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An Open Letter to the Cigar Industry: The Lie About Internet Cigar Sellers

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The Lie About Internet Cigar Sellers

It is said that “silence is acceptance.” And I have been silent for quite a while.

But given the current state of affairs in our industry, and now that everyone has taken their respective sides about the PCA/IPCPR’s ability (or inability, as I see it) to represent the needs of all retailers – it’s time I speak out, and fight for what’s fair.

As a brick and mortar retailer, as well as a Catalog/Internet company, this much is clear: our role in this industry has been misrepresented – that we’re “the enemy” of local retailers and must be driven out of business. And that must end.

This letter is meant for retailers, manufacturers and consumers. We are a fractured industry: B&M retailers vs Internet, Machine-made vs Premium. If we continue down this road it will be a defeat for all of us. And now that the factions representing the retail end of this business have been trying to cut Internet retailers out, the entire system will start to break down. That means the FDA wins the battle against us, without even having to fire a shot.

 

To our suppliers:

Deny the positive impact of Internet retailers like Famous Smoke Shop, if you like. But you must at least respect the growth we’ve brought to the cigar industry as a whole.

When pressed to provide us with fair treatment, manufacturers always respond, “But what will the retailers say, if we did ‘x’ or ‘y’ for you?” Retailers shouldn’t say anything – because the Catalog/Internet side of the business needs vendor support, as much as any other seller. Our contribution to the business is, and has been, enormous – and that has contributed to everyone’s success.

The Catalog & Internet cigar business likely represents 50-70% of all box sales. Will the industry grow by that much if our category dies? The answer is simply “no.” Manufacturers will have fewer outlets to sell their cigars. The collective cost of doing business will rise (i.e., FDA, regulation, excise taxes, etc.), and all of it will be passed on to the retailers – and ultimately, to the consumers. Cigar consumption will decrease as prices will double (maybe even triple) over the next five years. Rising cigar prices will not produce growth for any portion of our industry.

inside famous smoke shop retail store
Inside the current Famous Smoke Shop brick & mortar store in Easton, PA.

To the PCA:

You may think you’re hurting your perceived enemy, the Internet company, by pushing us out; but you’re hurting store owners, manufacturers and your friends in Nicaragua, Honduras and the Dominican more. And you don’t even try to understand why.

Accept the reality that local and Internet retailers are in a symbiotic dance, where we each provide a service to the customer. Let me remind retailers that we can never replace the face to face interaction you provide at the local level. Conversely, we’re able to serve the consumer who lives too far away from your shop to buy cigars. If the industry prospers, so will you – if you keep cutting us out, the industry will decline.

A stubborn fact remains: no matter how difficult or untenable the PCA or their tax-happy representatives make it to sell cigars, the Internet cigar business is not going away. Stop looking for excuses and scapegoats – it’s not our fault that 48 states have an excise tax and Pennsylvania and Florida do not. Do not blame the Internet for your failed attempts to stem the tide.

This brings us back to my previous document concerning the actions of the Maryland retailers and the PCA. The PCA needs to come clean and make a public statement acknowledging their involvement in taxing remote sellers and explain their motivation. This action cannot be undone and may lead to more states enacting excises taxes. What can be undone is a clear policy of where the PCA stands on this issue and what steps , if any, the PCA is willing to make to help their Internet brethren. But the fact that there has been no response from the PCA Board to my “Letter to the Industry” only arouses my suspicions.

Famous Smoke Shop 80th anniversary cigars guide Famous Smoke Shop in New York City's Garment District circa 1980s
The Famous Smoke Shop retail store, in 1980s New York City.

To consumers:

The Internet brings you convenience, selection and provides affordability. You know this already.

There is a human cost to the cigar business’ decline. The B&Ms won’t pick up the slack if Internet retailers go away – instead, fewer cigars will be purchased by the industry as a whole. That means fewer cigars being made, factories will close, people will be laid off, and tobacco farmers will be forced to grow products other than tobacco to survive. For the cigars that get made, prices will climb as supply becomes limited – and many B&Ms will go out of business.

The Internet cigar business has historically been willing to work on lower margins than the B&M category. This has been an advantage to consumers: we (meaning companies like Famous) keep prices low by buying in large quantities, and helping manufacturers move merchandise that might be difficult to sell. It was not because of altruism that we did this; rather, it was because competition is a good thing. This is how the market is supposed to work.

I have a saying about the cigar industry, it’s sardonic: The cigar industry hates regulation, except when they are doing the regulation themselves. A little history is in order here…when I entered the industry full-time around 1970, the concept of a premium cigar did not exist; neither did the Internet. There was very little regulation of cigars and Federal import tax was 4 ¼ cents per cigar. That’s about $1.00/box. Pricing regulation, which our industry (not me) loves and enforces, did not exist. Then in June 2007, the Supreme Court overturned a 96-year precedent and ruled that it would not be illegal per se for a manufacturer to set and enforce a minimum price. You see, up until that time, companies such as Famous, J&R, Holts and Cigars International could basically buy cheaper and sell cheaper, benefitting the consumer most of all. Soon after this ruling, cigar manufacturers and importers got on the bandwagon: “Here Famous, sign this pricing contract or we can’t do business.” I will leave it to you the consumer whether this was a good thing.

I’ve been in this business full-time over 50 years. I’ve earned the right to speak my mind – and while there will always be a few in our business that will speak harsh words against me or my company, I don’t believe that anyone can say I have ever broken my word. (And if this isn’t true, here’s your chance.)

I am not done with my indictments. I feel a Pandora’s box has been opened and for warfare not to ensue within our industry, I for one, need clarity on whether the PCA has everyone’s back.

The ball is in your court.

Arthur Zaretsky
President & CEO
Famous Smoke Shop

P.S. I almost forgot… I was amazed by the outpouring of support from consumers and friends within the industry. I want to thank everyone who has posted positive feedback on my previous letter.

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Ted
3 years ago

I’m not familiar with the PCA and their issues, with the exception of what I’ve read recently from Arthur and others, so can’t add much to that discussion.
What I am somewhat familiar with is the local B&M scene. We don’t have many in my location, but of those I’ve visited, only 2 get my repeat business.

Why?
Because they care about what they sell; because they treat me with respect and answer my questions, no matter how simple or repetitive they may be; because their demeanor and attitude towards their business and their clients makes me want to go back; because they’re NICE PEOPLE.

Similarly, it’s amazing how far a simple hand-written “Thank you!” on your receipt will go towards wanting to place another order with an online retailer.

If B&M’s are having business problems, the first place they need to look is in the mirror. Even a remote location, small selection, or higher prices will get repeat business if you make people want to come back. Blaming industry-wide problems on one aspect of the industry to the exclusion of yours is just foolish. It’s not good business, for anybody.

I enjoy my tobacco vice, as seldom as I get to indulge it. I hope I get to continue to do so for a good long time.

Arthur Zaretsky
2 years ago
Reply to  Ted

Ted:
Thank you for your input and response to my document.

Julio
3 years ago

Like I said before I don’t have the time for brick and mortar visits. I work as a assistant district sales manager in the industry of photo gifting and theme park sales for a company that’s been around since 1977 . Had we not changed with the industry we would not have contacted most theme park business in the country and even overseas. Had we not gone digital when prints were the only products making money we wouldn’t be around at all.
I’m an online purchaser of cigars. Take that away and I’ll have enough to last me for a few years but make no mistake I wouldn’t be visiting shops because I don’t have the time. I shop at 2200 hours usually and sometimes later and I’m usually never home when my package arrives. If it wasn’t for online sellers… Well let’s just say dead horse is dead. If you don’t evolve in business you might as well get a job working for your competition quickly before they are over staffed. Mister Z. Hopefully years from now we will all look back at this as a turning point when you and certain others forced discussion on the elephant taking up space on the sofa. Thank you for everything. I’ll continue to check Monster / Famous like I always have when I’m looking to buy. Not just because your from New yawk.

Arthur Zaretsky
2 years ago
Reply to  Julio

Hi Julio:

Being in the cigar business, as I have been, for over 50 years is getting more complicated. Some states are now requiring adult signature. That’s a problem for people such as yourself. Only solution is to send to an access point, which may or may not be convenient.In addition is cost extra to require adult signature.

Keith Wright
3 years ago

Well said Arthur. If anyone needs validity of your words just get them to read the Australian Governments view on cigars and any other tobacco products. They can show you where you will end up if you are not careful. Its criminal to charge nearly $1000/kg tax on all tobacco imported into the country by individuals for personal use. If i want a cigar from a B&M then i pay $20-50 per cigar.

Arthur Zaretsky
2 years ago
Reply to  Keith Wright

Keith:
Thanks for your kind words. When and If cigars reach that level of pricing, there will not be a cigar business, and lot’s of smuggling.

Ray
3 years ago

Online retailers avoid paying tobacco taxes and up till recently, sales tax to the states they sell to- this is the issue in my eyes. The brick and mortars (who are the true members of PCA/IPCPR suffer and eventually close because mega online stores like yours and others like Holts, JR, Thompson, Mikes, Cigars International, Neptune and so on, sell direct to the consumer in those high tax states. You’re robbing both the consumer and the brick and mortar from the experience of developing relationships with their local tobacconists. Sure you may in fact be helping to mass sell product but that also cheapens the hard work those artisans in D.R, Nicaragua, and Honduras put into producing great cigars. So you want a level playing field? Then pay the taxes or don’t sell to states that have tobacco tax. At the end of the day you’ve enjoyed the spoils of Tax Evasion long enough in my opinion.

Chris
3 years ago
Reply to  Ray

Clearly, the taxes only represent a small part in the pricing difference between B&M and Internet. Since taxes are now being charged on internet purchases, how do you explain the inordinate price difference still in play?

Anthony
2 years ago
Reply to  Ray

So basically you are saying, “screw the consumer who does not live near a B&M store”! That doesn’t help anyone. Like this letter states, if we shut down internet sales, we will end up losing cigar sales, and end up closing businesses… Enjoy your $20+ cigar, hope you can afford it…

Arthur Zaretsky
2 years ago
Reply to  Ray

Ray:
Ray and I have had an extensive offline discussion. Suffice to say we differ dramatically on the utility of what Famous Smoke Shop and my category does.

Anthony
3 years ago

I have no problem paying tax for online purchases. It is still cheaper for me. I like the sales I can find online. My local b&m have nothing that comes close. I would not have a cigar collection if I had to pay local retail and would likely switch to only smoking Cubans bought at duty free shops.

Arthur Zaretsky
2 years ago
Reply to  Anthony

Hi Anthony:
I will not address the Cuban cigar issue. Our market wants Cuban cigars because we cannot legally buy them in the USA. I think the quality of Nicaraguan, Dominican, Honduran cigars far exceeds the quality of current Cuban cigars.
Famous is now collecting sales tax in 40 states. I disagree with this Supreme Court decision(Wayfair Decision) on Constitituional grounds. It allows all the states to reach over state lines and audit Famous Smoke Shop. I have no vested interest in a state in which I do not reside. In effect, I am working for free: one definition of that is slavery because it is compelled.

Thank you for your business.

Chuck Gruter
3 years ago

I could not agree with you more Arthur! I shop online for unique blends and quantity purchases. I visit my local store just as often to meet brand reps and friends for the social benefits of cigars. Thanks to my local brick and mortar stores I have met and had conversations with Rocky Patel, Ernesto Perez Carillo and his daughter Lissette among others. I love saving money online – but nothing replaces the social gatherings, holiday celebrations, and personal friendships of local stores and lounges.

Arthur Zaretsky
2 years ago
Reply to  Chuck Gruter

Chuck:
Thank you for your comments. I do believe that B&M and Internet are an eco-system. We both need each other. i think the modern cigar lounges opening across the country will become a more important part of t he business in the future.

Morpheus
3 years ago

I agree, there has to be balance between both sides. I used to manage a cigar lounge and we had very good results with letting our customers know what was going on with this fight and how it affected prices. By being proactive and letting people know what type of internet sales were on for the cigars and allowing customers to smoke these cigars in the lounge as long as a same day purchase was made, we created a high level of trust and fierce loyalty. My customers would do anything necessary to keep my doors open. I have watched this debate about online v B&M since 2013 and have yet to see anyone cover what could be a killer for both sides. If the situation as described in the article comes about we will be creating a black market that could totally wipe out everyone except those with the deepest pockets. We are already seeing these cigars showing up. Some are garbage but some are impressive. Very impressive, and also very cheap. Fighting against ourselves and creating a vacuum for a black market to thrive is something we do at the entire indusrty’s peril.

Arthur Zaretsky
2 years ago
Reply to  Morpheus

Hi Morpheus:
I just returned from TPE Show. I was pleasantly surprised by B&M retailers approaching me and thank me for my opinion and honesty.( Was wearing a Famous Smoke Shop Hoodie). Everyone knew who I was and it was an opportunity for me to dialogue with
B&M retailers. I am not a mega company and I am the sole owner that came up in the ranks thru hard work.
The current setup of PCA doesn’t even allow for companies such as mine to have a voice. Change is needed and coming.

Austin Ladd Roberts
3 years ago

There are many in our ‘let the market decide’ country that do not and can not depend on B&M – for in this cigar-enjoying consumers’s case, it means a 335 mile round trip to the closest! I, too, am part of a market segment that has to depend on internet recommendations and internet sales. Keep up the good fight Mr. Zaretsky – I’ll burn one in your honor today.

L. Mike
2 years ago

Unlike you, I’ve got three B&M’s and a liquor store that have cigars for sale. I shop them for supplies, social interaction and an indoor spot to enjoy a smoke. But I still order online. I’m retired, fixed income and while I used to smoke the cheapest, I’ve “matured” a bit. The quality I can find online in the $2-4 a stick range is impossible for the B&M’s to stock. I buy the occasional $10-15 smoke to celebrate something or just to help, in my small way, support the locals business. Thanks for keeping the growers, rollers and blenders employed, and at a price point I can continue to enjoy their labors.

Arthur Zaretsky
2 years ago

Hi Austin:
I appreciate your comments.As I said we are an eco system. Those that run their stores efficiently do not bother with what I do.

Jerry Bryant
3 years ago

Everyone needs to work in the same direction. I buy both local cigar store and internet. Local admits he can not stock to meet everyone’s taste and preferences. We need both. Also, there is a price point that I leave cigars all together, I enjoy relaxing and having a great stogie but at a certain price I quit no more. I am not addicted. Everyone get on the same boat and row.

Arthur Zaretsky
2 years ago
Reply to  Jerry Bryant

jerry:
100% agree. One of my employees who has been with me 40 years just stopped smoking cigars. When we looked at the record of all the purchase he made it was $49,000.00. He quit cold turkey for economic and and health reasons, People do not need to smoke cigars… Sometimes we forget how expensive premium cigars have become.

Chris Curnan
3 years ago

I appreciate the candor and agree with your analysis. There are few B&M retailers in my area and the few here have cigars as only an ancillary product and markup is ridiculous. Internet businesses presents critical availability and competition to the B&M and serve to create an environment where both can succeed.

Arthur Zaretsky
2 years ago
Reply to  Chris Curnan

Chris:
Many local retailers would fail no matter what they were selling. Creative retailers will survive, but it takes work.

Jason Mcdaniel
3 years ago

I’m glad to see you standing up and speaking out! I live in a rural area outside of a tourist town. The nearest brick and mortar store to me is about 30-40 miles. The true fact is these stores target the tourist and as a result I have to pay the higher prices. Just in the past few years I have started purchasing online and I’m able to enjoy my daily cigars due to price and availability. Thank you for the service you provide and the fact you are speaking out for each of the individuals like myself.

Arthur Zaretsky
2 years ago
Reply to  Jason Mcdaniel

Hi Jason:
I think it was Abe Lincoln who said < "If God didn't love the poor,He wouldn't have made so many of them."

Rich Dunston
2 years ago

I also am not familiar with the PCA, Maybe I should be? I have been a cigar smoker for more than 55 years and have been privileged to puff in both large and small shops all over the US. If B&M retailers feel disadvantaged I think they should start in their own house. The best shops have welcoming environments that never meet a stranger. I make it a point to visit them and buy something anytime in in their city. The worst act like private clubs where the guy behind the counter wants you to hurry up and choose something so he can sit back down on the leather couch or at the card or domino table and schmooze with the regulars. I live in a large city and have a lot of choices. I’m lucky. There are a lot of good reasons to buy online and too many shops are pushing business away by being too busy with the “boys” to welcome a stranger.

Arthur Zaretsky
2 years ago
Reply to  Rich Dunston

Hi Rich:
I agree with your analysis. I do, however, think it could be good for Local retailers(of which I am one) to understand each other better. I just returned from TPE show in Las Vegas. Many B&M retailers praised my document. I was surprised. Internet retailers have no opportunity to be involved with decisions made by the PCA.

Henry Reidy
2 years ago

I agree, we need both brick and mortar, and Internet cigar companies for the industry to thrive. I purchased cigars online for convenience, selection and price. I also support my brick and mortar stores and while there, always purchase cigars to be smoked on their premises.

Arthur Zaretsky
2 years ago
Reply to  Henry Reidy

hi Henry:

Exactly my point. Internet retailers are excluded from many parts of the premium cigar industry, That needs to change.

Dustin
2 years ago

Arthur,
Here is the perspective of one B&M owner who doesn’t sell online. I don’t want you or internet retailers to go anywhere. I think your letter raises good points overall but I think you missed the mark on a few items.

Re: MAP Agreements – while I think some brands could care less (we see them whored out online at rock bottom prices daily) I think most brands request and enforce a MAP agreement as a way to protect their brand. Premium cigars are just that, premium. They are a luxury item made accessible to the masses. You don’t see Porsche, Rolex, or Louis Vuitton lowering their prices on their product or offering sales. That’s because they are a luxury brand and feel their goods are worth that price and discounting that would hurt the brand image. I think this is the same for a lot of cigar manufacturers. These are an artisan, hand made product that takes a lot of hands and a lot of time. That’s worth something.

Re: B&Ms want you to die – Look, I cant speak for every other B&M owner but I think those of us educated in economics understand that having online retailers is a good thing for the economies of scale for cigar manufacturers and distributors. Banning of online sales would kill the industry. I don’t think any B&M owner wants that death to happen. That said, you can’t confuse our want for a level playing field for a want of the death of you. I don’t understand how collecting and remitting taxes is going to kill your aspect of the industry? As you said, you buy in bulk for discounts and sell at lower margins. So even with taxes, you should still be cheaper. And taxes aren’t suddenly going to make a B&M pop up in an area where there is no B&M and this they shop online. Both sides have this urge to beat the “This is gonna be the death of us” drum every time something shifts in the landscape. I’m not asking manufacturers to give me the same deals, or stop selling to you at better rates. That’s capitalism at work and it works. You can buy more so Id expect you to get a better deal. But when you sell into the state I operate in, I expect you to have to collect and remit the same taxes as me.

The tax rules were put in place prior to the internet. No one saw what it would be but here we are. More and more is being sold online, and states have to adjust to survive and that means collecting taxes on out of state digital sales. The PCA, CRA, CAA or anyone else lobbies the Supreme Court in the Wayfair case. But it happened and here we are. Whether or not the PCA lobbied Maryland or Massachusetts (confusing which one right now) to collect those taxes is another argument above my pay grade. But you can’t believe that without their alleged influence that this wasn’t going to happen in some state and grow from there. The Supreme Court gave states carte blanche to collect taxes on internet sales. Those states were gonna milk that for everything it’s worth. It’s better than the alternative of states saying “We are losing tax revenue to internet cigar sales, so let’s ban those.”

At the end of the day I hope you business survives the impending taxes that are coming. You are an important part of the industry and a valuable retail partner to your strictly B&M counterparts. Feel free to email me if you would like to continue this discussion. I’m sure there is a lot I can learn from your 50 years in the business that may shift my thinking.

Thanks
Dustin Pike
Owner – Tobacco and Hops

Arthur Zaretsky
2 years ago
Reply to  Dustin

Hi Dustin:
I appreciate your well thought out response. Since it is the end of my day, and I’m tired, I will respond to your arguments at a more convenient time. Meanwhile thank you. What I will say at this time is that many retailers came over to me in a respectful manner at the TPE show in Las Vegas. I will be in contact shortly.

Arthur Zaretsky
2 years ago
Reply to  Dustin

Hi Dustin:
I promised to answer your document, so here goes.
1. Not selling online is a self imposed rule that in no way benefits your company. When I started my catalog business, customer would come to me an tell me they were retiring or moving. I was eager to continue our relationship and in many case I did.
2. A little history out MAP pricing. I came into the industry in 1970. No MAP. No Excise tax. No regulation on cigars , pipe tobacco, or snuff. Manufacturers controlled prices by short shipping. Legally manufacturers were not allowed to set a minimum selling price. We could have hand shake agreements, but that was basically it. It was an era when J&R, Mike’s, Holt’s & Famous came of age. There was no concept of premium cigars and very few cigar stores that did not carry a variety of other merchandise to stay in business.
The brands you mention (Porsche,Rolex, LV) are luxury brands, but how much of the population are able to afford these luxuries. If you buy a Porsche or a Rolex, unlike cigars, you will probably not buy another for quite some time. This is not at all true for cigars, and if prices continue to rise, cigars will become a true luxury occasionally indulged, or consumption will dramatically decline. None of which either of us want. Your analogy does not work in my view.
3. Let me address the “level playing field” argument. I will need to delve into some constitutional issues to make my argument why I think this argument does not hold water. If you wish to trade your liberty for control and taxation, that’s short term thinking. This may be good for you in the short term, but once state and local governments get a taste of easy money, usually taxes become punitive.
If we take the recent case of Maryland, where I now need to collect bothe sales tax and excise tax, before I could take my next breath , there is a proposal on the table to raise the excise tax from 15% to 86%. I’m almost tempted to say to Mr Retailer, you got what you deserve.
The heart of my argument, since the Wayfair decision in 2018, is that any state or local government now has the ability to audit my company. Thus I am collecting and remitting taxes to entities in which I have no voice. Many retailers are now placed in a very vulnerable position.
My position has always been to avoid paying taxes where it is legal to do so. Sales tax collection for remote sellers was not our responsibility for close on 100 years. It was ironic that the conservative judges voted against Wayfair and the liberal judges wanted to keep the laws in place. In any case all our freedoms are diminished, and I think this is not what the Founding Fathers would have wanted. In the end, is it my fault that other states need money and have put into effect excise taxes because tobacco is an easy target. In a sense why should I pay for your mistakes. Why did you not organize to oppose these toxic taxes?
The level playing field argument no longer holds water.
1. A retailer can compete by selling his cigars at more reasonable prices. You do not need to double the cost on every single item.
2. On line cannot reduce prices because everyone will see and know about the violation. Retailer do not have this imposition.
3. Unless you are Amazon, shipping is a significant cost that B&M generally do not have. In most cases retailers have included inbound shipping in their COGS.
4. Let’s take an example, a real world example with Maryland;
Box of cigars 100.00, 50.00 cost. excise tax 15% 7.50
Selling price at full retail $107.50 plus 6% sales tax total sales price 113.75. This hold true if and only if, the retailer does not include the excise tax in the cost in which case the selling price would be significantly higher if double.
Famous Smoke would need to sell the same box(at Map) but would need to add on another $10.00 for shipping. Or we could absorb the shipping and or excise tax and still have a selling advantage.
So with all due respect, I think the level playing field argument can be put to bed. Treat your customers like the precious jewels they are, carry the products they wan, give them a deal by lowering your margin , create the right environment and you will have customers for life. or as someone has said: Advertise, or the Sheriff will advertise for you.”

Dustin, you make many good points and I do not sense any hostility in your approach. Again we are an eco system, but taxes for anyone , to me, is a bad thing. I do not like lifetime politicians spending my money in states in which I have zero say. So while I am not in disagreement with you on certain points, philosophically we differ.
Thank you for you well thought out document and your good wishes. I wish you success in your endeavors as well. I think, at minimum, I have started a worthwhile dialog . we may come to realize that we are not the each other’s enemy, but the government or FDA may well sink us all.

P.S . i did not check for spelling errors, so please forgive me if my grammar is off.

Brandon Smith
2 years ago

I don’t know what I would do if I couldn’t buy online! I live out in the middle of nowhere and I very rarely am able to drive an hour and a half away to St.Louis which is the closest shop to me.

Arthur Zaretsky
2 years ago
Reply to  Brandon Smith

I hope our worst fears do not come to pass. This week we had excellent news. Judge Mehta rule that warning labels on premium cigars are illegal . Unfortunately this does not apply to machine made cigars.

Arthur Koscielski
2 years ago

I love the online sale of cigars. The variety available and the prices cannot be matched by any B&M. I frequent the only one in my city because of the atmosphere and company. The internet is not going away folks. The only way for the brick and mortars to survive is to provide exceptional service and friendly atmosphere that make you want to come back again and again.

Arthur Zaretsky
2 years ago

I agree with you. However, B&M can compete by not doubling their COGS pricing. Many, not all, just want easy street.

Tony LaMartina
2 years ago

I buy local when I can. If my local B&M doesn’t carry what I want, I turn to the internet. Price variance from my B&M is negligible really. I’m willing to pay the small difference to support my friends at Peaceful Henry’s. Many B&M have internet sales as well. So why try to cut the internet out. You only hurt the B&Ms as well.
Stop trying to hurt the internet retailers. Stop trying to control free market. The consumer ultimately decides where his/her dollar will be spent. Those that serve the customer, whether in a B&M or internet or both, will win and the market will redistribute the market share of those that do not.

Arthur Zaretsky
2 years ago
Reply to  Tony LaMartina

Is there any one one this forum does not buy online? It’s also tru that many B&M have a portion of their business done on the Internet. Our country is being over regulated by many Federal agencies. This argument is about cigars, but not just about cigars.

Guy Cigar
2 years ago

I would have liked to keep my job. I was in cigar sales for ten years. My territory was (still is) over run with high taxes. I would host events and promotions outside of the B&Ms (anything to generate as much business as possible). I can’t begin to tell you how many people told me they do not purchase local. It was more than eighty percent of the people I encountered, including the guys at b&m events that would lean in to me to tell me I made a sale, just online because even with the event discount and goods, the price was too high. I understand that most everyone is not rich. I was constantly told that the local pricing was too outrageous. Even with MAP pricing, internet retailers (not required to pay state OTP) have a completely unfair advantage over mom and pop owned B&MS. I could never get to my numbers. Stores kept closing in my territory. Very few new stores had opened. The ones that had, most did not survive. We can argue all day about local legislators and what they should be doing to protect our businesses. It won’t happen, and I know that you know it. So, you are the enemy. Destroying jobs and locally owned business. You can pat yourself on the back for all the growth in the industry, just make sure the asterisk is placed and it is noted as “growth for the manufacturers”. Again, this was my life for 10 years. I know what I’m talking about. Actually, on coincidence I was just in Las Vegas at the same time as TPE. I attended in 2010 and 2013. It was almost exclusively geared towards mass market. A few premium market companies attended. This year I was curious to see who was attending. Wow! Premium boutique brands I thought would never be caught there were on the list. A change of topic I guess, but I thought it was interesting to see with PCA starting to crash.

So yeah… I would have liked to keep my job. I had found myself away from the greedy corporations who think spending half of your life on the road is worth $45,000 a year. I was able to stay local, sleep in my bed most nights and spend time with my kids. Let me ask you this: Are you hiring for positions around the nation? I’m not willing to travel ever again unless we would be speaking six figures. Just thought I would ask. You seem so proud of your growth. Why not share it with those affected by the negative effects of online sales?

Arthur Zaretsky
2 years ago
Reply to  Guy Cigar

Sorry for your sad story. The reality is that B&M, on the whole need to be better businessmen. Nobody owes you a sale.Accomodate your customers, lower prices, compete. Seeking protection form the government is the road to hell. See my level playing field rebuttal to Dustin above.
We do not sell wholesale. We are not underselling business that buy from us, because we are not selling wholesale.Some companies are selling to B&M’s and then undersell their customers. This is unethical and I do not do this for that reason.
I have no need for a sales person. We are 98% a business to consumer company.
I hope you can find a job in our great industry, but 2019 was not a good year for many companies.

Jay Rosloff
2 years ago

I’m a retailer in the St Louis region.
My rent structure is 4-5x warehouse space. I offer my customers amenities such as comfortable seating, clean bathrooms, smoke extraction, product information, internet, tv, &c. We support local charities and extend military and first responder discounts, too. Obviously online operations will always be able to operate on a lower overhead cost. However, local and state taxes pay for schools, roads, public safety, &c. All I want is a level playing field as far as taxes go. Why should I give away a 14% advantage! Cigars were purchased long before there were internet sellers. But I know the reality is on-line isn’t going away.
I’ll compete with on-line sellers, but don’t piss on my head and tell me it’s raining!

Arthur Zaretsky
2 years ago
Reply to  Jay Rosloff

Mt. Rosloff:
See my rebuttal to the level playing field argument to Dustin , above. Can I vote for someone in your state? Do I have any say in where the money I collect for sales tax goes? can you state arbitrarily come in and audit me? Is this preferable?
Why did you not organize and oppose the taxes when they were being proposed or why not do something now?
Internet is not you enemy. Cars are not an enemy to airplanes. Im sorry you think I’m pissing on you. I see it differently.

Arthur Zaretsky
2 years ago

I have one more thing I would like to point out. Generally sales taxes are easy to collect. there are companies that have software for sales tax. Excise taxes are different,comlicates and there is no software or standard. I understand that is not your problem. it is my problem. We(Internet) are trying to make compliance easy. We( I can only speak for me) are trying to come up with formulas that make it easy to calculate excise tax in each state where the need arises.

MartinBuitrago
2 years ago

I do agree with Arthur and have great respect for him for writing such an amazing letter.. Even though I am a small online retailer mainly in the machine made category and do carry some handmade but not as good of selection or prices as Famous I do believe we are seen as the bad guys and often targeted for not having presence in those states. But what many don’t consider is that we do have same expenses as local B&m and our margins are often smaller since we have to constantly update website, marketing and age verification and rising shipping costs or even sign pricing agreements (for nothing if you ask me because of other distributors selling to some online stores which do not follow pricing agreement which also affects market and creates confusing on pricing )

Plus future generation are not smoking as much or switching to vapes which are not regulated and selling to our young which is decreasing sales at both online and B&M levels.

Martin

Arthur Zaretsky
2 years ago
Reply to  MartinBuitrago

Martin:
Yes I think B&M and Internet need to talk with each other. I would say that most local retailers do not understand how much it cost to sell online. We are investing back into our company all the time. I take a modest salary and treat my employees well. we are in the process of installing a new computer platform that will cost above 4 million dollars. I’m a NYC(former) survivor.

Ephanhymer
2 years ago

Shutting down internet sales would be a disaster! First off, what about those of us that don’t have a “local b&m?” The closest is 1hr away. But most importantly, this will lead to a complete takeover of the cigar industry by internet sales from countries like China and Switzerland. & if we’re forced to purchase from these cites, we may as well purchase the cubans. After all prices will be the same after this

Chris Ludlow
2 years ago

Get gets a little worse. In Delaware( my home) our elected folks took the 21 year old age verification a step further! Now for 68 year old me I have to not only prove my age producing copies of documents showing my age.(like a drivers list both sides) but someone of the correct age must sign for them when delivered! What a pain! However the post office is not far away! I’ve already worked it out with them! California is the other thorn. Famous and other online shops are dealing with this.Its a pain for them too. Leave it to the govment’ fed, and state to screw up something they know nothing about.

Arthur Zaretsky
2 years ago
Reply to  Chris Ludlow

Chris:
We have the same regulation in California, the land of fruit and nuts. This is a problem. We are trying to work with UPS to create access points where packages can be received.
I’m glad you understand that it is your state government that is making sale of cigars challenging.

Sean Householder
2 years ago

I noticed that he failed to mention the fact that Internet retailers have an enormous advantage over brick and mortar because none of them have been collecting state sales taxes for the last 25 years, and even now that some of them are collecting state sales taxes, none of them are collecting state tobacco taxes which, for those of us in California, means a 60% wholesale disadvantage.

I now have to survive by selling monthly memberships to my customers who will only buy their cigars online because they can get cigars for less money than I pay for the same box of cigars as a retail store.

I did enjoy the virtue signals where he takes credit for providing Cigars to the poor and the downtrodden in remote locations who would not otherwise be able to enjoy this wonderful past time.

Cry me a river pal, you said it yourself “competition is a good thing, this is how the market is supposed to work.” Let’s just stick with that statement and dump all this empty rhetoric about coming together is an industry. My industry is retail cigar store/lounge, yours is Internet retailer, and you are the enemy in my marketplace.

I happened to know that California is in the process of trying to force Internet retailers to begin paying California wholesale tobacco tax, and I can’t wait for that to happen. I hope you people are all forced to pay state tobacco taxes going forward just like you have to pay sales taxes.

Because then, at least, the playing field will be level, and I will take your customers away when you no longer have an unfair advantage over me.

SupraMario
2 years ago

“Because then, at least, the playing field will be level, and I will take your customers away when you no longer have an unfair advantage over me.”

No you won’t because we the consumer won’t buy cigars for 8Xs what they are worth, most of us will stop smoking.

You in Cali voted in reps that voted against your interest, why try and destroy the entire hobby and customers because you have a grudge against the wrong groups.

Seriously, you wanting to use the government to destroy business’s is so un-american it’s sad.

Arthur Zaretsky
2 years ago

I just read your response. I have been in this business 0ver 50 years. My company was successful before there were no smoking laws, excise cigar taxes, sales tax collection. Your argument makes perfect sense if you want everyone to pay more to your bankrupt state enterprise. Do you really believe that more taxation to “level the paying field” is the best solution to the shitty situation you fins yourself in, or that it would solve your “problem”.
Evolve. When expenses and taxation and regulation became unbearable in New York City, I left. Just as many are now fleeing California. The solution is not more bad government and fiscal irresponsibility. I didn’t choose to be born in New York, but when the time came I left. I wish that your state had no cigar taxes. I would still wipe the floor with you despite the extra cost of shipping. you are so misguided it’s hard to even have a discussion.

Sean Householder
2 years ago

If competition is a good thing, then you must be in favor of leveling the playing field in California so that you are fairly competing with brick and mortar right?

But you Internet retailers are not paying a 60% Wholesale tax to California are you?

So, you’re not really competing in California, you have a crushing advantage over brick and mortar.

Arthur Zaretsky
2 years ago

What voting rights do I have in California? Should I voluntarily pay taxes to a crazed debt ridden state where I have no say?
I understand that you are at a terrible disadvantage, but that is not my fault. Your options are to fight against this instead of imposing the same regulation on foreign entity({Pennsylvania) or begins to sell via Internet, or move out of California( like i did out of New York State). It is short sighted what you are proposing. The solution is less government not more government,

Tylor
2 years ago

I absolutely love buying cigars from Famous Smoke. I also love buying from my local B&Ms – the few that there are. Most of my boxes, with the exception of one, have been bought on Famous Smoke. Why? Because of the prices, selection, deals, and the shipping. I am a consumer, and I will look for the best prices. When I hear people saying things like “pay extra to support your local stores, or a few dollars per cigar won’t hurt,” it simply irritates me. I don’t like to be told how to spend my money. And If I had loads of money, a few bucks here and there wouldn’t bother me. If someone wants to pay a premium, then do it yourself. Don’t try to influence my with your opinion and logic because I already have my own. Mr. Zaretsky, I appreciate your commitment to the cigar industry and the value you afford us (consumers) when ordering cigars from your business.

Helen Innes
1 year ago

I have a pretty nice cigar collection that I have that is almost exclusively been bought online. There would be no way I would be able to afford what I have if I bought it at the B&Ms. Especially after paying the 65% tobacco tax that makes it’s way to the crooked politicians pockets here in California. It’s not the actual sales tax that I feel threatened by it’s being afraid of receiving some outrageous tobacco tax bill unexpectedly in the mail someday. Although I’ve only heard about this from people who have bought cigarettes online from out of state, I fear it may also be a possibility of happening with online cigar purchases. I’m not really sure if when the online cigar shops charge the states sales tax if the tobacco tax people will get informed also. I really miss being able to shop online with all the cigar sales and further extending my collection but I don’t want o be billed the California 65% tobacco tax later on. It’s not worth it to me to go to a local B&M or lounge that has way marked up prices and often gives me attitute too.

Todd
1 year ago

Arthur, great letter and I agree with you. Personally, I buy tons of boxes for smoking at home from you because I like the convenience and better selection, and also support my local shops when I want to go out and have a cigar. I’m glad to see you are back after the ransomware hack and wish you continued success!

Last edited 1 year ago by Todd
Stillman
1 year ago

Why is cigar news lacking in cigar news? Always a thing happening, but things happening never get mentioned. Congress wants to loot cigar and pipe smokers is big news, where is the coverage?

Mickey Spilatro
5 months ago

Very simply put, B&M cigar shops are a straight up gougers paradise. I went into a big one here a few years back looking for a box of a then hot cigar. The owner actually said to me, I’m going to do you a favor and sell you two of those cigars. I responded, I don’t need your favor, I’m outta here. I went online and found 4 boxes at a discounted price. I bought them and haven’t been in a B&M cigar store since. As far as I’m concerned, every B&M cigar in the country can shut down tomorrow and it will have zero effect on me. Hell, I remember during the cigar boom when Famous was still in NYC. Arthur is the only dude in the industry that was still selling at normal prices and not gouging. Yeah I go back that far. Like it or not folks, cigars are nothing more than a commodity. They always have been. If you like to buy into all the nonsense marketing and pay 4 to 10X what that cigar is actually worth, go for it. It’s always been about smoking what you like. Me, I love the cigars I smoke. None are in the chump stick category. My job in life is to enrich myself,my family, and to give back to others. My job has never been to enrich others buy paying retail for anything. Free markets for free men. Lew always said the only difference between a 2$ cigar and a 10$ cigar is 8$. If anyone knows that more than him, I’d be curious to hear about it. So to all you B&M stores out there, go ahead and enjoy those fat margins on those grossly overpriced cigars you sell. I’ll stick with my tried and true 3$ cigars and continue to enjoy 5 a day for the rest of my life. As I type this, I’m smoking a Famous Exclusive which I got on sale for under 3$ per cigar. They even came in a nice wooden box. I won’t say which Famous Exclusive, but it’s delicious. I shop at Famous and CI. When Lew was still at JR, I shopped there as well. I don’t need any favors from B&M cigar store owners, I’m doing just fine with Famous and CI.
Thanks

Arthur Zaretsky

Arthur Zaretsky

Owner and CEO of Famous Smoke Shop, Arthur Zaretsky has been running “the family business” since 1978. Under his direction, Famous Smoke Shop has grown from a modest Manhattan storefront to the nation’s most successful, privately-owned online cigar retailer. His 40+ years of experience, straightforward personality, and willingness to share his expertise with others, have made him one of the most respected businessmen in the cigar industry.

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