Thursday, May 30, 2024

On the eve of e-cigarette industry shuffle: the profit of merchants is becoming thinner and the offline expansion of brands is getting fierce


Although the e-cigarette industry is becoming more and more popular, with the change of attitude towards e-cigarette in various countries around the world, as well as the coming date of China’s national standard, nearly 4000 domestic e-cigarette enterprises are about to face a new situation in the industry.

“Being approved”, on October 14, on the website of the national standard information public service platform, the current status of the national standard of e-cigarette shows.

According to the introduction of the standard development plan issued in October 2017, the project cycle is 24 months, which means that it will be approved and issued by the National Standards Committee at the latest by the end of October. This news affects nearly 4000 enterprises in the electronic cigarette industry, which may have a huge impact on their future development direction.

In the eyes of various capitals, this is indeed a huge cake. According to the public data, as a tobacco country with 350 million smokers, in 2018 alone, China’s tobacco enterprise tax profits reached 1155.6 billion yuan.

According to Euromonitor statistics, in 2018, China’s e-cigarette market scale reached 5.152 billion yuan, an increase of 28.5% year on year, and in 2012 ‒ 2018, the compound growth rate reached 35%. At present, the penetration rate of electronic cigarette is less than 1%, if calculated by 10% penetration rate, the market scale will reach 100 billion.

On the eve of e-cigarette shuffle:

In the past two years, capital has been pouring into the industry, and a large number of e-cigarette brands have emerged in the market.

According to the data of prospective industry research institute, there are nearly 4000 e-cigarette enterprises in China, more than 500 in Shenzhen alone, but 80% of them are small enterprises with less than 50 people.

On September 27, Fang Hui, partner and CMO of Boulder electronic cigarette, told Time Weekly that when the market was hottest, the same products produced by the same OEM factory were sold with different brands because someone would buy them.

In the industry view, electronic cigarette regulation will inevitably become increasingly stringent, the first electronic cigarette national standard regualtion will make it more rational, but at the same time, it will also trigger a major industry shuffle.

Recently, Times Weekly reporters visited a number of offline retail stores and authorized exlusive stores and found that in the critical period of the development of the electronic cigarette industry, the market is quietly changing.


Merchants wandering around

“I’ve been in this business for nearly ten years, but I stopped last month. The market is not good now.” Wang Xuan, a shopkeeper who has been selling e-cigarettes for many years in Beijing, said on October 11 that he was “cold hearted” about the industry. His shop is an experience shop, which is frequented by smokers. According to him, this shop not only sells “pod systems” such as SnowPlus, RELX and Moti, but also mod vapes.

Wang Xuan told the Times Weekly, “I’ve been working for nearly ten years, making money at the beginning, but the more later I find it needs cost. Although the volume of passenger units is similar to that of the past, the unit price of passengers has come down. They used to sell for 1,000 yuan to 3,000 yuan. Now you can see the profit margin of a set as long as several hundred yuan.

At present, e-cigarette brands like RELX are actively looking for offline regional agents and expanding offline stores.

“RELX also came to me several times at that time, because our shop location is very good, but RELX’s profit is low, and the price it gives is far from my selling price, so we did not do it. I don’t sell if we don’t have 2.5 times or 2.7 times sales price to cost. ”

“It’s normal that the electronic cigarettes on the market are leaking more or less,” he said. Perhaps RELX’s price profit is not enough, and its profit is less and more troublesome. Who wants to push it?

On October 11, the Times Weekly contacted Zhang Ming, a Moti salesman (pseudonym). According to Zhang Ming, he is currently recruiting regional agents and franchise stores. The requirements of regional agents are relatively high. Take Beijing agents as an example, they need to pay 50,000 yuan deposit and 450,000 yuan for the initial purchase. After three months, the monthly purchase quota is 1 million yuan, and two stores need to be opened in the first three months. When asked when he would be able to cover the cost, Zhang said it would take 3 ‒ 5 months.

Franchise stores require franchisees to find a store location with a comprehensive profit of about 50%, which is in line with the investment demand of Moti. In terms of Moti, not only can it provide all the store decoration design and costs, but also does not need franchise fees, but it needs a deposit of 10000 yuan.

According to Zhang Ming, for the site of about 10 square meters, the cost of the whole decoration is 60000 ‒ 80000 yuan, which is fully borne by Moti.

Then, the reporter of Times Weekly visited a RELX offline authorized store. According to the account book of clerk Chen Hao (pseudonym), on October 11 alone, there were nearly 30 orders. According to the Chen Hao, the current combined kit of one device and 2 pods is estimated to be 99 yuan, and the daily flow of the working day is about 3000 yuan. For those who want to enter the industry, Chen Hao said, if you don’t know much about it, try not to enter, because he has seen many stores close down.

During the interview, an employee of an offline store of e-cigarettes told the Times Weekly that the owner of the store had been open for six years, but he did not make money. The owner also revealed to him that the industry was stagnant and he wanted to reduce his salary. He is ready to leave this month.


Crazy offline expansion

The offline stores of e-cigarettes are regarded as the key to delivery by brand makers.

“In the early stage, we are still studying how to sell e-cigarettes online, but now we find that online is not the main delivery channel of e-cigarettes, and its focus is still offline.” Fang Hui told Time Weekly.

At present, channel expansion is based on different product positioning. At present, the mainstream products are disposable and pod system, and the one-time products are more inclined to retail terminal channels, such as convenience stores and retail stores; Pod system channels are relatively rich, including brand direct stores, brand authorized franchise stores, and 3C channels.

“The most important thing for sales channel promotion is to find the right people and team.” Fang Hui said. According to Fang Hui, at present, there are nearly 1,000 employees in Boulder, including its sales team, and about 200 core teams, including 50 R&D teams. It can be seen that sales and channel personnel account for a large proportion.

On October 9, Times Weekly reporter learned from Moti CMO Zhou Jie that, in terms of the team size of nearly 1000 people, besides product and R&D team, the largest team is the sales channel department, “the number of sales channel employees currently accounts for more than half of the company.”

The reporter of Times Weekly learned from several e-cigarette companies that they visited that they attach great importance to offline promotion and are devoting great efforts to human and material resources to expand market share.

According to Zhou Jie, at present, Moti is expanding with the growth rate of tens of thousands of stores every month, and it is expected to have 10 thousand retail outlets by the end of this year. Offline channel expansion is not as easy as expected. Fang Hui, who once worked in Jingdong, explained to the Times Weekly based on his previous experience in the retail market: “there are 7 million offline channel retail terminals in China, and the number of chain stores may account for less than 10%, most of them are scattered small stores. It’s very difficult to cover them all if you want to get through one by one. ”

Times Weekly reporters also visited several offline stores at random. Taking Beijing as an example, a certain number of convenience stores have placed disposable e-cigarettes in prominent positions, with a variety of brands, such as SnowPlus, RELX, FLOW, etc., as well as unknown ones such as Youwu, Youyi, etc. Reporters randomly asked several convenience store employees about the current sales of electronic cigarettes, and generally said that the sales were good, and people will come to buy them one after another every day.

In the aspect of exclusive stores, the reporter found that there are many offline authorized stores of RELX on the market at present through the search of APP such as Public Comment.

Then the reporter contacted a Beijing channel salesman of Moti. According to the salesman, Moti started to recruit agents in Beijing in July this year. So far, only four stores have been opened in Beijing.

smoker's paradise

Game theory of electronic cigarette

“Who are your products sold to? That’s the boundary issue we mentioned before.” Boulder electronic cigarette partner and CMO Fang Hui said.

The leaders of several e-cigarette brands interviewed by Times Weekly all agreed that they do not want their products to be the first cigarettes for young people, and the target audience is still smokers. Offline shops, each brand of electronic cigarettes are also marked in an obvious position with “minors are not allowed to use”.

In the eyes of the outside world, this kind of measure is just like the Internet bar indicating that minors are not allowed to enter.

On October 11, a reporter from Time Weekly met Li Xin, a 23-year-old girl (not her real name), in an offline store of e-cigarettes. The frequency of buying electronic cigarettes is about once every two weeks, with an average monthly cost of 250 yuan. According to Li Xin, there are not many people smoking e-cigarettes around her, and there are fewer boys than girls.

When the Times Weekly reporter visited the offline stores, he also observed that most of the customers were young women aged 20 ‒ 30, with relatively few male customers. At present, the industry’s general consensus on e-cigarettes is that e-cigarettes are a high re purchase consumer product, which can continue to bring profits.

However, Wang Xuan, who has been selling e-cigarettes for ten years, disagrees: “some people don’t buy e-cigarettes after buying them again. After selling e-cigarettes for ten years, I found that none of the old smokers around me abandoned cigarettes because of smoking e-cigarettes. Many people who smoke e-cigarettes carry a pack of traditional cigarettes with them. The fundamental problem is that e-cigarettes can’t achieve the effect of traditional cigarettes.”

“The problem here is that replacing real cigarettes requires a taste similar to real cigarettes, that is to say, stop craving cigarettes. If I am a smoker and you give me electronic cigarettes now, but I have bad vaping experience, it’s certainly not good. This involves the reduction of electronic cigarettes. ” According to Fang Hui, if you reach out to non-smokers because the product can’t attract smokers, it’s a kind of over play. Boulder is against this practice.

At the same time, Fang Hui also acknowledges that there are some shortcomings in the current electronic cigarette industry, but for the electronic cigarettes still in the early stage of development, Fang Hui firmly believes that vaping technology can be improved, “but I think there is still a long way to go.”

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