Landong recently conducted a one-on-one interview with Zhang Jinyuan, CEO of LINX vape brand, at the New Consumption Summit of Z Era in 2019. We talked about the development of the electronic cigarette industry and LINX.
This is also the first issue of “100 People in vape industry” which is a personal interview column launched by Landong New Consumption. We will select the best ones in the upper, middle and lower reaches of China’s vape industry chain for interviews, in order to show the entrepreneurship ecology of China’s vape industry in a more comprehensive way.
LINX was founded in January 2019 by former Uncle Tongdao blog CEO Zhang Jinyuan and other founders. Now it has obtained four rounds of financing. Investment institutions include CICC Huicai and so on. LINX belongs to one of the social media influencer brands founded this year, ranking sixth in the JD mall 618 best-selling vape brand list.
Zhang Jinyuan gave a speech and shared it in the summit in the morning. Unlike the traditional speeches on other places, Zhang Jinyuan used only one PPT, but he did not advertise directly for the company, but described some prejudices faced by the whole electronic cigarette industry.
In his words, the outside world is full of curiosity about electronic cigarettes as a new industry. It also encountered many prejudices.
He believes that electronic cigarettes are particularly interesting things, the essence of which is really brand-new consumer goods, and electronic cigarette technology is also new. In the past, it was difficult to find products similar to electronic cigarettes, which is why today a lot of capital is willing to invest it. The essential reason is that there is an opportunity to recreate an industry really, not simply upgrade it.
As for market judgment, Zhang Jinyuan believes that in the next three to six months, new entrepreneurs will continue to emerge and new brands will continue to pour into the market. Today’s user market is still very small. Although we can see the explosive growth of JD mall data, it is a very small market compared with the market of mass consumer goods. How to occupy customers’ mind and cognition is the most essential problem of this matter.
Zhang Jinyuan objected to calling the products as an electronic cigarette. It’s called electronic vaporizer in his mouth in public. He argues that the word e-cig limits the imagination of the industry, while electronic vaporizer provides a device the meaning of atomizing or vaping everything, providing a new entrance for humans beyond the traditional eating, drinking and playing.
He believes that the electronic atomizer is a new way to please and entertain oneself besides eating, drinking and playing. What LINX needs to is be the entrance, which is a much better item than addictive consumer goods. It’s a way to atomize everything, not a lighter with a specific ingredient.
Zhang Jinyuan accepted an interview with Landong “100 People in vape industry” afterwards, and we arranged the form of simple questions and answers to facilitate better reading.
Landong: Why do you think that calling vape as electronic cigarettes makes the market smaller?
Zhang Jinyuan: I think that nicotine-containing vapes will eventually enter a strong regulatory category, rather than weak regulation. Strong regulation comes from licences, or products classified as certain state-owned or state-owned backgrounds. But we should be prepared for this, rather than be blindly confident that they will not be regulated. In addition, both capital and investors come to the vapes for addictive feature. This concept can get more money, and its product characteristics make it better used. When the base number reaches a certain level, qualitative change will happen naturally. We want to welcome such qualitative change well.
Landong: The atomizer becomes an entrance, and the e-cig will be just one of them. Will you produce more “content” to atomize? This is an interesting idea.
Zhang Jinyuan: I think there will be a path for the development of this industry. Everything is natural at first. As long as he is a practitioner in this industry, he absolutely can come up with it in five minutes. For example, to vape areca nut, I don’t need nicotine salt anymore. Arecoline still has some characteristics of nicotine, which can be thought of immediately by a slight think. Think again, I make gum to use mint which’s refreshing and refresh my mind. This is something we can see in the next few months. It’s all the beginning.
Landong: Back to LINX’s specific situation, how many rounds of financing have been completed now?
Zhang Jinyuan: Four rounds have been completed.
Landong: Where are the funds currently used?
Zhang Jinyuan: The two most important uses of funds are product research and development. This is the most fundamental thing for an enterprise. It is how to continuously optimize your products, adjust your formula and optimize this matter. At the same time, there is an investment in brand building and sales channel building, these two things are mutually reinforcing.
Landong: Will LINX hold music festival marketing?
Zhang Jinyuan: We find that most brands will emphasize some common labels. The first one is the product labels. The second one is the crowd labels. That is, I am more fashionable and cool. So I want to go to music festivals and night clubs. I want to cooperate with the best night clubs in China. We want to cooperate with the best music festivals in China, but this is also a very inefficient way. For example, we may found there may be five brands of electronic cigarettes in the festival, but users are not loyal at present. For LINX, it is more desirable to establish channels that it can control. We make more in-depth investment in data analysis and CRM. For example, LINX has entered 2000 nightclubs in Shanghai and Beijing, grabbed data through a payment system and a backstage CRM management system, and then conducted research and analysis.
Landong: What do you think about the balance between online and offline sales in the future, or what are your priorities?
Zhang Jinyuan: I think if we take this matter apart, offline will be the biggest source of GMV. Every consumer GMV comes from offline, but online will be your core source of profit. Now we regard offline as a traffic capture tool, or a sample source for data acquisition, because the most difficult thing for us to do data analysis is to find the sample source. There are too few samples online. In this case, the core strategy of offline is to move forward. We occupy the market share with shorter time and higher efficiency, so that more samples can enter the database, but the ultimate profit must come from online user maintenance.
Landong: Just past 618, everyone is rushing to rank high online. What kind of fluctuations did you experience when you observed the whole situation on that day?
Zhang Jinyuan: When we observed the situation that day, we had been communicating closely with our operation team. We can see that, first of all, this number is surprising to us according to the JD mall report, there are two surprises.
Firstly, the overall growth of e-cigarettes is not as good as we expected. We recall that 618 in 2018 increased six times as much as that in 2018. What is the situation of 618 in 2018? In 2018, the whole electronic cigarette industry lurked underwater, did not rise, did not break out, nobody made a brand. At the same time, most of today’s visible brands did not enter, there was no Moti, vvild, all of these did not exist. But after so many people entered, the market explosion even spread widely, it increased six times only. This data itself contains a lot of interesting data. It needs our own judgment to sort it out.
Second, we see that the industry is competing and ranking in a very strange way. I think this is a very immature performance of the industry market, because we can acknowledge that there is no final effective recognition in the competition for second or third or fourth places. We can only compete for recognition through inefficient means or even ridiculous means. I think this is the industry’s sadness.
Editor’s Note: He refers to the way e-commerce business do fake reviews to boost the rankings.
Landong: What kind of trend do you think the whole industry will take from the end of 2019? Will any startups collapse before Double Eleventh shopping festival (11th November)? Will the top five or eight finally be revealed by the end of 2019?
Zhang Jinyuan: I think there must be brands collapse before the Double Eleventh , because the input-output ratio of the whole industry is not proportional. We can see from the JD mall data that the market growth is not as expected, or not as we think, if some brands spend too much money on non-hematopoietic projects, they will fall very early. According to what we know, some well-known brands will fall before Double Eleventh. Secondly, I think the real outbreak of the electronic cigarette industry should be after the formal conclusion of national regulation.
Landong: What do you think of the national standard for electronic cigarettes that may be introduced this year?
Zhang Jinyuan: I think the national standard is the most important link, but not the whole industry, because the national standard stipulates products, but there is no regulation institute. Once the conclusion is reached, we can talk about the top three or the top five. For example, it’s hard to imagine a company wants to be listed on the stock market when they’re faced with such big policy uncertainties. The second is that the whole user market may really turn from wait-and-see to fission and outbreak. It must be after the national standards come out, capital will enter the market more quickly and users will fission more quickly, and then it will start. At that time, everything is possible, even if you re-establish a brand at that time.