Local SEO is super important for location based services and retailers. Optimizing local sites aren't any different than basic search engine optimization efforts. You still have to do your keyword research and make sure your site is well optimized for those keywords. You simply need to add the geo-modifiers to your keywords. For example: cigar store in Connecticut or smoke shop in Monroe, CT.
Along with your web site, you must also make sure that Google/Bing local listings are well optimized. Additionally, you should also optimize local directory listings such as Kudzu, Manta, Yelp, Foursquare, Yellow Pages, Merchant Circle, Citysearch and others. You must at least have a decent local profile everywhere your customers might be looking. Oh yea, guess what? All these listings allow you to add your website which is like link building for your site. All these listings will help your SEO efforts.
I own 2 retail cigar stores. Brand Cigars in Monroe and Brand Cigars in Newtown. So, naturally, local SEO is my focus for the stores. If you Google "cigar store in ct" or any towns surrounding my store, my sites rank very well. I added a dedicated tracking phone number to see how many people call my stores from the web and I average around 30-40 calls a month from the web. It's not bad considering the population size that smoke cigar is very small. Of course, along with my sites, I have to optimize my Google place lising, Yelp, FB, Four Square and other local related services.
Previously, I worked for Basement Systems where local SEO was our daily focus. We had to rank for terms such as basement waterproofing as well as basement waterproofing in any town or state. We were very effective and ranked for almost all towns in any given state where we had local contractors.