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Dec.99/
Jan.00

Internet Marketing:
Cyber $ales
(cont.)

Avilia Cigars, a brand new web entry, has taken a niche approach, focusing only boutique cigar brands.
Among the newest entries to the Internet-only cigar market is Avila Cigar Corp., Miami, (www.avila.com) which went on line Oct. 28 focusing on boutique brands from small manufacturers. "The Internet is great because of the number of people it can reach and how quickly they can be reached," said Avila President Rafael Nodal. "We specialize in very small companies by current market standards, but they still take pride in the work that they do.

"The market segment that we want to reach is people who know about cigars."

He says on-line merchants who advertise cigars that they donít have give the industry a black eye. "For some, the Internet is only a marketing strategy for their company," he says. "We will only list a cigar for sale if we have it in stock."

Smaller retailers report greater success with the Internet, in part because even a few Internet sales add to their bottom line.

Albert M. Baca, owner of Smokerís Depot, Albuquerque, N.M., (www.cigars4u.com) says his Internet sales have grown steadily since he created an Internet website three years ago. "It involves quite a bit of work," Baca says. "But itís developed into something that weíd sure hate to be without. When we first started, it wasnít generating any orders, but the overhead was small. Now it requires a lot of time and thereís a lot of investment."

Baca said he spends about $2,500 a month to maintain his Internet site. "We are to the point that weíve got to have two computers in case one of them crashes. And weíve got to have an e-mail account and backups and an Internet service provider. Weíve got two backup servers in case there are problems.

"Probably half of my business comes from the Internet. Weíve built a pretty good reputation. It would be a lot harder to start off today because the competition is much more fierce right now. There are a lot of good websites and there are some big boys out there selling cigars."

Between he and his wife, Baca says the store puts in six hours a day on the Internet. "A poor day would be about 15 orders. A superb day would be 50."

Ira Neuringer, owner of Smokeyís Cigar Shop, Ardsley, N.Y., (www.smokeyscigars.com) says when he started on the Internet in 1997, he generated between $300 to $500 in sales a month. "Now we do more than that a day," he said. "Thereís no get-rich-quick, though. Itís a lot of work.

"You have to keep up with all the changes and the new stuff. We advertise on a lot of cigar sites and we do a lot of e-mail offering specials. Our list is approaching 6,000 e-mail addresses. Typically, we might get 60 responses, but often when we do the specials, they buy other stuff too.

"We also try to be tobacconists. People like to call on the telephone and ask questions, and we want them to do that."

If an order canít be filled, Neuringer or one of his employees will call the customer, if a telephone number has been provided, and offer them alternative selections. "The web is so impersonal, people actually welcome us calling them," he says.

Rick Erickson, president of The Idaho Tobacco Co. Inc., Pocatello, Idaho, (www.stellarcom.com/tobacco/) plans to establish an on-line customer base associated with his retail store and then probably close the retail store. His Internet experience to date, however, hasnít been what he expected. Heís been selling on-line since August.

"Iím getting a fair number of hits on my website, but itís not nearly as much as I had hoped." said Erickson, who estimated that heís invested about $3,000 creating and maintaining his website. "One of the problems is that the search engines are extremely inefficient. There is way too much garbage on the Internet that has nothing to do with commerce. It gets garbled and jumbled up with sites that are trying to do business."

To counteract the clutter, his website is listed (for a fee) on cigars.com, which serves as a billboard for as many as 40 retailers, and which shows up on the first page of most search engines when the word "cigars" is entered.

"The percent of orders I am getting versus the hits on the page is about 5 percent, which probably is pretty good," Erickson says. "But Iím only getting about a thousand hits a month when I think I should be getting closer to 10,000. Iím sure thatís just a matter of exposure."

Erickson codes his on-line cigar catalog with the colors green, yellow, and red to indicate the likelihood that he will have a specific cigar in stock. He, like others who ship to customers outside of their domain state, is able to deduct Idahoís 35 percent tobacco tax for Internet orders.

John Eveland, president of National Cigar Store Inc., Waterloo, Iowa, (www.2000cigar.com) operates a retail store, has his own Internet site, and has a long-term lease on the Internet domain name cigars.com used by Erickson and others to reach their sites from the major search engines.

He says most of his Internet customers are looking for cigars that they canít find at their local smoke shop - primarily Padrons and Arturo Fuentes. "Those are the most sought after cigars on the Internet," he says. "Sometimes you have them. Sometimes you donít. For the cigars that are readily available, I donít get many calls for them."

On an average day, he said, he will take half-a-dozen Internet orders. "A good share of our orders come from the very high tobacco tax states. I can discount cigars by 22 percent on the Internet, which is the tobacco tax in Iowa."

The Durango Smoke Shop, Durango, Colo., (www.durangosmokeshop.com) primarily sells imported and specialty cigarettes via the Internet, offering cigars only by e-mail inquiry. "One of the main advantages of the Internet is that you can place an order any time day or night," says Colm Galvin, Durangoís manager, who estimated that 25 percent of the shopís sales involve on-line transactions.

"It wouldnít be possible to keep an updated inventory of cigars," Galvin said. "What we recommend is to e-mail us asking for a certain cigar. We will respond immediately with availability and prices."

Durango doesnít discount its on-line sales by the amount of the Colorado tobacco tax, as do most on-line sellers. Galvin also questions whether customers are interested in having personal contact.

"The Internet allows customers to order 24 hours a day, whether we are open or not, instead of being stuck on the telephone."

John Photakis, owner of The Owl Shop, Worcester, Mass., (www.owlshop.com) considers the Internet an advertising medium and doesnít provide on-line purchasing, offering only a catalog and toll-free telephone number to make orders. "Iím not fully satisfied with the security of the Internet," Photakis says. "There are too many opportunities for breaches of security, and there are new viruses coming out daily. And thereís other stuff we donít know about."

Nonetheless, Photakis, who invented and distributes the Tee-Gar cigar holder for the golf course, thinks that some retailers have jumped onto the Internet too soon. "There has been a lot of media hype about the Internet that Iím not sure is warranted," Photakis says. "We do get some inquiries and some sales, but itís not the big gold rush that everyone is talking about. But I didnít expect it to be."

And Photakis disagrees with Galvinís assessment that customers donít want to talk to their tobacconist. "We want to talk to the people, introduce ourselves, and form a rapport," Photakis says. "Typing on a keyboard just doesnít work the way we want it done."

That is the key to cigar sales on the Internet, whether the seller is a high-end tobacco shop or an Internet-only discounter - finding a way for the Internet to work to the satisfaction of both the retailer and the customer


SMOKESHOP - December 1999