SIC 5993
TOBACCO STANDS AND STORES



This entry includes establishments primarily engaged in the retail sale of cigarettes, cigars, tobacco, and smokers' supplies.

NAICS Code(s)

453991 (Tobacco Stores)

In 1998 a reported 5,204 tobacco stores operated in the United States, with sales totaling $460,757 according to Smokeshop in the "1999 Industry Report." Eighty-eight percent of sales came from tobacco-related merchandise.

Tobacco specialty stores, often called "smoke-shops," were traditionally located in malls or downtown business districts. The mall shops were often part of a chain, while the downtown shops tended to be independents that also sold other items such as magazines and newspapers. Historically, tobacco manufacturers subsidize some of these endeavors in an effort to ensure a constant retail outlet for their products. The largest domestic concentration of smokeshops appears in the southern United States, with 1,516 establishments reported. Although the total number of establishments declined by 23 percent in the late 1990s, the states of Montana, South Dakota, Wisconsin, Oklahoma, and the District of Columbia reported an increase in the number of shops. Across the United States, the number of shops declined at a rate of 8 to 1, with the most significant decline in the western states with 35 percent reduction in stores. Total sales dropped by 14 percent, although employment in smokeshops increased from an average of five employees per store in 1997, to 7.4 employees in 1998, with 43 percent of smokeshops offering employee fringe benefits.

The number of tobacco stands decreased steadily in the United States during the latter half of the twentieth century. Declines were attributed to a change in life-style for many Americans as businesses moved out of the downtown areas where support for smokeshops was high. With less pedestrian traffic, the smokeshops suffered a loss of clientele. Many of the smokeshops that were located in malls in the 1970s slowly disappeared in the 1980s as rents climbed too high for small businesses to endure. Additionally, the steady decrease in consumption of most tobacco products, due in part to the dissemination of information about the dangers of tobacco use, factored into the decline. Meanwhile, an increasingly wide array of stores added smoking supplies to their inventories. Distributors reported that many of the specialty tobacco shops lost sales to other less specialized retail outlets, including drug stores, grocery stores, and convenience stores. Discount department stores and supermarkets became popular second-tier distributors, even for pipe tobacco. The overall convenience and the lower prices offered at these outlets increased their attraction for consumers as an alternative to smokeshops.

At the end of the 1990s, pharmacies discontinued sales of tobacco products in response to negative public sentiment towards the tobacco industry, and convenience stores began to pose serious competition to tobacco specialty shops. In 1997, a particularly large number of nonspecialty retail outlets joined the trend and backed away from the tobacco business in response to efforts by the U.S. government to regulate the tobacco industry. The FDA—backed by President Bill Clinton—passed several regulations, among them a mandate that retailers verify the age of cigarette buyers at the risk of steep fines for those retailers in violation of the law. Remarkably, the anti-tobacco onslaught contributed in part to a limited revival of smokeshop businesses. In anticipation of these stricter regulations, new cigarette outlet stores — small smokeshops selling low-priced products at high volume—opened for business nationwide. In fact, the number of cigarette outlet stores in the United States jumped 36 percent, to about 3,600, between March of 1995 and April of 1996. In 1998, 67 percent of tobacco shops listed themselves as tobacco-only retailers. Analysts predicted a growing trend if government regulators prevailed, and if supermarkets, drugstores, and convenience stores continued to abandon the tobacco consumer.

By the late 1990s, the largest form of retail tobacco consumption came from increased sales of premium cigars—cigars that sell for $2 or more. These accounted for 39.7 percent of tobacco sales at smokeshops. The escalating popularity of premium cigars prompted many department stores, such as Saks Fifth Avenue and Macy's, to add cigar accessory shops in order to profit from the modern fashion trend. So popular were the cigars that, even as President Clinton signed bills hindering cigarette advertisements during the 1990s, he refused to abandon his own habit of enjoying an occasional smoke. Restaurants and liquor stores across the country added fine cigars to their retail mix, further reducing the clientele at traditional smokeshops. Statistics from the Cigar Association of America, reprinted in Market Share Reporter in 1999, revealed that only 16 percent of cigar sales transpired at cigar stores in 1998. During that time, smokeshops in rural sites remained stable, yet urban sites declined by 10 percent. Of existing establishments in 1998, 95 percent were independent, 75 percent existed at only a single location, and 9 percent of businesses operated three or more stores.

Among the largest businesses listing tobacco stands and stores as their primary business were Burley Tobacco Growers Cooperative Association and A. Fader and Sons. Other businesses in this industry included Nazareth's Fine Cigars of Beverly Hills, California; Smoke and Snuff Shops, of Clearwater, Florida; and Smoker's Den, of Bennington, Vermont.

Further Reading

Barry, Susan. U.S. Industry & Trade Outlook '99. New York: McGraw-Hill, 1999.

Curan, Catherine. "Big Stores See Cigars Puffing up Yule Sales." Daily News Record, 8 November 1996.

"Fader's Tobacconists, Smokers Accessories, Cigars, Pipes, Tobacco Lounges." Available from http://www.faderstobac.com/aboutfaders.htm .

Lazich, Robert S. Market Share Reporter. Farmington Hills, MI: Gale Group, 1999.

Osterholm-Cox, Nancy. "Tobacco Specialty Stores Taking Root in Colorado Springs." Knight/Ridder Tribune Business News, 3 April 1997.

Romell, Rick. "Discount Cigarette Stores Have Smokers Puffing for Bargains." Milwaukee Journal Sentinel, 29 August 1996.

"Smokeshope Magazine's 1999 Industry Report." Smokeshop Online. Available from http://www.gosmokeshop.com/0899/report.htm .

"1999 Industry Report." Smokeshop, August/September 1999.

U.S. Distribution Journal. November-December 1997.

Vaughan, Vicki. "Cigars Are Back from the Ashes." San Antonio Express-News, 17 November 1996.

Ward's Business Directory of U.S. Private and Public Companies. Detroit: Gale Research, 1996.

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