between the vaping industry and the tobacco industry is that the vaping industry was created, from the very beginning, by smaller entrepreneurs who are far more innovative than the tobacco industry ever will be,” said Todd Skezas, CEO and co-founder of San Diego-based Vapor Authority. “Nearly all of the early entrants were smaller startups, and the industry has grown and evolved due to their work. Even today, as the industry continues to grow, vaping entrepreneurs continue to have unparalleled opportunities to grow, innovate and lead the industry.”
Entrepreneurs looking to go into the vaping market today will however, face a different climate than those early innovators who first defined the marketplace. Three factors will change new entrants’ strategies: An increased competitive environment, new anti-vaping legislation, and tariff challenges. Both challenges can be overcome, but must be met head-on. “In the area of tariffs, the ongoing trade war with China may present some major challenges especially to smaller vaping entrepreneurs,” said Skezas. “In a low-margin resale business, where much of the hardware and raw materials come from China, resellers will need to bring more to the table to differentiate themselves.”
Also, anti-vaping legislation such as San Francisco’s total ban on flavored liquids will have an impact on regional resellers especially, especially smaller neighborhood shops. Such bans have had a disproportionately negative impact on smaller, mostly immigrant-owned shops in the city.
Vaping businesses are stepping up to the challenge with differentiators such as increased variety, in-house testing labs, and unique offerings such as organic or nicotine-free vaping liquids. Whether opening a neighborhood vape shop, manufacturing vape liquids, launching an online resale organization or importing vape hardware, opportunities still abound, and for those entrepreneurs who keep the challenges in mind when creating their startup plan, chances for success are high. For those entrepreneurs, the things to keep at the forefront from the beginning include:
- Differentiation. The market is maturing, and competition abounds. Create an offering that goes above and beyond other run-of-the-mill vape businesses with a better variety, or attractive spaces where customers can vape while they socialize. Those big tobacco companies are competing strictly with money and volume – smaller innovators can do better.
- Focus on quality. Continuing regulation isn’t necessarily a bad thing, it will ensure the quality and consistency of products. Get ahead of the game with an in-house testing lab so you can clearly illustrate nicotine levels and other factors. If you don’t have the resources for an in-house lab, source your products from reputable vendors who do test their products.
- Information-based marketing. Yes, your marketing and social media should inform potential buyers of where you are located and what you offer, but more than anything, effective marketing will revolve around an information-based campaign. There is a substantial amount of misinformation about vaping, and publishing a blog or social media posts with industry-positive facts will go a long way.
The vaping industry has already shaped up to be one of the greatest greenfield opportunities of the decade, with predictions calling for growth to $86.43 billion by 2025, due in large part to rising health awareness among consumers, and a desire for alternatives to traditional tobacco cigarettes. While those larger competitors will certainly take their share of the market, there is plenty of opportunity available for smaller entrepreneurs and startups to enter this market and thrive.