Outside the circle, there are many opinions about the huge profits of electronic cigarettes. As the saying goes, only with understanding can we have a say! The leaders of these 20 electronic cigarette enterprises include electronic cigarette manufacturers, e-liquid manufacturers, brands and agents, as well as channels and physical stores.
Among them, there are the elder generation of electronic cigarettes, as well as the new entrepreneurs of Internet technology. They have expressed their views on whether electronic cigarettes are profitable from different angles and aspects. From this we can get a comprehensive understanding of many real industry situations.
Electronic cigarette manufacturers
Sigelei CEO Ou Junbiao:
Generally speaking, an industry can be divided into stages of germination, growth, maturity and recession. In the germination and growth period, the profit is relatively high; in the maturity period, the profit is relatively reasonable; in the recession period, the profit is relatively low.
Electronic cigarettes are still in the growth stage. As long as they have the strength of R&D and technological advantages, new products on the market meet the needs of consumers, it is normal for them to have high profits in the early stage, but they are not really extravagant profits. I think considerable profit is a reward for companies who work hard and pay attention to R&D and technology. Only in this way, people are willing to invest, a industry can have hope and the basis of sustainable development! I appeal to more enterprises in electronic cigarette industry to pay attention to R&D and technology!
2. Innokin CEO Li Jianwei:
Comparing with the general profit margin of the electronics industry, electronic cigarettes are good profits, the key is that you have to be able to deliver enough products.
3. ALD marketing manager Wang Huiyang:
From the macro point of view, monopoly or high threshold vertical subdivision of industries or luxury goods will exist in the strict sense of violence. Electronic cigarettes obviously do not fall into these categories. Returning to industry user perception, in the past few years, with industry players as the main consumer group, electronic cigarette products have been given a genre of geek DIY fun collection and social attributes of high-end subgroup, which really has a certain premium.
With the popularity of one-off pod vapes, the emergence of new retail, Wechat business, sharing economy, channel deepening and other phenomena, electronic cigarettes are becoming more and more like consumer goods, premium can only depend on brand. Even JUUL, which has recently landed in China and has become a global hit, it still has a brand premium that is far from being an extravagant profit.
At the same time, taking ALD as an example, as one of the leading R&D and manufacturing enterprises in the research and application of electronic atomization technology, its annual R&D expenditure is not less than 10%. Various types of quality systems continue to improve and being invested, including compliance testing not limited to enterprise standards, national standards, FDA, TPD, and production automation, information upgrade. Increase investment at the same level.
These efforts to improve product quality and user experience will inevitably cost a lot, resulting in a very limited profit margin for manufacturers. Of course, we believe that only in this way can we ensure the healthy development of the industry, and we have no illusions about windfall profits.
4. Chief Strategic Officer of Youme Group, Zhang Shuo:
The development of any industry is indispensable to goodwill and doubts, including electronic cigarettes. Electronic cigarette is a highly sensitive industry which has been highly concerned since its birth. There are still misunderstandings about electronic cigarette in the outside world and even in the mainstream media, and even some exgerated harm of electronic cigarette.
I think e-cigarette is a healthy and long-term cause, which can promote the healthy life of smokers through the role of social environmental protection. We should take a positive view and make good use of the power given by technology, and return everything to products and users. As for the end-to-end profit-seeking, it will not exist in any industry for a long time.
YOUMEGROUP, as a force in the industry, has always focused on providing users with cost-effective solutions for healthy tobacco alternative, focusing on product development, user experience and service upgrading. We have a scientific research team of more than 70 people from Huawei, ZTE and so on. I also believe that the real user-centered enterprises will make a lot of efforts in product development and user experience. This is not only time but also money and energy. I hope YOUMEGROUP will be your collection. Together with colleagues in the industry, the League can take practical actions to improve the health of smokers, make the outside world less questionable and more aware, and make the industry more healthy and sustainable.
5. Chairman of Hangsen, Yao Jide:
From the manufacturer to the consumer, any product, as long as it is made normally with guaranteed quality, it has relatively high cost, and can not be said to be very profitable; only fake and inferior products, at the same price as genuine products are extremely profitable.
6. CEO of iPure Juice Biology, Yang Peng:
The cost of the factory is about 30-40 yuan, the price is about 60 yuan in the hands of the brand dealers, the wholesale price of the brand dealers is about 100 yuan, and the retail price is about 300 yuan. The cost is about 30 yuan, and the selling price is 300 yuan. I personally feel it’s profitable and will return to a reasonable price cycle.
Electronic cigarette brands
7. Director of Ammo: Zhao Helen:
The so-called extravagant profits are relative, not absolute. At present, the gross profit rate of electronic cigarette industry is generally around 60%, but it is relatively high in appearance.
Electronic cigarette industry from the very beginning of relying on e-commerce, to the beginning of this year, “sales channel is king”. It greatly increased sales channel costs. But as a new kind of consumer goods, the cost of sales channel and propaganda will take up most of the business revenue, which is benign and normal in itself.
In addition, some peers have learned the bad habit of “burning cash” of Internet enterprises, which will create an illusion that “electronic cigarette enterprises are very rich” for outsiders. In the view of Ammo, the so-called “extravagant profits” of electronic cigarettes are the rights and interests of retailers.
8. General Manager of NOS, Liu Nan:
The so-called electronic cigarettes belong to extravagant profits, it’s indeed huge profits. The huge profits are not price margin profits, but higher repurchase rate, smoking electronic cigarettes need no education, as long as they can smoke.
Therefore, the cost of high-quality products will not be low, leave alone profiteering. The real profiteering is not a standard enterprise with integrated R&D and production. The profiteering is a non-standard legalized workshop and counterfeit goods, without too much operating cost. The human resources, R&D and hardware investment of standard enterprises account for a high proportion of the cost.
To make an analogy: a standard enterprise, from tax, manpower, R&D, production, has a certain amount of labor input, 50 people of the compan. Compared with the current non-standardized workshop of 3-5 people, bad business investment costs are absolutely different. We also hope that consumers will be vigilant in recognizing the guaranteed brand products of large enterprises. Establish a benign development environment for the market. Give consumers a brand service standard with high identification, goodwill, safety and reliability.
9. CEO of AN, Cheng Dayu:
Electronic cigarettes doesn’t have huge profits at all. For example, the success of our AN electronic cigarette, the amount of effort and capital invested in the early stage, outsiders can not see at all. If AN doesn’t succeed, all the efforts will be in vain.
It can be seen that if the industry wants to make money successfully, the stakes are still a little big. Competition in the market is also fierce, and the cost of getting customers is quite high. It seems that there is a big profit margin between manufacturing cost and retail unit price, but there is a lot of investment in every sales link. Brands not only need promote marketing, company internal expenditure and so on, but also face some risk of bad debts. Actually, there are very few profits left on hand. The profit distribution of our products is generally 2:3:5 proportional distribution. We make 20% profit, 30% for dealers and 50% for retailers. Noice from some dealers: Being an agent of some brand like SnowPlus is extremely profitable.
10. Founder of FLOW, Zhu Xiaomu:
Before making electronic cigarettes, I also hold the same view that the electronic cigarette industry is a typical profitable industry with low cost and high profit. But after making the product, I changed my point of view.
Electronic cigarette is still in its early stage in the world and China. Although the market is large, it still needs market education. This requires users to see, touch and smoke in order to understand more about electronic cigarettes. Therefore, the current electronic cigarette sales channel is still mainly offline, which needs to divide a large part of the profits into electronic cigarette stores, 3C stores, comprehensive supermarkets and other forms of dealers. Because the industry is too new and too small, online channels have not yet developed. Overall, e-cigarettes are not a lucrative industry with high margins. (Source: Dialogue FLOW Zhu Xiaomu: Electronic cigarette is not a lucrative industry, it will be the future trend)
11. The founder of VEIIK, Zhang Deguo:
E-cigarettes look profitable, the retail price is four or five times as the production price, but the profit of brand side is not high. The main purpose is that the sales chain of electronic cigarettes is not yet mature. There are many levels of sales. If the levels go down, the retail price will be higher. Electronic cigarettes rely on sales channels, most of the profits are in channels, but channels do not make much money.
Take e-cigarette stores as an example, looking at the high profits, but facing a user, the small sales quantity of sales relies on the high price. Deducting rent, water and electricity, and labor, there is not much money to make. If the profit is low, the business can’t be sustained at all. Some well-known domestic brands have high profits, and a lot of money is spent on propaganda and promotion, sales channel development.
12. CEO of KMOSE, Liu Haonan:
As the manager of an e-cig enterprise, I personally think that this question should be viewed from two dimensions:
1. Compared with many other industries, the product cost of electronic cigarette industry is not low. To build a good electronic cigarette product, we should consider many factors, such as R&D, design, production, market and so on. From the conception of product to the presentation in front of consumers, and then to the embedding of consumers’minds, a lot of energy and financial resources are needed during this period.
2. But there are also some bad merchants in the market who provide low-quality products, even fake and inferior products. These businesses only consider making a wave of fast money, do not build brands to build markets. It is this irresponsible approach that gives consumers such a perception. However, with the development of the industry, such practices will be eliminated.
13. Co-founder of Wel, Qiu Yiwu:
“It does have instability factors, or negative news and policy pressures, but there is no doubt that, for the moment, it is a good opportunity for entrepreneurship.” However, this is not to say that e-cigarettes can make money now. “Electronic cigarettes are controlled at two ends, one end is the cost of supply, and some large factories have strong supply chains. Now they even raise the price high. At the other end of the sales channel, if you have so much capital, you should subsidize the sales channel.” Under this situation, most brand enterprises may be losing money.
14. Founder of TAKI, Zhong Yufei:
Many people think that e-cigarettes are profitable, but in fact it is a misunderstanding, “If you really want to make solid products, get through upstream and downstream, the industry’s profit margin is about 30%. But many companies in the market just tag its own label doing OEM, so that the profits will be huge.
15. POOLAN founder and CEO, Sun Haiming:
I use “235” to describe the profit sharing model of the e-cig industry chain. “Brand profit 20%, trader profit 30%, terminal profit 50%. The domestic market is roughly so. This means that 80% of the profits of electronic cigarettes entering the circulation link are distributed to sales channels.
16. Waidea Tech CEO, Huang Huafu
Nowadays, unless technology and market are monopolized, it is very difficult for an industry to make huge profits. I believe many e-cigarette practitioners will complain that the market is too transparent and there is no profit, but some consumers complain that the e-cigarette industry has huge profits, or simply caused by information asymmetry.
Because electronic cigarette is an emerging industry, once someone really wants to know the industry, he will feel it very profitable after skipping the middle link and mistakenly think it is profitable. But he forgets that, from electronic cigarette factory to the hands of consumers, it needs to go through several intermediaries. As each industry matures, there will be fewer and fewer intermediaries and lower prices.
17. Owner of Baode Electronic Cigarette Chain Store in Guangzhou, Big J:
In a word, damn the huge profits! Compared with some kinds of clothing, shoes and hats, it is a tiny profit. Retail end gets 50% gross profit, deducting all kinds of hard costs, about 20% more, it remains 20% pure profit, which can be called a huge profits? Leave alone wholesale, the insiders are very clear about that.
I think first of all, we should make clear that the concept of huge profits is relative, not absolute. Take the former box mod for example, a so-called brand mod device may be sold for thousands of yuan, how much is the cost of raw materials? 100-200 yuan, you say profiteering, but you have to know that the market demand is very small. 1 order have to cover the 3 year’s cost.
If someone is short of money, he would sell it with 50% off discount. If someone manages well, he sells one every day and makes a lot of money. What happens next? Mod vape trend is off, it is the result of the spontaneous adjustment of market supply and demand, the price is also spontaneously formed price. Profit comes from information gap, and the market will adjust itself. At present, there is no oligopoly in the electronic cigarette market, which means that there is no market manipulation, which is the appearance of free market economy.
Nowadays, people feel that the profit of electronic cigarettes is deep, which is compared horizontally with the profit of traditional retail industry, but the audience of traditional retail industry is very different from the audience of the current electronic cigarette market. For example, when the e-cigarette market is completely popularized and popularized, leave alone the comparison with tobacco, compare it with the daily products that every family may consume every day, then you can see that e-cigarettes won’t be very profitable. I believe it is absolutely comparable to the overall profit of the traditional retail industry.
18. Shaanxi Supermarket Convenience Store Sales Channel, Mr. Lu:
I feel profiteering has been the term of the OEM era a few years ago. Electronic cigarettes have been reformed and reinnovated all these years. Nowadays, large capital has intervened, making many excellent brand old factories like sitting on the fire. Especially this year, it’s good or bad. The good thing is that the country has increased the high exposure rate of electronic cigarettes; the bad thing is that some capital manufacturers only know how to publicize vigorously, but the products are really not complimentary. They solicite local distributors buy in huge stocks, which will lead to excessive drying of local electronic cigarette resources.
As for huge profits, the electronic cigarette market has become transparent this year, 90% of them are making cartridge-changing cigarettes. And this pod vape ranges from 199 yuan to 399 yuan, and its cart ranges from 68 yuan to 99 yuan. The market price and pattern are very clear. The price is much more flat than before, because everyone knows that whoever can win the hearts and minds of the people can win the world.
Capital operations don’t care about the distributors below or the market share. They just want to raise funds, go public, wait for the stock to rise, and then cash out. Ultimately, only dealers and agents pay for the bills.
I think if this goes on, the national electronic cigarette market will become a vicious circle. Maybe the national standard will be introduced soon, which will break the current market pattern. This is what I hope.
Electronic cigarettes are now as common as the mobile phone market for more than ten years. Manufacturers, venture capitalists and hundreds of schools of thought all want to share a piece of this, but the quality of products are far different. The introduction of the national standard will clean the whole industry and make the future market of electronic cigarettes more standardized and clear. Maybe in the near future, e-cigarettes will form a real brand ranking just like the mobile phone market. When people buy it, they will feel the same as the mobile phone, such as: apple, Huawei, Samsung, Xiaomi, etc.
19. Owner of E-Cigarette Entity Store in Huai’an District, Huai’an City, Jiangsu Province, Manager Dai:
As an entity e-cig store owner who has been operating for five years, I don’t think e-cigarettes are profitable. We came from the era of mod vapes, when many people are buying electronic cigarettes for curiosity. After buying box mod, it was really rare to buy a second bottle of e-liquid. Many people stop when they don’t feel it fresh.
Business has really improved a lot since the start of the pod vape market last year. This is also related to the customer groups we have accumulated over the past few years. Profit is OK, but there must be enough customers. No matter how profitable they are, if you don’t have the customer’s approval and support. Everything is in vain! Business is learned. It’s a truth to be a man. If you’re a good man, and naturally people comes to praise and help you.
20. Vape Life Company, Manager Xu :
I think profiteering is a necessary process for all industries… When it becomes really popular one day, no one will talk about the topic of huge profits.