Vape Shops Caught Fire Nationally. Now Regulations Could Smoke Them Out Of Existence

Cities and towns across the country have watched a proliferation of vape shops waft across the landscape over the past half-decade, and Sugar Land, Texas, is no different.

With about a dozen stores primarily selling electronic cigarettes and accessories, the city is part of a fast-moving retail trend that saw the number of electronic cigarette stores grow almost 20% annually between 2018 and 2023, not including vapes sold at gas stations and convenience stores. 

But as in jurisdictions across the nation, Sugar Land residents grew alarmed, taking their concerns to city council when a smoke shop in Sugar Land’s New Territory neighborhood opened just an eight-minute walk from a nearby middle school.

As of this spring, no more vape or tobacco shops will be allowed to open, though already operating stores can stay.

“Is that needed in Sugar Land? The answer is no,” Sugar Land Council Member Naushad Kermally said of more vape shops in city limits. Kermally also owns retail centers across the U.S., but chooses not to lease to vape or tobacco sellers. 

“If someone doesn’t like that I’m taking a strong position on it, so be it,” he said. “But I’m only looking out for the health and safety of our constituents.” 

Though often opposed by health advocates, choosy landlords, parents and community activists, vape stores have taken a strong hold on America, growing far faster than the retail market at large. Vape stores have filled empty storefronts and increased foot traffic, even in rural areas, making up one of the fastest-growing segments of niche retail growth in the country.

The controversial retailers became an election-year issue last week when former President Donald Trump vowed to be their champion in the nation's capital.

Yet with local and federal legislators increasingly regulating e-cigarettes through flavor bans and other restrictions and a flood of vape shops opening up in close proximity leading to plenty of competition, some foresee the vape shop bubble bursting sooner than later. 

“Something’s gotta give, because there seems to be way too many of them,” Kermally said.

There are more than 10,500 electronic cigarette and vape stores in the U.S. this year, up 14.2% from the year before, according to IBISWorld data. IBIS reported the industry was on track for $8B in revenue.

For reference, Burger King had 6,693 locations as of the start of this month and reported $1.3B in revenue last year across the U.S. and Canada.

The sale of flavored e-cigarettes began rapidly escalating shortly after flavor-focused brands like Juul were introduced in 2015. U.S. sales surged from $304M in 2015 to $2B in 2018. Researchers estimate the global market size could reach $47.5B by 2028. 

Yet the burgeoning retail vape industry could go up in smoke sooner rather than later as more municipalities join Sugar Land and federal lawmakers get involved.

“There is certainly a lot happening in this space at the federal, state and local levels,” said Azim Chowdhury, a partner at Keller and Heckman law firm in Washington, D.C., who advises corporations on U.S. Food and Drug Administration compliance.

“I would definitely say vape shops as a category are under serious threat [to] their existence.” 

Vape shops benefited from relatively high retail vacancies in the early years of the pandemic and rapidly multiplied, especially in smaller storefronts, which tend to see more turnover and formerly serviced mobile phone sellers and other small tenants, The Atlantic reported. The usual occupants of those storefronts had no need to open new locations at the time, leaving a gap for vape shops to fill and sell pricey goods that need regular replenishment.

The business has a low barrier to entry, said Tarry Ennab, a Dallas-based business broker who claims he’s the person people call if they want to buy or sell a smoke shop in Texas.

Vape shops are relatively cheap and easy to open and run, he said.

“With $150K, you can start a business which includes the sign, the showcasing … and the inventory,” Ennab said. “And boom, you have a store.” 

Vapes are small, relatively expensive and need to be repurchased regularly. And the vapor industry is unconsolidated, so manufacturers aren’t pushed to the fringe by major monopolistic brands like Coca-Cola and Walmart. From January 2020 to December 2022, the number of e-cigarette brands increased by 46.2%, from 184 to 269, according to the Centers for Disease Control and Prevention. 

E-cigarettes have been touted as a safer alternative to traditional cigarettes since they have nicotine but no tobacco, but they enticed young people and previous nonsmokers with a variety of flavors. Youth usage quickly gained popularity. 

More than 27% of high school students reported using e-cigarettes in 2019, but that dropped to 7.8% in 2024, according to the FDA. Trump raised the minimum age to buy tobacco products from 18 to 21 in December 2019, a point he cited in a Truth Social post last week, saying he kept vaping “away from the ‘kids’” while also promising to be the savior of the industry.

The vape market has adapted and persisted despite being the target of various regulations. Largely in response to Juul being blamed for igniting the youth vaping epidemic, the FDA in 2020 banned the sale of flavored cartridges for reusable e-cigarettes, the kind that Juul sells.

The FDA notably did not ban flavored, fully disposable e-cigarettes, leading to a shift toward single-use vapes made by brands like Puff Bar, Vuse, Geek Bar and Lost Mary. The e-cigarette market continued growing, with monthly sales increasing from 15.5 million units in January 2020 to 22.7 million units in December 2022, according to the CDC. 

Waqar Ali was involved with a vape shop business in 2020 and remembers a significant dip in business right after the pod flavor ban, he said. But with new, disposable products and diversified inventory, the market recovered and then some.

Ali is now the co-owner of Secret Library, an upscale vape store that in 2022 opened in a plaza catty-corner from The Galleria in Houston. Secret Library appeals to what he characterizes as sophisticated adults who want quality customer service rather than the lowest prices in a place that will rush them out, Manager Bree Menard said.

At first, the building owner was iffy about leasing to a smoke shop, Ali said. When they shared details about their model, the landlord was convinced.

“They don’t want bad crowds coming in over here,” he said. “Smoke shop in everyone’s mind is like … ‘Bad crowd, rowdy customers, this and that.’ But we’re trying to change that.” 

Menard will soon be partnering manager on a second Secret Library location, and she’s seen how difficult it can be to find an ideal location for this kind of business.

“We’re trying to identify locations like The Galleria where A, nobody doesn’t want us there,” Menard said. “And then B, there’s proximity to adults. That’s the main thing, 21 and up. There’s no money in selling stuff to teenagers.” 

But there are plenty of landlords who are willing to lease to vape shops without any questions, especially those with less popular centers, Ennab said.

“Some greedy plaza owners will have two smoke shops,” he said. “Which honestly doesn’t make sense … You can’t lease to two pizza stores in the same plaza. That’s crazy.” 

Putting multiple vape shops in proximity to each other splits the customer base, Ennab said. It’s unlikely that anyone is driving 10 miles to get to a smoke shop, he said, adding that’s why the peak of smoke shop openings might have already passed.

“A customer doesn’t care about the smoke shop name. He will search in Google ‘nearby smoke shop,’” Ennab said. “There are some loyal customers to smoke shops, but most of them are not. Prices are almost the same everywhere.” 

Vape shops are not needed on every corner like a nail salon or dry cleaner, Kermally said. 

“You certainly don’t need it in every shopping center,” he said.

Kermally has noted that vape shops can pay big rents. He has a space available at a shopping center in Kansas where a vape shop is willing to pay double the rent a national wireless provider pays in the same center, he said.

But for landlords like him, that's immaterial.

“I refused it. It’s not about the money for me, it’s about the community,” Kermally said. “I don’t even listen. I hit delete. My brokers know not to bring it to us.” 

Kermally sees smoke shops as a nuisance, adding that many of them have neon signs, dirty parking lots and stay open for 24 hours a day. He doesn’t wish anything bad on any businesses, though, and has friends who own and supply vape shops. 

“They can do that in Houston all they want. We’re not going to have that here,” Kermally said of Sugar Land.  

But Sugar Land might be becoming the norm. In the past week alone, Surfside Beach, South Carolina, Miford, Connecticut, and Rome, New York, have all either imposed or discussed bans.

Chowdhury said regulations are being considered at all levels of government. Louisiana banned the sale of disposable vapes that are not on the Louisiana Office of Alcohol and Tobacco Control’s approved list starting in March. Numerous cities and states have also banned the sale of flavored tobacco.

The list is growing even as the number of vape shops rises quickly.

California prohibited retailers from selling flavored tobacco products, including menthol cigarettes and e-cigarettes, in 2022, then strengthened the law on Jan. 1. 

“Vape shops are basically all shutting down across California, regardless of their lease,” Chowdhury said.

Vape shop owners not currently being impacted by regulations, like Secret Library’s Ali, aren’t naive enough to think they will never be affected. Operating any business is risky, he said, acknowledging the boom could go bust at any time.

“There is no assurance, we never take it lightly,” Ali said. “Anything can happen.”