Competition from web-based cigar retailers has hurt industry demand and profit
Los Angeles, CA (PRWEB) May 17, 2012
The Cigar Lounges industry is mainly affected by per capita disposable income and competition from e-tailers (i.e. web-based retailers).
“Since the recession, these drivers have negatively affected the industry,” says IBISWorld industry analyst Justin Waterman, “causing US consumers to reduce spending on cigars and seek out cheaper cigars online.”
As a result, IBISWorld estimates that revenue will decrease at an average annual rate of 2.3% to $3.92 billion over the five years to 2012. The recession did have one positive effect on the industry, though, particularly in 2008. Although many retail industries declined in that year, the Cigar Lounges industry posted growth. According to the Centers for Disease Control and Prevention, the percentage of US smokers rose in 2008 in line with stresses from the economic collapse, helping drive revenue growth of 1.3% over the year.
In 2009, per capita disposable income fell significantly and the threat of e-tailers' cheaper cigars grew. Revenue fell 4.2% that same year and a further 6.2% in 2010. In addition to stealing revenue, increased external competition has eroded profit. To retain a customer base and compete with e-tailers industry participants have lowered prices, which has reduced profitability. “Many underperforming retailers, facing lower profit, chose to exit the industry over the period,” Waterman says.
As such, the number of enterprises declined from 6,708 in 2007 to an estimated 5,714 in 2012, marking an average annual drop of 3.2%. The Cigar Lounges industry consists primarily of small, specialty establishments that cater to local and regional markets. Many of these lounges or bars are sole proprietorships that operate only one location with only a small number of employees. Some firms may operate multiple establishments in different cities or regions. The widespread nature of the industry adds to its low market share concentration. This industry has historically exhibited a low level of industry concentration, and IBISWorld expects concentration to remain low over the next five years.
Despite the unfavorable past five years, the industry has clearer skies ahead. As disposable income rises and consumers are able to pay a premium for products offered in cigar lounges, industry participants will benefit. In the effort to provide a premium experience that competes against e-tailers, average employment per establishment is expected to rise. And as consumers resume purchases of high-margin discretionary items, industry profitability is forecast to expand slightly. Although revenue will remain in its downward trend, industry decline will slow overall in the five years to 2017. For more information, visit IBISWorld’s Cigar Lounges in the US industry report page.
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IBISWorld industry Report Key Topics
This industry comprises businesses known as cigar bars or lounges, where patrons can purchase and smoke cigars. Players in this industry may also provide limited food and alcohol services.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.