1. The Online Cigar Industry Grandhi Suman Hou Yanqiu, Kadekuzhi Anand, Keller Debby Kini Dinesh

2. Online Cigar Industry2 Industry Overview Customers bought cigars through mail order, 800 numbers, stores and clubs. Growth of Cigar industry –1994 – 14%- 1995 – 31 % –1996 – 67%- 1997 – 30 % –Has been declining since 1998. [CBS Marketwatch]

3. Online Cigar Industry3 Major Players Cigar.comLeading online retailer. Recently purchased smokeshop.com. JR CigarOnline/Traditional retailer. Publicly traded. Stogiesonline.comOnline retailer. Cigarbank.comOnline retailer. Cigardepot.comOnline retailer. Smokeyscigars.comOnline Retailer. It is hard to distinguish between sites. There does not appear to be any established market leader.

4. Online Cigar Industry4 A Sample Front Page www.stogiesonline.com

5. Online Cigar Industry5 Basic Strategy Typical B2C shopping sites. Revenues are made mostly through sale of cigars and accessories. Little or no revenue from other streams. Customers select products and add them to the shopping carts. Consumers provide credit card information and shipping options. Cigars are delivered to the customer at the specified address.

6. Online Cigar Industry6 Cigar Accessories Catalog

7. Online Cigar Industry7 Customers Customers are typically active cigar smokers, varied age groups, upper and upper-middle class professionals, both men and women whose time is saved by shopping online. Customers also include people/corporations who buy cigars as luxury gifts. Customers are very brand conscious. Customers are also likely to buy accessories such as humidors, lighters, leather cases etc. Customers are likely to have access to technology needed to shop over the Internet.

8. Online Cigar Industry8 Strategies to Attract customers Novice –Offer Sampler Sets not usually found in retail stores –Offer recommendations –Ratings of cigars by quality and price –Detail explanations of flavor, smoothness, and character. Cigar Connoisseurs –Easy search for specific types and brands of cigars –Offer boxed sets

9. Online Cigar Industry9 Strategies to Attract Customers Everyone –Online advertising. –Sell other cigar related goods: Humidors, Cutters etc –Have specials: Free shipping, Gift certificates –Affiliate Programs (7% commission, 7c/click at cigar.com)

10. Online Cigar Industry10 Value Additions The basic value proposition is to permit customers to purchase the best possible products through an easy to use shopping interface. Gift certificates [smokeshop.com] Special packaging to maintain quality [smokeshop.com] UPS tracking [stogiesonline.com] Customer testimonials Communities [smokeshop.com] Build own sampler packs. Free shipping [smokeyscigars.com on orders of $25 or more]

11. Online Cigar Industry11 Value Additions Reviews from experts and other cigars Coupon rebates/Discounts [cigarbank.com] Live inventory information Permission Marketing – “Cigar of the month” delivered automatically Personalized Cigars [ personalizedcigars.com ] Recommendations for accompaniments such as wines. Books, Magazines and Articles. Free email and chat rooms.

12. Online Cigar Industry12 Strategies to Retain Customers Current Online Cigar industry websites are very basic and there is tremendous scope for improvement. Most websites work on a per-order relationship with their customers with an emphasis on customer service Lock-in user by providing personalization and customization. New cigars are tried on recommendations from others. Opportunity to build communities and use collaborative filtering techniques to make these recommendations. Permission Marketing – “Cigar of the month” Gift Certificates. Quick Order [like 1-Click Shopping at Amazon]

13. Online Cigar Industry13 Cigar.com We believe that cigar.com is the best online cigar retail website –Recently acquired smokeshop.com to become the largest cigar retailer on the Internet. –Provides numerous value added services such as sampler packs, accessories, specials, gift ideas, gift certificates. –Has affiliate programs. –Has a membership program which offers additional discounts, monthly samplers etc. –Caters to wholesalers.

14. Online Cigar Industry14 Legislation Congress is currently trying to ban all mail order and all internet sales of cigars. [http://fujipub.com/cigarban/hr2579.html] The bill is working at ensuring that cigar retailers may sell cigars to the ultimate consumer only in a direct, face-to-face exchange and may not make sales through vending machines, mail-order sales, or the Internet. This bill, if passed, will have a great impact on the entire cigar industry that works on mail orders and Internet sales.