October 2016

Vape Shop Events: A Snapshot of the Market

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By Norm Bour

The fourth version of Vape Shop Events was recently held in La Jolla, California. This model, which has been called “speed dating for the vape industry,” has proven to be an effective way to conduct businessto- business relations, but there was a noticeable difference this time.

That difference was the smell of fear.

Many that were scheduled to attend canceled, and since this was the first event held after the recent release of the deeming regulations, that was the major topic during the two-day show.

Liquids Testing and Diversification

This round-robin event usually brings together 27 sellers (manufacturers) and 20 buyers (usually distributors), and confines them behind closed doors to talk business for 20 minutes. The intimacy and privacy have proven to be a potent combination in this industry as well as others.

With the August 8 date just weeks away, there was a noticeable cloud of nervousness. Will these producers stay in business? Are they serious? Apparently, some were not since a few pulled out before the event started.

It’s just the beginning of the end for many who may “open a carpet cleaning company,” which one said as an excuse. The herd is about to be thinned, folks.

Many of the distributors were reluctant to commit to large volume purchases and prices have been pushed down lately.

Why?

Many are liquidating inventory they know cannot be sold after August 8.

There were also conversations about contaminants and pH tests and other areas the Fed may attack,

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and the forgone conclusions is that more regulations are forthcoming, which will make things even more difficult.

Meanwhile, there were some interesting vertical crossovers, which included liquid companies opening new retail shops.

Taylor Craig, founder of Unified Vape Distribution, Big Bang Vape Co. and Bomb Sauce E-liquid in Atlanta, Georgia, started in the vape space in 2012 with his first shop, which became an immediate success. A second and third shop followed, but he diversified into e-liquids and has developed an impressive business with worldwide sales of several different lines.

Even so, he committed to a fourth retail shop, which will take place in Q3, 2016. When asked about his motivation, Craig said, “We want to help as many smokers as we can, so that means having the greatest retail presence possible.”

He added, “This may be the last chance for a while to be of greatest service to those that want to quit smoking.”

I disagree. As we see the market shrinking, there will be many opportunities to pick up shops and inventory for a song, which is exactly what happened in Phoenix, Arizona, with ProArt Vapors.

They found a deal that was too good to be true, according to co-owner Adam Cericola, and opened their first retail shop called Parrot Nation, which is named after their original line, Parrot Vapors.

The shop opened this March, and due to the social media efforts that had proven effective, the shop became an immediate success. Whereas most shops create a retail platform, then develop their own liquids, ProArt did it in reverse.

“Don’t put all your eggs in one basket,” Cericola said, which is becoming apparent in this vape space.

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Diversification is critical.

“The prior owner did a horrible job with this shop,” he continued. “The location was good, but they were always short of product, they had a dismal decor and they had horrible business practices.”

Donovan Phillips, owner of Avail Vapor based in Richmond, Virginia, is a significant player in the vape space and his brand currently owns 92 company shops in the U.S. Their proprietary app scans the QR code on each bottle, which brings up the production data and date, plus a copy of the signed lab report, which can be downloaded.

They also developed a cleaning cloth called Vape Erase, that removes PG residue which habitually fogs and obscures glass counters and windows. These clothes bring one more level of diversification and revenue, which is a wise move.

Collaboration: A Necessary Step for Future Survival

Along with the conversations about the downside of the new regulations and the concern over what e-liquid companies will remain in business, one of the more positive observations was the spirit of collaboration and cooperation. The “me” attitude that has dominated the vape industry for many years may be changing as those that want to survive realize that it may be easier if they collaborate with others.

Granted, this event is attended by more “serious players” than the average vape fest, but as the industry attempts to grasp what’s next, they are seeking partnerships and perceived safe havens.

Madvapes rep Mike Schriefer attended Vape Shop Events (VSE) for the third time and came looking primarily for one thing: distribution partnerships.

Even though Madvapes is one of the largest distributors in the nation, and the largest franchisor, they still believe in the power of partnership.

“At one of our recent events we formed a working relationship with another distribution powerhouse,” Schriefer said. “They are strong on the west coast and we are strong on the east, but now we work

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together if either needs products and are short on inventory.”

Lizard Juice from Florida, has also formed an unusual symbiotic relationship with a non-typical partner: CBD Drips, one of the largest manufacturers and distributors of cannabidiol (CBD) products.

They now have a unique ability to supply two different and non-competing lines to the shops they serve. Boyd Easley, VP of 12 Crowns Consulting, the parent company of CBD Drip, loves this new relationship. “This gives us an added channel we did not have before, so it’s a win-win for both sides.”

Lizard actually formed a second and also distinctive partnership: the US Military.

Their unique program called “Bottle Overseas,” involves shipping one bottle overseas to active military members for every bottle sold both in retail and wholesale.

“The ‘Hero Line’ was created just for this campaign,” said Marcus Tilley, wholesale manager of Lizard Juice, “and was motivated by two female employees with military husbands they could not supply with juice.” But they worked with the military and did find a way.

They currently ship to about half a dozen bases overseas and when asked if the military was resistant, Tilley said, “No. They already have soldiers smoking and vaping. Having us supply free e-liquids to them was another win-win scenario.”

Is there a pattern here?

Yes; several.

One is that the market is going through a massive upheaval and only the few and the strong will survive. Those that do endure the test will be helped by seeking the help of others and offering theirs as well.

We are all in this fight together, so let’s act like it.

Norm Bour is the founder of VapeMentors and creator of the VAPE U online programs. They offer services & resources for anyone in the vape space, including vape shops, online stores and e-liquid brands. He’s also the host of Vape Radio, the largest vaping radio show in the world with more than 1.3 M downloads. Norm interviews the masters of vape and thought leaders in the vape space. Contact him at norm@VapeMentors.com.