China vape export market will shuffle in the second half of 2019 – Small brands are struggling to be alive

The owner of an electronic cigarette export company in Shenzhen said, “The export market of electronic cigarettes is becoming more mature and less profitable than in previous years. With more and more players and brands, greater competition, the importing countries began to be picky about the prices and try to reduce their costs.

Therefore, it is no longer feasible to just be an agent. Customers need to remove middlemen and work directly with factories to build cost advantages.”

Last year, two factories colluding with big customers of them leaving them alone. And this time, they decided to take pains to buy the 51% of a new factory – in fact, they have become a factory, and foreign trade becomes one of the core function department only.

The strong becomes stronger

Artificial intelligence has become more and more mature. The exhibition in Shenzhen has exhibited many kinds of artificial intelligence equipment: machine arm dazzled the eyes of the visitors; intelligent production is also extremely charming…

With the gradual maturity of the industry, big players make money and get high-quality customers. They can invest a lot in smart devices and eliminate “workers” from the cost and management. Thus, compared to the small players or small brands, they have an insurmountable advantage.

Porter’s 5 forces: Theory

Porter's 5 forces: Theory

Two of the main facotors are barriers to entry and substitutes.

Barriers to entry:

Comparing with mobile phones and TV, the difficulty of electronic cigarette production is a piece of cake. The threshold is very low. A small owner with hundreds of thousands yuan can rent factories, recruit a number of workers and start work. Cooperate with foreign trade companies to solve the problem of customer source (they can also plan to kick out middlemen when necessary, which is called “no middlemen make price difference”).

Substitutes:

There are not many patents for e-cigarettes, nor is there a well-known brand in the world except Juul (so brands can not be differentiated). Therefore, it has strong substitutability. Everyone can copy and imitate each other, especially in Shenzhen, where the fake product manufacturing ability is excellent.

Therefore, the advantage of capital is particularly important.

So it confirms what we have said before: Strong competitive advantage can be built through technological reform and equipment renewal. If you are a small player, can not build a competitive advantage through brand, technology, etc. With the maturity and transparency of the industry, the bargaining power of small players is also weak.

Therefore, the peak period of the electronic cigarette industry has passed.

vape export shuffle

N for 3 stages of the vape industry

First part of N:

It is a period of rapid growth in the industry, at this time, it can be said that any player can enter, can quickly dig lots of gold.

Middle part of N:

At this time, each player basically earns money. People who continue to strive, and know how to live in safety being awared of danger, will accumulate growing energy; people with no operational experience may earn money or squander it; while people who have no crisis awareness, will be left by the factory.

Third part of N:

It shows that when the industry matures, the big players will rise rapidly, while the small players’ power will be easily attacked. At this time, the world has been peaced.

One Reply to “China vape export market will shuffle in the second half of 2019 – Small brands are struggling to be alive”

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