When the development of the once-frenzy industry became calm and rational, it returned to the essence of commerce. The optimization of company personnel, the tightening of capital pockets, and how entrepreneurs have risen against the trend, have become common propositions of the industry.
Tech Planet selected the popular industry that attracted the most attention in 2019 and caused the most discussion in the industry, and interviewed five entrepreneurs who are still struggling in the industry; among them, it includes Chen Min, CEO of Mystlabs in the electronic cigarette industry. In addition, there are entrepreneurs in online education, blockchain, fresh e-commerce, and sharing economy industries.
The frenzy bubble gradually dissipated. As a newcomer to the e-cigarette industry, how did Mystlabs CEO Chen Min look back on this year; how did the bubble pass and how to seize new opportunities?
“This industry will definitely not die” Chen Min, CEO of e-cigarette Mystlabs
I always joked that our founding team is a scientist who serves two 20-year-old smoker users, and a capitalist is driving and investing. Counting it out, our average startup team is already 39 years old.
At the end of 2018, after countless meals and inspections, this situation really began to string up and the project began to prepare. It was not until March 2019 that the company was formally established, and by August, our first e-cigarette product was really available.
In the e-cigarette industry, this is a very slow pace. Earlier we went to Shenzhen to find the supply chain, and the factory told us directly, “I have so many ready-made models here, just pick one and sell it.” The time period they gave was 40 days. In 40 days, a brand new e-cigarette was created, from production to finished product sales.
But we want to differentiate. When I did it seriously, I felt that I had underestimated the industry threshold for electronic cigarettes. It took us a long time to do electronic cigarette structure, design and selection of e-liquid materials. In such a small space as the electronic cigarette, it is necessary to insert batteries, circuit boards, atomizers, we have made push-pull designs, and shrapnel, etc. It takes a lot of effort to put them in reasonably.
In 2019, the overall industry bubble has dispersed a lot, and the natural elimination phase has begun. At least 70% of e-cigarette companies have retired, and some have even quietly died without any market volume. In addition to the eve of Double Eleven, on October 30th, the “online ban on e-cigarettes” was implemented. For the e-cigarette industry, this is simply a major earthquake.
The “online sales ban” came very quickly. The biggest loss was the e-cigarette brands preparing for Double Eleven. The collapse of online channels led to their backlog of large quantities. Brands can only go offline, cut prices and sell off inventory.
When everyone is squeezing offline, competition in offline channels is intensifying, and costs are rising. For example, if a brand wants to enter a convenience store, without ever selling anything, the increasing admission fee and the production of various store promotional materials are a hard investment.
The offline efficiency is far lower than the online one, and it takes time and a lot of investment. This part of the e-cigarette brands and manufacturers without offline operation capabilities will quickly fall. This part that cannot be digested by the market may quickly withdraw within a month or two. The Spring Festival is this node.
In the current environment, there are only two roads before brands and manufacturers. In addition to running offline, they are exploring the overseas market. As long as you find the right channels, partners, and reliable products, prices, and quality, you can choose to sell overseas.
Chinese manufacturers have the advantage of fast innovation and natural advantages in supply chain costs. Relatively speaking, the overseas e-cigarette market is more mature, but the foreign environment is complicated. There are mature e-cigarette brands with a market value of more than 38 billion U.S. dollars, as well as e-cigarette brands owned by several major global tobacco companies.
I have been in the robot industry before, and I mainly face corporate users. More experience is in TCL, engaged in the consumer electronics industry, 2C experience is more, so I have always wanted to find opportunities to return to the 2C market. 2C is more exciting, and user feedback will be very direct-if the product is not good, you will be scolded to death.
However, after the e-cigarette online sales channel is broken, the user feedback chain will become longer. Now, the scenes have all migrated to offline, and the test is the ability of the e-cigarette brand’s offline channels.
In the longer term, the e-cigarette industry is still at an early stage, the market is far from being saturated, and it is not necessary to grab share from other brands. After all, e-cigarettes are a business that users repurchase. If there is no repurchase, this business does not make much sense. The motivation for users to repurchase is quality and taste.
I think that one day, when battery manufacturers begin to optimize the design of batteries for e-cigarettes, the raw materials for e-liquids will be healthier. All e-cigarette industries and participants in various chains will design and optimize e-cigarettes so that product latitude gradually gets increasing.
Future sales rules and methods have not yet been clearly defined. We just need to wait and see how future policies will be regulated. From the point of view that e-cigarettes have been listed as “completion of traditional tobacco”, the industry will certainly not die. Capital’s confidence is in the hands of policy. What we can do is not only do a good job of the product, but also make it follow the regulations, develop under the “rules of the game”, and make the industry more regulated.
