Vaping Businesses Under Heavy Pressure Less Than a Month After New Policy
Less than a month after the new policy, vaping businesses are under intense pressure. What should be peak season has turned into a scramble to clear inventory and cut staff.
In previous years, this time was the peak season for the production and sales of e-cigarettes, when factories would hire workers and be at their busiest, with orders pouring in. <\/span><\/div>
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However, if you ask e-cigarette companies what their top priority is right now, it can be summed up in six words: clear inventory! Clear inventory! Clear inventory! Layoffs! Layoffs! Layoffs! <\/span><\/div>
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E-cigarette practitioner Li Qing stated that the online ban before Double Eleven caught e-cigarette brands and distributors off guard. <\/span><\/div>
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He revealed that he also runs an e-commerce business, but does not engage in online e-cigarette sales. His company’s revenue during Double Eleven was 10 to 15 times the usual. “Thinking about it this way, you can guess how much stock the brands and distributors have hoarded.” <\/span>
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To prepare for Double Eleven, many brands stocked up with at least several million yuan worth of inventory, and now this inventory cannot be digested, and subsequent orders have also become problematic, putting unprecedented pressure on the entire industry. <\/span><\/div>
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Now that online channels have been shut down, not only have e-cigarette products been removed from e-commerce platforms like JD, Tmall, and Taobao, but Baidu Maps, Amap, and Dianping have also blocked the keyword “e-cigarette,” making it unsearchable. The only option left is to handle the hoarded stock through offline channels to recover funds. Faced with severe inventory backlogs, some have even slashed prices to just a few yuan, selling at a loss. <\/span><\/div>
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Last week, I saw practitioners in my social circle posting photos of “the e-cigarette industry collapsing, complete clearance! No cost considerations, not a single item left!” <\/span><\/div>
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However, it is not easy to clear stock offline either. The urgency of the policy, media demonization, and excessive enforcement by local tobacco bureaus have triggered a chain reaction: distributors are afraid to sell, consumers believe e-cigarette products are harmful, and suppliers feel the market is shifting, demanding payment for goods, causing panic throughout the industry. <\/span><\/div>
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In the Xixiang, Shajing, Fuyong, and Songgang streets of Bao'an District, Shenzhen, there are 600 e-cigarette manufacturers in an area of several dozen square kilometers, producing 90% of the world's e-cigarettes, making it a true “fog valley.” Now, the “fog valley” seems to have suddenly stopped breathing. <\/span><\/div>
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With e-cigarette orders decreasing or even “partially disappearing,” the entire e-cigarette industry chain, from brand owners to OEM factories and upstream suppliers, is experiencing a severe life-and-death struggle. <\/span><\/div>
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E-cigarette companies are laying off workers to “survive the winter” <\/span><\/strong><\/div>
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Currently, the situation of small and medium-sized e-cigarette companies can be described as “bodies lying everywhere.” It is unknown how many small factories have already closed or are on the verge of closing. <\/span><\/div>
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Previously, leading companies would not take small and medium orders, but now due to insufficient orders, they are willing to take orders of hundreds or thousands. If leading companies are not saturated, the plight of small and medium enterprises can be imagined. <\/span><\/div>
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In an interview with Securities Times, Luo Haibo, general manager of Shenzhen Zhuomeirui Technology Co., Ltd., said that at the beginning of this month, a wave of government staff came to visit and distributed a survey form, writing down the reasons for the changes in the industry, hoping the company would pay salaries on time. Luo Haibo stated that the company would definitely pay salaries on time, but there are no orders, and employees have left. At peak times, their company had over 2,000 employees, but now only 500 remain. <\/span><\/div>
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There are rumors that 40,000 people in the Shajing area will be affected, and Luo Haibo estimates it will be much more than that. He stated that many industries have been sluggish in recent years, and e-cigarettes were doing a bit better. There are e-cigarette factories everywhere outside Shenzhen, and outsiders keep entering, but now the situation has suddenly changed. <\/span><\/div>
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An employee of an e-cigarette company, Zhang Yi (pseudonym), revealed to Qianbidao that his company is reducing staff. He stated that after November 1, the company has reduced its workforce by one-third from over 200 people. “The layoffs mainly involve employees with relatively high salaries, and every department is affected, and other e-cigarette companies are the same.” <\/span><\/div>
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The current environment is even harsher. Zhang Yi stated that his company’s domestic business has basically been suspended. They are working on offline sales, and layoffs are still ongoing. <\/span><\/div>
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A co-founder of an e-cigarette factory, Liu Wei (pseudonym), also revealed to Qianbidao that he knows of a top 5 company in the industry that is currently conducting layoffs of 20% to 40%. <\/span><\/div>
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The most obvious change is that Liu Wei’s company found it very difficult to recruit talented individuals in March and April when the e-cigarette industry was booming, even trying to poach people. But now, many people from the top 5 companies have proactively sent him their resumes, including mid-level and senior personnel from large companies. <\/span><\/div>
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Hope for National Attention <\/span><\/div>
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In Shenzhen, there are conservatively over 1,000 e-cigarette companies, including manufacturers, brand owners, and trading companies. Due to the domino effect, it is expected that more than half of these 1,000 e-cigarette companies will face the risk of closure this winter. <\/span><\/div>
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Currently, a large number of companies are experiencing a sharp decline in orders, necessitating mass layoffs. Under the pressure of shipments, prices are also being driven lower and lower, with previously set prices by various levels of distribution plummeting. E-cigarette companies are struggling to maintain operations. <\/span><\/div>
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Since its inception over a decade ago, the e-cigarette industry in Shenzhen has unmatched supply chain advantages and innovative vitality, becoming the global manufacturing center for e-cigarettes. China’s e-cigarette exports have already secured an absolute market advantage globally, directly providing over 500,000 jobs, with over 200 million people employed in related supply chains, generating nearly 30 billion yuan in export revenue each year, with a compound annual growth rate of 26%. <\/span><\/div>
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Here, the e-cigarette industry hopes to receive national attention, care, and support, allowing China’s e-cigarette industry to develop healthily and orderly, continue to maintain its leading position globally, and avoid the impact on China’s global leadership in the e-cigarette industry, preventing large-scale factory closures that could lead to massive unemployment and unrest! <\/span><\/div>
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