Monday, May 20, 2024

Special FMCG growth logic of e-cigarettes in China


From the perspective of HLWJH, e-cigarettes seem to be hardware products, but in fact, the growth logic is more in line with fast-moving consumer goods. In essence, although it is a hardware product, in the purchase decision path, the electronic hardware purchase decision chain is long, but the purchase decision path of cigarettes is relatively short, and the growth logic of e-cigarettes will also be transformed from marketing channels to sales channel-driven in China.

We try to explain the growth logic of FMCG with the model of M=P*Q*B, M=market share, P=user’s brand awareness strength, Q=channel coverage, B=high-quality sales channel coverage.

In other words, under the premise of sufficient user brand awareness, the coverage of the channel and the quality of the sales channel itself will determine the next e-cigarette market share distribution.

In fact, for e-cigarettes with stronger FMCG attributes, users’ brand recognition is fundamental to promote conversion.

Special FMCG growth logic of e-cigarettes

The same is true for e-cigarette products, which means that the Matthew effect will be more obvious in the next industry competition.

In addition to brand recognition, the number of sales channels covered is also a very important indicator. The more channels there are, the wider the user coverage will be. This is also the reason why many e-cigarette brands deploy offline. Offline channels are practical for e-cigarette brands. And it;s a “non-renewable resource”. Only enough sales channels can support the fundamentals of future growth.

If the number of sales channels determines the fundamentals of future growth, the coverage of high-quality channels may become the key to determining the future market share of e-cigarettes.

“The transfer of e-cigarettes to offline is like an emerging fast-moving consumer brand that wants to open up the market. The number of sales channels is very important, and the quality of the sales channels directly determines whether the brand can sell or not.” said a person in charge of a FMCG channel market.

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