Up in vapor?
Small vape shops struggle to survive under growing weight of tax changes, tariffs, the product’s possible health risks and social media’s reluctance to accept advertising
For Gary and Pam McBurney, smoking a pack or more of cigarettes a day for 30 years was taking a toll on their health and their wallets.
“We hated ourselves,” Ms. McBurney said.
Finally, something helped them quit within three weeks: vaping. “We wanted to become nonsmokers. Vaping is the only thing that got us over that,” Ms. McBurney said.
The couple decided to open up their own vape shop in 2016. “Our first mission was to help people overcome their smoking addiction,” Ms. McBurney said.
But getting the word out has not been as easy as they hoped. Vaping and e-cigarette use has garnered a bad reputation. People have been hospitalized over extreme side effects; San Francisco banned vape sales; manufacturer Juul Labs was accused of targeting ads at teens; and there have been reports about unknown chemicals and health effects.
It has been enough to slam the brakes on the growth of an industry that emerged less than a decade ago.
Vape shops started to grow in number in 2012. There are more than 8,000 shops open in the U.S. today, according to the American Vaping Association.
The business has become increasingly challenging. Lawmakers voted for new taxes; social media sites began blocking vape businesses from pushing out ads; and local events do not want them pitching tents. A steady stream of vape shops have gone out of business. Most recently, the U.S. Food and Drug Administration announced Aug. 7 that it is investigating 127 cases of people suffering from seizures after vaping.
Origins of vaping
Vaping involves an e-cigarette that basically is a handheld battery-powered vaporizer simulating smoking but without burning tobacco. It contains nicotine, so traditional cigarette smokers are still getting that fix. The user is exposed to flavored water vapor, which can be fruity, minty or tobacco flavored.
Although the first documented reference to an e-cigarette came from a U.S. patent in the 1930s, the first commercially successful e-cigarette was created in Beijing in 2003.
Hon Lik, a pharmacist, inventor and smoker, created the device after his father, also a heavy smoker, died of lung cancer, according to the Consumer Advocates for Smoke-Free Alternatives Association. E-cigarettes were introduced to the U.S. in 2006.
By 2011, a study was published showing that e-cigarettes were a promising tool to help smokers quit, producing sixmonth abstinence rates better than those for traditional nicotine replacement products. Two months later, the FDA said it would regulate e-cigarettes as it regulates other tobacco products.
Vape shops began popping up like Dollar Tree stores. By 2014, the major multinational tobacco companies had entered the e-cigarette market, according to the Annual Review of Public Health.
Juul Labs — the largest e-cigarette company in the U.S. — was founded in 2015 and launched its first e-cigarette later that year. The company has 72% of the market share, according to a study from the JAMA Internal Medicine.
Struggles with promotion
Among the biggest struggles for the owners of Vapor Galleria, a franchise on the South Side, is how to promote the shop that they spent about $200,000 to open three years ago.
Mr. McBurney said Facebook is an important tool. But when they want to boost their new vape juice flavor or CBD — short for cannabidiol and is a chemical compound from the cannabis plant — most social media platforms won’t let them.
“When you see the pay for the boost, it just says ‘denied,’ ” she said.
Dave Norris, owner of Blue Door Vaping in Mechanicsburg, said that is true for him as well. “This is perhaps one of the biggest harm-and-reduction tools, but it is not seen as that in this country,” Mr. Norris said.
Greg Conley, president of the American Vaping Association, said the organization also
struggles to promote itself on social media. “There is a lack of understanding within the general public,” Mr. Conley said. “They don’t know vaping businesses are just looking to market their products to people who are looking to quit smoking.”
Denied access
Mr. McBurney said getting into events around Pittsburgh is tough because no one wants to allow a vape business to set up a tent, citing Picklesburgh as a recent event that would not allow them to participate.
Picklesburgh officials did not respond for comment by time of publication.
The shop tried to get a spot for the Three Rivers Regatta, an event that was ultimately canceled. At first, they were told “absolutely not.” But when they spoke to another man who worked for the festival, he said he could get Vapor Galleria in.
On social media, the two said their daughter finds creative ways to promote the products without paying for an ad boost and uses platforms like Snapchat and Instagram that are not as strict with advertising.
Taxes and tariffs
Three years ago, huge taxes hit local vape shops across Pennsylvania.
Vapor Galleria opened in December 2016, two months after a 40% floor tax — a onetime tax placed on a commodity undergoing a tax increase — was passed on vaping products.
More than 400 vape shops had been opened by mid2016, according to the vaping association.
At least 100 shops across the state went out of business in 2016. The tax was considered a “wholesale tax,” meaning all inventory was subject to the tax — everything from vape juice to batteries.
KingdomVapor in Butler, avapor wholesaler, fought the tax.In March 2017 the wholesalerfiled a lawsuit against thePennsylvania Department ofRevenue, claiming that therewas a misinterpretation ofthe law and that it could onlybe imposed on nicotine products.
Thecase closed in December2018, with a ruling in favor ofthe vapor wholesaler. All theshops were then eligible fora tax refund for what they paidover the prior two years.
The Department of Revenue is uncertain how much the state owes in refunds because vaping products fall under the category “other tobacco products.” So sales of cigars, smokeless tobacco and other products are included with vape product revenue. Each vape shop has to send in a form asking for the refund.
Kingdom Vapor did not respond for comment by time of publication.
Health and price concerns
According to a review from Johns Hopkins Medicine, vaping is bad for your health. But it’s less harmful than traditional smoking because e-cigarettes heat nicotine flavorings and other chemicals to create a water vapor that is inhaled.
“Regular tobacco cigarettes contain 7,000 chemicals, many of which are toxic,” the review article said. “While we don’t know exactly what chemicals are in e-cigarettes ... there’s almost no doubt that they expose you to fewer toxic chemicals than traditional cigarettes.”
Cigarettes on average cost about $7 per pack and disposable e-cigarettes cost about $9.50 on average for one ecigarette. But when one ecigarette is about the equivalent of 2.5 packs of traditional cigarettes, the longterm pricing is cheaper.
Taxes on a state level have seen some rollback but taxes on a national — and international level — have made it hard for small players such as Vapor Galleria to make a profit.
In addition, President Donald Trump has imposed tariffs on many Chinese goods. Ninety percent of the store’s products come from China.
“I see it on my invoices now. [Warehouses] are adding an extra $12 to something I didn’t have before because of the tariffs,” Mr. McBurney said. “So everything we order that comes from China, they add a tariff on, which is killing us.”
Despite the headwinds, Mr. McBurney said the couple’s South Side store averages around $1,350 gross revenue per day.
Target market
Small business vape shop owners are on the same page when it comes to who they say they are trying to market their product to: cigarette smokers.
Mr. Norris in Mechanicsburg, who smoked more than a pack of cigarettes a day for 25 years, said vaping help him stop because it allowed for a healthier way to get nicotine.
But one of the things that appeals to smokers —- getting nicotine in a better flavor through vaping -— is also drawing in an underage crowd.
In 2018, 3.62 million middle school and high school students were considered users of e-cigarettes, according to the FDA. Its most recent survey said 81% of youth ecigarette users cited appealing flavors as the primary reason for use.
Earlier this year Juul Labs stopped selling its flavored vape pens in brickand-mortar stores.
TheMcBurneys are not givingup on their mission andtheir small business, althoughthey worry that things couldkeep getting harder if taxlaws are changed and promotionroutes dry up.
“If one door closes, we will just find another door,” Mrs. McBurney said.