Want to open your own e-cigarette shop in Germany? Here you’ll find an overview of the most important topics for setting up such a business. From the choice of legal form and business registration to tips for cost planning and franchising.
E-cigarettes: A market with opportunities
A first glance at the market and you’ll see that the chances of starting a business in the e-cigarette trade are good. According to statistics from the German E-cigarette Trade Association (Verbandes des eZigarettenhandels or VdeH), annual sales for e-cigarettes in the German market rose from around 5 million euros (2010) to 400 million euros (2016). Approximately 3.5 million Germans currently use vapour devices – and that number is rising. This growing market offers excellent opportunities for your self-employment.
Which legal form is the right one for your e-cigarette shop?
One of the first decisions you should make as a founder is choosing a legal form for your company. For the opening of an e-cigarette shop, nearly all German legal forms are available to you. The usual legal forms are UG (haftungsbeschränkt) and GmbH for the establishment of vape shops. An e-cigarette store as an individual enterprise is also doable. Be sure to note that the individual legal forms also differ from a tax perspective.
Here’s a brief overview of the most common legal forms in the retail trade of electronic cigarettes:
Opening e-cigarette shop as UG (haftungsbeschränkt)
UG (limited liability) stands for Unternehmergesellschaft (haftungsbeschränkt) – in English, entrepreneurial company (limited liability) – and is a special form of GmbH. It’s particularly suitable for vape shop founder who want to set up a limited liability company with little start-up capital.
Advantages: A UG only requires a share capital of at least €1, which means the total formation costs are lower than with a GmbH.
Liability: A UG has limited liability. That means that partners are generally only liable with the company assets and not with the private assets.
Opening an e-cigarette shop as a GmbH
The shareholders of a GmbH, or limited liability company, require a total share capital of €25,000.
Advantages: The GmbH is a very popular and highly respected form of business, in Germany and also abroad.
Liability: The partners do not assume any personal liability, but are liable with the company assets.
E-cigarettes shop be opened as a sole proprietorship
The sole proprietorship is the simplest way of forming a company with simple registration and no accounting obligation.
Advantages: No capital contribution is required.
Liability: Careful, the sole proprietor is also liable with his or her private assets.
Your business idea and your business concept are the most important factors in deciding which legal form is best.
Step by step to self-employment: Checklist for e-cigarette shops
Officially, your self-employment can only start once you have registered with the responsible authorities and institutions. Here is a checklist with the most important steps:
Registering an e-cigarette shop as a business
No matter which legal form you choose, the first step is always the business registration. You can only officially open your e-cigarette shop once you have the green light from the trade office (Gewerbeamt).
After registering with the trade office, the tax office (Finanzamt) will get in touch with you for tax registration. As soon as your documents have been reviewed and checked by the tax office, you will receive your tax number (Steuernummer) and may issue invoices.
Business registration in Hamburg (download form)
Business registration in Munich (download form)
Business registration in Cologne (download form)
Business registration in Frankfurt (download form)
Entry in the commercial register (Handelsregister) as an e-cigarette retailer
As a public register, the commercial register documents the registered merchants in the district of a competent register court (Registergericht). The GmbH and UG (haftungsbeschränkt) legal forms must both be entered in the Handelsregister.
Chamber of Commerce and Industry (IHK): Membership for retailers
Like the tax office, your local IHK will be informed by the Gewerbeamt when your company is formed. IHK membership is mandatory and they’ll contact you directly.
Retail trade association (Berufsgenossenschaft für den Einzelhandel)
In Germany, trade associations are the providers of statutory social accident insurance (gesetzlichen Unfallversicherung) for companies and their employees. The German Employers’ Liability Insurance Association (Berufsgenossenschaft Handel und Warenlogistik or BGHW) is responsible for all kinds of retailers. Be aware that you are responsible for taking the initiative to register – no one will contact you. Even as a small business owner without a staff, you have to register with your relevant trade association.
German E-cigarette Trade Association (Verband der eZigarettenhandels – VdeH)
You may want to consider voluntary membership in an industry association. The VdeH is an association of manufacturers and distributors of electronic cigarettes, shishas, and accessories. Trade associations offer the representation of interests and knowledge sharing for all retailers at the regional level.
E-cigarettes in retail: What are the requirements?
If you are planning to open an e-cigarette shop in Germany, there are usually no special permits that you need to obtain or professional qualifications that you have to prove. Nevertheless, we recommend inquiring with your responsible trade office to be sure. There may be requirements for your shop.
However, like any other retailer, you must comply with federal and state regulations. Be sure to inform yourself ahead of time about the following points:
- Commercial insurances (Gewerbliche Versicherungen)
- Legal opening hours at your location
- Declaration of prices
- Architectural specifications for your shop
- Customer toilets
- Compliance with the German Protection of Minors Act (Jugendschutzgesetz) (see “Knowledge” section)
Niche and target groups for your e-cigarette shop
What kind of e-cigarette shop would you like to open? Whether you open your company as a head shop, vape shop, shisha shop or even as a comprehensive specialist retailer, there are many ways to position yourself in the market. Your business idea must be clearly defined and formulated so that you can align all decisions with your concept. Take this task head on and consider your own guiding questions in order to approach a concept.
- Product line: Are you planning a specialist shop for e-cigarettes with an extensive range or an exclusive niche range?
- Target group: Are you addressing smokers, former smokers or non-smokers? Do you offer vaporizers for cannabis
- Procurement: Where do you get your goods from and under what conditions?
- Services: Do you offer cleaning, repairs and spare parts?
- Sales: Do you want to integrate an online shop on your website?
- Product bundling: Do you offer complete packages for beginners or tools for professionals?
- Additional service advice: Can you give your customers professional advice?
- USP: What’s your unique selling point?
Location of your vape shop
The right location is a decisive factor for every new store opening. Your first consideration should be whether you want to open an e-cigarette shop as a presence shop, run a completely online business or offer both. Based on this decision, you can plan all further steps. The demand for vaporizers and liquids and the existing competition at your location are decisive factors. The first step is thorough research of the market. Market analysis data can come from a wide variety of sources. After some Internet research, the Federal Statistical Office (das Statistische Bundesamt) and industry journals are the first sources that you can use for yourself. Alternatively, you can commission a professional analysis that corresponds to your individual needs.
Costs: Opening an e-cigarette shop with or without equity capital
Calculating your costs is the core of your business plan. Depending on which business model you choose, your financial plan may look completely different. For example, if you don’t have a store, you can save on shop rent and operating costs. However, then you’ll have to invest more money in professional web design, software and online marketing.
In general, however, you should consider the following costs for setting up your e-cigarette shop:
- Formation costs at offices and authorities
- Possible consulting costs (e.g. tax consultant, IHK)
- Acquisition costs for your product range (vaporisers, liquids, battery carriers, flavours)
- Possibly renting or leasing space for your vape shop
- Costs for web design and IT services (website with integrated web shop, maintenance)
- Possible personnel costs for salaried sales staff
- Marketing expenses
- Insurance (trade insurance, social insurance, professional liability insurance)
- Tax dues
- Reserves for unforeseen events
The purchase of the initial product range will account for the majority of your expenses. Once you have entered all costs, you can add price and sales calculations to your business plan. Keep in mind that every company has a start-up phase in which costs exceed income. If you cannot raise your necessary start-up capital from your own resources, you should compare credit options from potential lenders (public and private).
Knowledge about e-cigarettes: What know-how do you need for your self-employment?
Entrepreneurial knowledge for retail
The classical entry into the retail trade is through a commercial apprenticeship (kaufmännische Ausbildung), but it’s not absolutely necessary. However, you should not underestimate the requirements of setting up a business. As an entrepreneur, you not only need the right feeling for figures and sales, but be good at keeping an eye on trends. In short, to be successful in the electronic cigarette retail trade, you should first acquire comprehensive start-up knowledge for the self-employed. Adult education centers, chambers of industry and commerce and universities offer seminars and further training on the subject of entrepreneurship. Accompanying specialist literature on topics such as accounting, corporate management and marketing are necessary if you as the founder want to keep track of things.
Electronic cigarette expertise
Of course, you should be very familiar with the goods you sell. Many customers who come to your store for the first time need solid advice or have specific questions about the products on offer. Whether it’s vaporisers, battery types or liquids, you need to have expert knowledge. Trade journals are a good way to stay up to date with new trends and products.
Legal: Which laws affect your e-cigarette trade?
The legal framework for the sale of e-cigarettes and vapour consumption has changed several times in the past. The definition of the electric cigarette has been the subject of sustained debate. Is it a tobacco product, a stimulant or a prescribed medicinal product? The newly formulated EU Tobacco Directive of 2014 states that it is not to be classified as a medicinal product. Other German and European laws will also apply.
E-cigarettes and non-smoker protection
E-cigarettes are not subject to the German Non-Smoking Protection Act (Nichtraucherschutzgesetz). Vaping is therefore generally permitted, even in restaurants, public spaces and transport. However, many companies such as Deutsche Bahn prohibit vaping under private law.
E-cigarette and child protection
As of April 2016, the sale of e-cigarettes and e-shishas to minors is prohibited. The sales ban also includes nicotine-free variants and mail order.
Advertising ban for electronic cigarettes
The German Tobacco Products Act (Tabakerzeugnisgesetz) came into force in May 2016 and regulates the advertising activities for tobacco products and related products. These include e-cigarettes and liquids that contain nicotine. The ban includes the following media types:
- Print advertising
- Radio advertisement
- Online advertising (Facebook fan pages, Twitter, banner advertising, AdWords campaigns, product placement in price search engines, content marketing)
- TV ads
- Advertising through sponsorship
The prohibition of almost all types of online marketing is particularly hard on you as a retailer.
So what kinds of advertising for your e-cigarette shop is still permissible?
- Advertising to experts such as manufacturers and other retailers
- Outdoor advertising (posters, shop windows, vehicles, large areas)
- Cinema advertisements after 6 pm
Opening a vape shop with an eye on the future
Looking to start a company with a future? Plan your company with foresight and develop strategies in the event that relevant EU directives become more stringent or the trend away from electronic cigarettes continues. The success of your company depends in part on future scientific findings and the resulting changes in the legal situation.
Vaping with scepticism
Smoking hasn’t had a good image for decades now and the number of active smokers is falling. Although e-cigarettes are sold as a healthier alternative to traditional tobacco products, there are many doubters. In the past, vape technology and its ingredients were increasingly suspected of being more harmful than the industry initially claimed. Long-term consequences of vaping are not yet known.
Franchise models for vape shops
The e-cigarettes trend has quickly produced several franchise models. A partnership as a franchisee offers many opportunities but needs to be carefully considered. Most franchise concepts in the e-cigarette market are also young companies. The first question should, therefore, be whether the knowledge advantage of a few years is so decisive that a partnership against license fees might actually pay off. The existing franchise systems in the German market, such as Mein Stepfer Shop or Smoke Kingz, offer different focal points. Alternatively, an affiliate partnership as a retailer with existing online shops is possible. Get comprehensive information and expert advice before making a franchising decision.
Start-up check for the retail trade
The most important questions for entrepreneurs, information on qualifications, the legal framework of the retail trade, and future prospects for the industry can be found in this how to open a business guide.
Which legal form is your best fit? firma.de connects you with the right expert for the right advice for your business idea. Book a legal consultation for the best possible start!
The information published on our site is all written and checked by experts with the greatest care. Nevertheless, we cannot guarantee the accuracy of this information, as laws and regulations are subject to constant change. Therefore, always consult an expert in a specific case – we would be happy to connect you with the right professional.
firma.de assumes no liability for damages caused by errors in the texts.