Tmall Tightens Nicotine Vape Sales, Encourages Low-Cost and Zero-Nicotine Devices

On August 29, news emerged that Tmall has recently made some adjustments and changes to the e-commerce sales of e-cigarettes, mainly reflected in the recommendation strength of products containing or not containing nicotine.

Tmall will tighten recommendations for nicotine-containing e-cigarettes

Recently, Tmall's e-cigarette-related personnel requested e-cigarette manufacturers to start preparing for the development and production of nicotine-free products, mainly based on the current unclear policies regarding e-cigarettes. Products containing nicotine will be recommended less, while Tmall will promote nicotine-free products as the main offerings, allocating resources for advertising and promotion towards nicotine-free products.

Tmall's warning may be related to the tobacco monopoly bureau's recent investigation into the upstream and downstream of the e-cigarette industry, including the registration and documentation of e-liquid and nicotine sources, which is seen as a signal of tightening and standardizing the e-cigarette industry.

Tmall was one of the early e-commerce platforms to embrace e-cigarettes, issuing two documents in April and June 2017 to regulate e-commerce sales.

In April 2017, Tmall, in collaboration with several e-cigarette companies in Shenzhen, initiated the “Tmall E-Cigarette Industry Quality Self-Discipline Convention” to standardize market order.

In June 2017, Tmall added “E-Cigarette Industry Standards” rules applicable to all e-cigarette products listed under the “ZIPPO/Swiss Army Knife/Glasses” primary categories, mainly involving some publishing norms for e-cigarette products.

The most recent change regarding e-cigarette policies occurred on May 30, when Zhejiang Tmall Network Technology Co., Ltd. changed its business scope, adding e-cigarettes to the list of products sold, which the official stated was a normal business operation in compliance with legal regulations.

At the same time, some illegal promotional terms regarding smoking cessation have been deemed illegal advertising.
 
Screenshots show that Tmall's related personnel notified e-cigarette brand e-commerce operators that they had received two public opinion reports regarding e-cigarette advertising “smoking cessation,” which, after legal confirmation, was deemed illegal advertising. They need to control such products, and e-cigarette merchants should avoid using terms like “e-cigarette smoking cessation” in their titles, as well as terms like “clearing lungs, detoxifying, smoking cessation,” etc.

Blue Hole's search on Tmall for e-cigarettes found that most of the main recommended products are still nicotine-containing products, and this policy may gradually begin to be implemented.

New e-cigarette brands are finding it difficult to open stores on Tmall

In addition to the weakened recommendations for nicotine-containing e-cigarettes, Tmall has also set strict requirements for new e-cigarette brands.

A new e-cigarette brand launched in early August told Blue Hole that Tmall is currently unfriendly to new brands, requiring not only that the company be registered for more than two years but also imposing restrictions on the time of trademark acquisition.

Blue Hole casually searched Tmall for several recently funded new brands and found that none had opened Tmall flagship stores.

Yinwei, which received 100 million in funding, has no store on Tmall.

KMOSE and VOZOL, both of which received tens of millions in funding, also have no stores on Tmall.

Even the strong Xuejia e-cigarette, which received $40 million, has no store on Tmall.

The recently announced partnership between Peng Jinzhao, Luo Yonghao, and the Xiaoye e-cigarette brand with Chen Guanxi also has no store on Tmall.

It’s indeed unfriendly. Brands established in April still have no Tmall stores, and with Double 11 approaching, how will this first Double 11 battle for e-cigarettes be fought?

However, where Tmall is strict, JD.com is welcoming. With Tmall's high requirements, many new e-cigarette brands are turning to JD.com to open flagship stores. The aforementioned Yinwei, Xiaoye, Xuejia, KMOSE, and VOZOL have all opened flagship stores on JD.com, indicating that the main battlefield for the Double 11 battle for e-cigarettes will likely be JD.com.

This is not scientific, as Double 11 is a festival created by Tmall.

Tmall's closed-door meeting encourages manufacturers to push low-cost products

Recently, Tmall organized a closed-door meeting with e-cigarette manufacturers. An attending manufacturer revealed relevant information to Blue Hole, which can be seen as signals for the operation of e-cigarettes on e-commerce platforms in the second half of the year.

1. The competition in the small e-cigarette market will become more intense in the second half of the year, with 80% of manufacturers planning to launch new small e-cigarette products.

2. A large number of overseas brands will enter the Chinese market before the end of the year, with several brands already in cooperation negotiations and possibly engaging in deep cooperation with Alibaba Health.

3. Tmall is very optimistic about the small e-cigarette market, and platform resources will tilt towards small e-cigarettes, encouraging manufacturers to launch more nicotine-free products.

4. The e-cigarette category saw a strong initial explosion, but it is predicted that there will be a fatigue situation later on, with leading brands currently showing a slowdown in growth on Tmall.

5. Selling e-cigarettes through Taobao live streaming is still under internal discussion as not allowed, but Alibaba is communicating about this matter, and the chances of allowing live streaming in the future are high.

6. According to Tmall's big data, the oil leakage issue accounts for a significant portion of customer complaints, which is a problem faced by all brand owners.

7. Tmall is very optimistic about the low-cost small e-cigarette market, suggesting that brands can plan low-cost small e-cigarette products, aiming to bring prices down to around 15 yuan after meeting testing requirements and conducting cost calculations.

8. Tmall's big data shows that the three core selling points for e-cigarette users are: stress relief, relaxation, and refreshment.

Blue Hole Observation: Starting a business in e-cigarettes is genuinely difficult

From the information gathered at Tmall's closed-door meeting, it can be seen that nicotine-free small e-cigarettes are encouraged for development, and low-cost small e-cigarettes are encouraged for launch. Will there be a day when a brand offers a 9.9 yuan product with free shipping...?

Blue Hole has observed that the sales channel distribution for some manufacturers generally shows an online-to-offline ratio of about 2:8, indicating that the core battlefield for e-cigarettes remains in offline channels. Although the online e-commerce proportion is small, the gross profit is high; the offline channels, while having a larger proportion, often offer discounts to gain market share, leaving manufacturers with only GMV.

It was previously said that the barrier to entry in the e-cigarette industry is low, with 5 million yuan enough to start a brand. After six months of observation and research, Blue Hole believes this statement is particularly naive. Forget 5 million; even 50 million might not be enough to create a sustainable e-cigarette brand.

Many e-cigarette entrepreneurs have told Blue Hole that starting a business in e-cigarettes is genuinely difficult; this may be the entrepreneurial project requiring the most capability at present.

This makes sense.

You see, an e-cigarette brand needs to do many things: build consumer brand awareness, manage supply chain product development, engage in online e-commerce, develop offline channels, spend money, seek financing, manage operations, expand overseas, and constantly monitor relevant policy trends, and crucially, it’s not profitable...

This is a very multi-faceted entrepreneurial project, involving both front-end and back-end as well as online and offline, making it much more challenging than pure internet or pure offline entrepreneurship. So the ultimate soul-searching question arises.

Young as you are, why do you want to start a business in the e-cigarette industry...?