LINX E-Cigarette Distribution: How Good Is LINX?

LINX e-cigarette distribution, how good is LINX? LINX e-cigarettes represent a channel player's entry into the e-cigarette industry. It resembles a combination of a self-media alliance: the founding team members are the founders or CEOs of various self-media platforms such as Visionary, Tongdao Dashi, Weimei Holdings, and Military Second Dimension. Among them, Li Yan, chairman of Weimei Holdings, Zhang Jinyuan, chairman of Tongdao Dashi, and Ren Yi, founder of the blockchain smart hardware company Mikes, are primarily responsible for daily operations.

How much do LINX e-cigarettes cost? According to data released by LINX's official WeChat, they sold 5,000 e-cigarettes within 45 hours of launch. If calculated at a price of 299 yuan for a set (1 device + 4 pods, currently the only option), the total sales from this pre-sale exceeded 1.5 million yuan.

Zhang Jinyuan explained that they officially decided to start the e-cigarette business last December. Considering they could ship by the end of February, this means LINX completed a cold start in just three months. Zhang Jinyuan stated that this was thanks to the team's rich experience: "We are all chairmen of different companies, doing director-level work." Meanwhile, Ren Yi, who comes from Xiaomi, played a crucial role in the supply chain's operational capabilities. This urgency stems from their reflections on self-media business: in recent years, e-commerce revenue has become increasingly important for self-media. For example, Military Second Dimension's e-commerce sales reached 100 million yuan in 2018, accounting for a significant portion of their income. However, they have always been in the "middleman profit" business, and how to retain users has become a core challenge.

In light of this situation, Zhang Jinyuan and others hope to find a consumer product to establish their own brand and retain users. This must be a fast-moving consumer good with a low unit price and high purchase frequency to leverage the promotional advantages of self-media. The choice of a closed system e-cigarette that requires repeated purchases of pods became their selection.

However, the LINX team maintains a cautious attitude towards using their channel promotion capabilities. Zhang Jinyuan believes that forcefully presenting a new product to unsuitable users is very dangerous. During the early promotion of LINX, Tongdao Dashi only used eight posts from their public account on the same day.

On the other hand, Zhang Jinyuan believes that their current advantage is the ability to connect directly with consumers and capture their attention, something that previous supply chains could not achieve. Through frequent communication with consumers, they can iterate products more effectively and capture core users. For fast-moving consumer goods, capturing users and continuously improving repurchase rates are the most important metrics.

Below is a summary of part of the dialogue between LINX founder and CEO Zhang Jinyuan and "Consumer New Voice" (WeChat ID: varitrend):

Consumer New Voice: When did you first pay attention to the e-cigarette field?
Zhang Jinyuan: I was an early user of e-cigarettes, back when they were still in a very retro state, with large devices that required refilling. In April or May of last year, because I was also investing, some friends in the investment circle started discussing this with me. By August, we began to see some news, including the rapid development of JUUL and high-value equity transactions, as well as the development trends of domestic brands like RELX, which brought this matter to our agenda.

Li Yan, chairman of Weimei Holdings, has a courtyard in Beijing where our seven members often gather. During one of these gatherings, everyone recognized the potential of this business, so we decided to take action together.

Consumer New Voice: Wasn't this a bit hasty? Was there more concrete data to support this?

Zhang Jinyuan: In December last year, I tested a small account with fewer than 1 million followers. It was an e-commerce account that would promote different products daily. We promoted a disposable e-cigarette, which was a relatively basic product with a unit price of only 69 yuan. The results were excellent; one article sold 7,000 units, and we felt this could be a very large market.

Consumer New Voice: The founding team of LINX has formed a very strong self-media channel alliance. What was the consideration behind this?

Zhang Jinyuan: We have indeed been operating in the self-media industry for a long time. Since 2017, we have observed a trend: besides advertising, e-commerce has become a very important source of income for self-media channels. In 2018, Military's e-commerce sales reached 100 million, Weimei's was 60 million, and Tongdao's was also around 60 million.

However, self-media e-commerce has a drawback: the products are not our own. We, as a channel, are not fundamentally different from previous advertising. If customers buy something from us and find it good, they will eventually seek out the official channels, leading to gradual loss.

Therefore, we have been thinking for a long time about creating a consumer product and establishing our own brand. Our first judgment is that self-media is not suitable for selling durable goods, such as phones or computers, which are high-priced products. This is because self-media channels are based on WeChat, where people are accustomed to small payments, and the maximum WeChat red envelope is 200 yuan.

The second consideration is market capacity and concentration. We hope to choose a market that is very broad but has low concentration, and e-cigarettes fit this need perfectly. China is home to the largest smoking population in the world and the largest consumer market, yet it has not produced particularly good brands. For instance, RELX, which is currently in the lead, is actually a new company that only emerged last summer. Consumer New Voice: Does LINX's strong channel capability create a unique advantage in the e-cigarette sector?

Zhang Jinyuan: In terms of product marketing, we have always been very cautious about using our strength. The power of marketing is indeed significant, but when promoting a new brand's first generation or early products, you must present it to users who appreciate it. Otherwise, if you sell the product to unsuitable users, they will regret it, leading to numerous issues. Despite our public accounts linking so many users, during the first wave of pre-sales, we only used end-user traffic: three posts from Military Second Dimension's public account and eight from Tongdao Dashi.

Consumer New Voice: What is the process of product development and mass production for LINX? How did you manage to ship in February after deciding to enter the e-cigarette market in December 2018?

Zhang Jinyuan: In fact, the main players in the market can quickly design and produce once the supply chain is established. The time mainly spent is on negotiations. Our partner responsible for the supply chain, Ren Yi, comes from Xiaomi and has rich experience and familiarity with traditional business practices, so we completed negotiations with suppliers early, saving a lot of time.

E-cigarettes have undergone many years of evolution, and the technology is now very mature. From a core technology perspective, it mainly revolves around atomization technology. Currently, the results vary among companies. Other components like batteries and chips are quite standard. Creating a mature product is indeed very fast now.

(Consumer New Voice: So technology isn't that important?) We will keep an eye on technology. For example, we have a physical sterilization technology that will be used in the next generation of products, allowing for a nano-level change in the materials used for the mouthpiece, reducing bacterial growth by 50%-80%.
The next focus is on refining the product to make e-cigarettes more suitable for the Chinese market. We chose to use food-grade stainless steel for the body. The reason for this choice is that we noticed that most products on the market look very similar, and in this case, we want to establish a brand's quality and tone through a different style. Additionally, the body is made of mirror-polished metal, which is a complex process and not easily replicated. We want e-cigarettes to be more beautiful and visually appealing.

Consumer New Voice: In the current situation where e-cigarette supply chains control production capacity and are more dominant, how does LINX negotiate with suppliers?

Zhang Jinyuan: Our suppliers are those who manufacture phone casings for Apple, and Xiaomi is also a long-term partner of theirs. From a supply chain perspective, they focus on two things: brand and channel. From a brand perspective, we have been in our respective vertical fields for many years, and we have a deep understanding of brand building and promotion, which increases the likelihood of successfully incubating a new brand.

From a channel perspective, the most critical aspect of atomizing e-cigarettes is the pods, which are the core of fast-moving consumer goods. Achieving close communication with users becomes crucial. For suppliers, regardless of which distribution channel is used, they cannot receive direct feedback from users to build brand loyalty. But self-media e-commerce can. In the WeChat battlefield, our alliance is currently the strongest channel visible in the e-cigarette field.

Consumer New Voice: How is LINX's sales channel currently structured?

Zhang Jinyuan: We mainly sell online using our channels, such as Weimei's self-media alliance, which has over 800 accounts, allowing LINX to create a significant reach across these 800 public accounts. Of course, we are also negotiating with mainstream channels like JD, Tmall, and Taobao.

Offline, we believe the main role is exposure. Distribution must align with consumer logic; selling a 300 yuan device in convenience stores is inappropriate, but pods can be. We will also determine what products to distribute in tobacco shops based on this logic. Our partner Ren Yi has a profound understanding of the entire sales system, so if we need to establish offline channels, it is entirely feasible.

However, at this stage, the more important factor is the number of users you can directly communicate with. A loyal heavy smoker can consume two packs a day; how significant is that? If such a person can establish direct contact with you, your business prospects will look very promising. The e-cigarette battle is about who captures more core users.

Consumer New Voice: Currently, many new e-cigarette brands are emerging in the market. How does LINX establish brand recognition among users?

Zhang Jinyuan: I believe there are two aspects. First, e-cigarettes are still a new product, and we need to help everyone accept this new product; second, it is something that goes into the mouth, so building trust with users is more important than anything else.

To achieve this, first, our supply chain must be robust. We have established strategic partnerships with factories, and we fully control the supply chain, ensuring that our requirements are met without cutting corners. For instance, our factory's cleanroom assembly, Apple's metal cutting, and polishing processes are all top-notch and have undergone numerous validations.

The second point is that we want to create a safe consumption process for consumers. The seven of us have previously run many businesses, but we have never before put our faces, names, and companies directly on the products, betting our reputations on them, which serves as a form of endorsement.

Consumer New Voice: What is the most pressing issue LINX needs to address at this point?

Zhang Jinyuan: I think it is how to refine the product. Any brand or channel that is detached from the product is meaningless. Our industry still faces many fundamental issues, such as leaking and flavor, which are basic problems. We need a truly satisfying e-cigarette that meets the public's needs, rather than one that users feel is just acceptable, uncomfortable, or unsatisfactory. We must create a product that scores 100 points.

LINX is currently recruiting globally for e-cigarette distribution. With the e-cigarette market experiencing geometric growth, we hope to partner with friends looking to make their first pot of gold in the e-cigarette industry. Don't hesitate to contact us! LINX e-cigarette distribution contact WeChat: hswx9981 or call for communication: 17682343645.