Industry Perspective: Is There Still a Second Boom Ahead for China’s Vaping Industry?

Since the online ban policy last year, e-cigarette brands have begun to shift to offline; however, the subsequent pandemic has made outsiders almost forget about the existence of e-cigarettes.

So where will the domestic e-cigarette market head in 2020? Let's analyze and predict.

——Market demand has been proven——

Whether online or offline, the booming sales of e-cigarettes have fully demonstrated the real market demand for e-cigarettes and the public's pursuit of new things.

For some smokers, e-cigarettes do have a role in alleviating cravings. Moreover, qualified e-cigarettes pose far less health risks than traditional cigarettes.
 
——Most brands exit the market——

In 2019, when disposable e-cigarettes were at their peak, there were no less than 3,000 e-cigarette brands nationwide. In Shenzhen, an order of 3,000 units could be OEM processed. Various styles and craftsmanship of e-cigarettes dazzled consumers.

With tightening policies and the emergence of the pandemic, some brands gradually exited the market. Even previously popular brands began to sell off at a few yuan per unit.

——Opportunities still exist for self-owned factory brands——

Policies and the pandemic have affected brand owners, but they have also impacted e-cigarette production factories. By the second half of 2019, some factories had already exited the e-cigarette production field. Some surviving factories that originally only did OEM began to promote their own brands.

I mentioned in "The New Retail 3.0 Era" that the three core values of vending machines are experience, brand promotion, and traffic generation. From this perspective, it is currently the best time for self-owned factory brands to engage in e-cigarette vending.

 

Setting aside policies, from a market perspective, the prospects for e-cigarettes still have noteworthy points.

1. Product awareness has greatly increased

After experiencing the market boom in 2019 and the policy turmoil, the public's awareness of e-cigarettes has significantly improved.

In my analysis of the vending machine industry, I mentioned that whether a product is suitable for vending should be analyzed from six dimensions, one of which is awareness.

The higher the user awareness, the greater the sales; conversely, the same applies. Therefore, compared to 2019, the sales of e-cigarettes through vending machines will see some growth.

2. Product gross profit increases

The market price of a disposable e-cigarette ranges from 39 to 59 yuan, and consumers have already formed a cognitive bias regarding this price. Therefore, the retail price of disposable e-cigarettes will not fluctuate significantly.

However, as the heat decreases, the OEM cost of e-cigarettes has decreased by at least 30% compared to 2019. This has created greater gross profit space for vending.

3. Quality + marketing builds brands

Many so-called e-cigarette brands in 2019 were merely names. Aside from design flaws, battery issues, and e-liquid problems were prevalent.

Quality is the foundation of a brand; high quality + good marketing can create a brand. Focusing solely on marketing without quality results in a fleeting presence! Only e-cigarette brands that can withstand scrutiny will survive in the end.
 
For the e-cigarette industry, the only uncertainty is ZC.

Based on my understanding of the consistent thought of "stable development, orderly opening" and my judgment on social development trends, I estimate the regulatory measures for the e-cigarette industry:

After the online ban, the second measure should be quality control. Those enterprises that do not meet quality standards will be eliminated from the market. Since e-liquid is key to e-cigarette quality, the second step should be production standards and e-liquid control.
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If the e-cigarette market still has explosive growth, then there will be a third action, which is offline channel control. However, based on the effects of the first measure in 2019 and the impact of the pandemic, the second measure will be delayed. This leaves some room for orderly market development.

For some enterprises, one positive effect of the pandemic is that you are now on the same starting line as those who were originally faster than you.

Therefore, during the pandemic, we should not only focus on masks and temperature guns but should seize this opportunity to quickly catch up with competitors.

This article is reprinted from the e-cigarette WeChat public account for sharing purposes!