It has been 8 years before electronic cigarettes suddenly become popular in China recently

Ferocious vapes

Electronic cigarette, an old “new thing”, came to the crossroads again under the attack of two fevers.

On the one hand, the controversy is unprecedented intense. Under the exposure of the “lung injury” epidemic situation, around the key words of “health” and “low harm”, e-cigarettes have been more and more attacked.

On the other hand, in recent years, the restraint and calmness of capital have not been able to reappear in the field of e-cigarettes. Since the end of last year, the “little trend” that sang all the way has been still eye-catching. Even the most retarded people are not hard to feel from the front shelves of music festivals, convenience stores and supermarkets where young people gather: e-cigarettes are on fire and becomes popular in China. It’s like overnight.

In the path to maturity of new things, it is always hard to escape criticism, which is an inevitable experience, and also a force to urge the industry to further optimize the iteration.

If you have paid close attention to the recent reports on e-cigarettes, you may know that in a report of the FDA in early September, it was pointed out that the main cause of this event may be the presence of vitamin E acetate in e-cigarettes.

Why does common vitamin E cause respiratory disease and death? It starts with its molecular structure.

Vitamin E acetate is a kind of oil state. It enters into the lung through heating and decomposition. When the steam cools in the lung, it will return to the original oil state. It forms a coating on the surfactant layer of the lung, hinders the exchange of oxygen, thus causing dyspnea, cough, chest pain and other symptoms, and may eventually lead to respiratory disease and death.

The vitamin E acetate is mainly found in THC (tetrahydrocannabinol) electronic atomizers on the illegal market. Obviously, THC is not a legal electronic cigarette ingredient, and it usually only appears in some of the black market sale of poor quality oil products in the United States or in the oil prepared by the users of electronic cigarettes themselves.

However, unless it is the insiders, it is difficult to understand the truth of most people, from eager to try to stay away, it is also a title distance.

But for the practitioners who really want to do it, the burden is a little heavier. How can they go?

Re-enter the counterfeit cell phone age?

“It’s a good idea to say that a hundred flowers bloom in full bloom. To make it straight, it’s the era of counterfeit mobile phones years ago.”

Liu Dongyuan, the VITAVP vape founder. He is not old, but he is already an old man in the industry. When it comes to the prosperity of the electronic cigarette industry, he summed it up without hesitation.

VITAVP vape founder
VITAVP vape founder

In the recent e-cigarette financing list, Liu Dongyuan and his “vitavp is the only one” stand out among a group of familiar Internet entrepreneurs. The company, founded in 2015, completed the Angel round financing of ten million yuan at the end of last year. The investor is the Pusi capital that has invested in the Internet cafe, Poison app and LeLe tea.

According to the data of Tianyan, as of August 31, more than 35 e-cigarettes have been financed in China, with a financing amount of at least 1 billion yuan, including some continuous entrepreneurs. New brands and capital are coming into the market one after another. There are two reasons for this “golden age”: one is that the money is easy to earn, the other is that the threshold is low. At least, it looks like that.

It’s easy to think of the mobile phone market in the early 2000s.

At that time, thanks to the so-called “turn key solution” of MediaTek, the difficulty of making mobile phones was greatly reduced, the threshold and huge profits were greatly reduced, and a large number of terminal manufacturers at that time were rapidly activated. Countless people changed their ways and joined the ranks of phone makers. In 2006, the so-called “golden age” of counterfeit mobile phones, the number of mobile phone manufacturers in Shenzhen once reached nearly 4000.

The same is true of the current e-cigarette market.

As the largest country of electronic cigarette production, China’s domestic market penetration rate of electronic cigarette is less than 1% (13% in the United States), which can be described as a vast world. At the same time, thanks to the “flowers in the wall and fragrance outside the wall” of more than ten years, China’s large number of e-cigarette OEM enterprises can provide a complete set of e-cigarette production supply chain. Without complicated steps such as R & D and design, entrepreneurs can quickly create e-cigarette brands and realize mass production of products, “5 million is the price of the ticket to the vape field“.

However, science and technology are not based on changing the shell. The prosperity of counterfeit cell phone is just a flash. In less than three years, the trend is beginning to show. By 2012, the mobile phone manufacturers in Shenzhen have been washed away by 90%. The leader of domestic mobile phones has already changed from the former “Huawei Coolpad ZTC” to the current “Huawei Opple Xiaomi”. In terms of e-cigarettes, it is necessary to learn from the previous cases.

When consumers’ demand for mobile phones is further upgraded, manufacturers who can’t create value can’t respond. They can only be beaten passively. In addition, the quality can’t be guaranteed. The profit space is cruelly squeezed and quickly eliminated by the market.

What about electronic cigarettes?

 

The threshold of electronic cigarette

When it comes to “electronic cigarettes”, most people now think of the images that are similar to the Juul type closed-end electronic cigarettes. People in the industry call them “pod vapes”. Device+ pods have rich taste and are easy to operate. Whether you are an old smoker or a new smoker, you can “learn by yourself” without using the manual.

This is a far cry from the first electronic cigarette Liu Dongyuan came into contact with.

“When I entered the e-cigarette industry, it was just when the Chinese market was most awful.” In Liu Dongyuan’s words, “awful” refers to:

In 2004, the first real “electronic cigarette” in the world was born in China with the functional mission of helping people “quit smoking”. However, it soon died down in 2009. In the next three years, the electronic cigarette has lost its voice in the Chinese market. Until the end of 2012, there was a mod vapes. The electronic cigarette has also become a game for a few people from the “health care mode” of smokers. It’s the kind of “behavior art” that you need to spend about four or five hours to teach a person how to refuel, how to change the core, and how to refill the vape juice. People in the circle are satisfied with it, and even have their own exclusive name, vapor. But for ordinary consumers, its design is a little anti human.

In fact, before the box mod, there was a type of electronic cigarette, called ego. It has the same composition structure as the first generation of electronic cigarette, but it has a larger size. The mouthpiece integrates the pod and the atomizer, and the user needs to add e-liquid to it.

“I used to play music in my early years. I couldn’t smoke in the studio. I had to touch the electronic cigarette, which was the EGO. Although there were many problems with the product at that time, I quit smoking after using it for half a year without much pain.” In 2011, Liu Dongyuan first had the idea of “relying on it to change the smoking habits of a generation”.

As the first wave of entrants, in the first two years, Liu Dongyuan did not directly enter into the production link, but chose to cooperate with some overseas brands to help them do localization in China. “At that time, there was no e-cigarette brand in China, only OEM of foreign brands.” Liu Dongyuan tried to help these brands build local sales channels, help them debug the taste of oil and tobacco, more in line with the habits and preferences of Chinese or Asians and other product details. In this process, he was able to thoroughly touch every part and production link of the electronic cigarette. “I’ve also gone through the period of selling houses and cars as collateral and swiping more than 20 credit cards to pay employees.”

In 2014, Liu Dongyuan began to break through one by one with the unit of component parts, and launched electronic cigarette brands such as Jiuxiao and Typhoon. When it came out in 2015, it sold only e-liquid, and soon became the first Chinese brand that sold more than 10000 bottles of vape juice in Japan.

“We are trying these lines to accumulate some experience for an integrated system in the future.”

The first real vitavp is after 2017. “In fact, we have been thinking about it since 2015, but at that time, many production processes could not be achieved, so it has not been started.”

vitavp products
vitavp products

The maturity of the underlying technology is the key to the evolution of e-cigarettes from niche fashion to consumer goods. Liu Dongyuan gave an example. For example, in terms of operation, it needs to be simplified as much as possible. There should be no button pressing action. The starting process should be like smoking. Once you inhale, it will start itself. To do this, we need a key component – air switch. Although this technology was launched in 2015, its real maturity is by the end of 2016.

It should be noted that the underlying technology and application level technology are two concepts.

“It’s just like the underlying technology of mobile screen is actually made by a special screen supplier, but it depends on the integration ability of the whole brand side to determine whether you are assembling Apple or Jinli.”

This includes the application of the underlying technology at the product level. “We have invested a lot of R & D effort in the underlying technology and application layer.” In the past few years, it has obtained the FDA (food and Drug Administration) certification, ROHS, Japanese food safety certification, etc., and has more than 40 patents including the heating body.

 

E-liquid leakage rate: from 3% to 0.001%

The evolution from open mod to closed pod system is not only the change of product form, but also the upgrade of business model.

In the age of mod, there are two businesses for making device and adjusting e-liquid. But now, it has evolved into a combination business of device and pods. Pod is a consumable. Through the later service, users can be trained to buy pod again, bind users with device, and then use pod to continuously tap the value of users. The problem of “repurchase rate” is here. Easy to disassemble – as long as the product quality is stable enough, the sunk cost of the device makes the user have little reason to move. However, this also means that the first thing to be solved is the e-liquid leakage.

The leakage of electronic cigarette is a big problem in the industry. All kinds of e-cigarette brands emerge in endlessly today. However, any honest manufacturer dare not pat their chest and say that their products are 100% leakage-free. One is the industry’s average leakage rate of 3%.

The different solutions provided around this common problem just reflect the precipitation and thinking of the brand on the product. For consumers, “no leakage” or “leakage in very few cases” has become a key to measure product quality and even make consumption decisions.

“It’s a very, very difficult thing not to leak at all.” Liu said. Many people think that electronic cigarette is a very simple thing, at least compared with mobile phones, its manufacturing is much less difficult. “But the simpler it is, the more difficult it is to debug it.”

Liu Dongyuan said the causes of the leakage can be divided into two categories.

One is really leakage. Because now all atomizers rely on negative pressure to keep the e-liquid in the pod, but if the pressure tolerance of the pod is not good enough, there will be an imbalance between the internal and external air pressure, and the e-liquid will run out. This is not a simple problem that can be solved by sealing, because its liquid is in a semi open structure, if it is completely closed, it can not be atomized. The problem involved here is actually to have more precise control over all aspects of the expansion coefficient of the heating body.

vitavp products
vitavp products

According to this, vitavp has only made corresponding improvements in the material and structure of the latest generation of electronic cigarette products. For example, it adopts the integrated silica gel atomizing pod to integrate the originally assembled atomizer parts, so as to greatly improve the product sealing and optimize the internal structure.

Pima organic cotton with oil locking ability is used to replace the original ceramic atomizing core. Due to the strong lipophilic property of the material, many brands choose the ceramic which is easy to transfer the e-liquid as the material of the atomizing core. However, to enhance the conductivity of the atomizing core, it is necessary to increase the e-liquid guide hole, which is very easy to cause the oil leakage of the atomizer. The density of Pima organic cotton is very high, which has certain advantages in oil transfer, oil storage and high temperature resistance.

Another situation is actually the leakage of condensate in the use stage. It’s something that has been condensed after atomization. It will make consumers feel like”leakage” in the use process. In order to avoid such use “illusion”, vitavp intentionally shortens the length of the airway at the time of pod design, so as to avoid the formation of condensate on the airway.

1 in 100000, this is the rate of oil leakage of vitavp provided by Liu Dongyuan only for its new products. Of course, this is still to be tested by the market.

 

vitavp business methodology

The popularity of OEM and ODM just shows that in the early stage of the industry, this seems to be a more relaxed path. However, vitavp chose a more cumbersome way to build the whole supply chain in Shenzhen as early as possible.

This undoubtedly means a huge capital investment. At least in some people’s eyes, this money is not as good as taking the “subsidy” channel to replace the market. However, if we regard e-cigarettes as a long-term business, the benefits of self built supply chain are also obvious: it means taking the initiative in R & D and production.

Nowadays, the homogenization of products in the industry is serious. It’s nothing more than the random combination of pods, shell color and taste. This leads to the competition in the industry concentrated in the downstream of the industrial chain, which can only rely on a large number of marketing means to create the so-called brand identity, and finally it becomes a price war.

Only by continuously investing in product research and development can we break away from the homogenization. “Our approach is to develop independently, purchase all parts by ourselves, and then our engineers will participate in the whole closed-loop of our supply chain to adjust the whole production plan.”

Before vitavp’s exclusive supply chain, Liu Dongyuan added a prefix, “flexible supply chain”. You may have heard of it in e-commerce and clothing manufacturers before, but flexible supply chain in electronic products is rare.

According to Liu Dongyuan, “flexible supply chain can let us better control our inventory, and we can make adjustments according to the feedback of the market.” Its prerequisite is the control of the design, including all parts, and your ability to participate in the supply chain, rather than just providing a logo. ” The direct effect is that the brand can produce according to these orders in time after customers place orders.

“Because e-cigarettes are actually a lot of SKUs. If you only rely on sales forecast, you will surely generate a large amount of inventory, but we can now ship them within 48 hours according to the front order. Small batch customization can also be realized. ” For example, last year, vitavp cooperated with IG to produce 1000 sets, which took only seven days. “If you don’t have strong control over the whole supply chain, you can’t produce such a small quantity. Generally speaking, in this electronic cigarette, if you want to achieve such a small production quantity, its cost may rise very, very many times, but we can solve this problem at a cost that is not too bad. ”

This means that vitavp has more ability and energy to try cross-border co branding with more IP. In today’s e-cigarette online channels are not so rich, it means that the brand has more opportunities and possibilities to talk to consumers and reach their emotions. “Now, if we make joint and limited versions on the original basis, we can solve them in 10 days. If we have new flavors, we will make 500 different formulas in a month.”

vitavp products
vitavp starter kit

In addition to Shenzhen, vitavp has also set up sites in Beijing, Shanghai, Chengdu, Tianjin, Hangzhou, Urumqi and other places, so as to better carry out localized fine operation. “Urumqi is actually a place where the e-cigarette market is quite developed. There are 35 e-cigarette stores in Xinjiang, which can reach a median among all provinces in China. At the same time, this area is actually very difficult to cover through other local offices. ”

“Of course we have a global presence.” Liu Dongyuan said that although at present China is the market with the greatest potential, what vitavp wants to do is “a big business.”

 

How to go further?

In the era of counterfeit cell phones, the defective rate of products used to be very high. It is likely that consumers would not be able to turn on a new mobile phone when they bought it on the street. However, since the continuous development of mobile phone industry, the defective rate has been based on PPM, that is to say, only a few of a million mobile phones may have been defective when they were turned on. Now, it should be the level of the e-cigarette industries should have.

In June this year, the official website of the National Standardization Management Committee once showed that the compulsory national standard project of e-cigarettes has entered the stage of “formal approval”, which means that the domestic e-cigarettes industry, which has been in the state of “no product standard, no quality supervision, no safety assessment” for a long time, will officially usher in the industry supervision standard. “Now there are many small brands relying on some unqualified factories and small workshops, which will be washed out first. In the first stage, there are only about 20 brands left. Quality is the key factor to support the brand to go further on this track. Later on, in fact, it depends on who has a deeper understanding of users and who is closer to users. ” Of course, that’s the key to winning in the next stage.

In the current e-cigarette market, the controversy has never stopped, and the capital and the media have stirred hard, which has also made this once niche category appear more and more frequently in the public’s vision, and the brands have also made great efforts to play the traditional game of “subsidy” again in order to quickly seize the market. However, when more and more consumers know what e-cigarettes are and experience them, they will soon know what good e-cigarettes should be like. With the maturity of consumers’ mind and the evolution of the market, a “midfield battle” is going on.

“There is a long way to go for the future electronic cigarette industry. In the short term, for traditional smokers, it is a consumption upgrade; in the medium term, it is an expansion in the field of big health; in the medium and long term, with the completion of 5G infrastructure, it will also be one of the entrances to the Internet of things. The circuit of e-cigarette is pregnant with infinite possibilities and imagination. We are lucky to participate in it and hope to promote the process. ” Liu Dongyuan said at the end of the interview.

Leave a Reply

Your email address will not be published. Required fields are marked *