Tighter Vaping Regulation Continues to Hurt Brick-and-Mortar Store Performance

The National Day holiday this year has already passed. During the past seven days of the National Day holiday, according to a survey released by the Grid Consumption Platform, compared to last year's National Day holiday, the impulse for holiday activities has also decreased. Last year, around 100,000, this year only over 10,000.

Not only during this National Day holiday, but also in the sales survey of e-cigarette brick-and-mortar store owners released by Blue Hole New Consumption in September, 50% reported a decline, and 30% had monthly sales income of less than 10,000, which directly reflects the difficulties faced by industry practitioners at present. Additionally, in the second half of 2021, there have been continuous negative media reports tarnishing the industry, leaving industry practitioners feeling disheartened and deterring newcomers from entering the industry. In regular industry chat groups,

Moreover, the current focus of industry insiders is on the direction of market policy regulation, with many hoping for a glimmer of hope for the industry, while others are worried about its impact on the market.

Industry regulation is a double-edged sword.

Although news about the implementation of standards and regulations has been circulating since the beginning of this year, it has yet to be confirmed by everyone. In fact, judging from the current sales performance in the market, there are not only objective factors but also more subjective factors within the industry. The oversaturation of product channels caused by industry competition, the slowdown in the growth of new market participants, has led to price transparency across the entire market. Meanwhile, some media reports have exposed that agents, in order to meet huge performance targets, have hoarded products, leading to long-term shortages of goods in brick-and-mortar stores, and the entire industry is even selling products at low prices. Some employees have revealed that at this time, the prices of products in brick-and-mortar stores are already significantly higher than the channel's shipping prices, making purchases a loss.

Before the arrival of industry regulation, major brands hoped to leverage this time gap to closely monitor channels, occupy advantageous market discourse, marketing promotion, channel customer expansion subsidies, and performance impulses. However, all these measures have led to the aforementioned situation, which is the first blade before regulation.

Looking at this year's new brands, there are significantly fewer compared to 2019 and 2020, but the changes this year are qualitatively different. More and more brands are beginning to focus on quality and user experience, pursuing brand differentiation and loyal user market positioning. The absence of industry regulation has caused many small brands that only sought profits in the short term to retreat from the market, leading to a competitive battle among stronger brands. It is believed that the market triggered by regulation will be a high-quality industry competition. Currently, new brands are starting a battle for dominance in the second half of the year, which is another sharp blade.

How can new brands enter the market at this moment?

Having learned from the industry's lessons, I believe new brands can reconsider their market positioning. Recently, in discussions with the Soul brand, I learned that as a market leader in overseas mainstream brands, they have observed the aforementioned situation in the domestic industry market and have today’s topic. The following is from communication with the Soul brand leader.

Why create the SoSoul brand?

The trend of e-cigarette globalization is irreversible.

From the perspective of global development stages, the entire industry is rapidly developing, with international markets guiding domestic markets to transform quickly. This is why domestic brands have entered the market in just a few years and then rapidly declined and eliminated. All of this presents a huge challenge for an immature domestic market and attracts the industry to supervise more orderly development.

The domestic market relies heavily on OEM, lacking good brands.

In 2019, when the domestic e-cigarette market was still a blue ocean competition, most brands were clearly homogenized, with most being OEM, opening stores, financing, and rapid channel expansion. Product quality control was not mature enough. The founding team of Soul led overseas products to the forefront of the market. Upon returning to China, they found the domestic market chaotic, and the product flavors were still at a very primary stage compared to mature overseas markets. However, Chinese consumers have yet to encounter mature electronic vapor products and flavors. This is also the reason why the Soul brand sees a blue ocean in the domestic market.

Are you worried about industry regulation?

Regulation is not a prohibition.

This industry is positive. Although many media outlets are maliciously tarnishing the industry, in the long run, this is a stage that every industry must go through in its early rapid development. The domestic e-cigarette market is currently in this early development stage, but early overseas markets were also like this. Currently, users view e-cigarettes merely as trendy products for young people's electronic entertainment. As understanding of independent e-cigarettes increases, they will gradually gain recognition from many older smokers, which can be matched through online data.

In the same situation, regional popularity can also be achieved:

All the above information comes from Baidu data!

All online promotions and sales are prohibited, leading to stronger competition among offline brands.

Since the comprehensive ban on online sales in November 2019, we have seen rapid development in offline stores. Even during the pandemic, 2020 was the first year of soaring e-cigarette specialty stores, marking the beginning of the offline market. Over the past year, industry insiders must have felt the further changes brought about by the strict ban on online sales, from platforms like Xianyu and Pinduoduo exploiting regulatory loopholes to rampant WeChat businesses, especially in the second half of the year.

The competition for recruitment resources and offline channels has intensified.

In the past year, major brands have aggressively expanded with market subsidies and promotional advantages, leading to a fierce battle among stores. Looking back over the past six months, many brick-and-mortar store owners have faced declining performance and overdue product subsidies. I believe the next companies will face another important choice: whether to completely close stores or choose strong brands to continue seizing opportunities.

How should newcomers choose brands and positioning?

Although it seems that there are many brands in this industry, during the current gradual development and iteration of the market, many practitioners have missed the opportunity to enter over the past year. Faced with fierce competition from leading brands, more and more practitioners are beginning to look for new brand gaps in the market, and the next brand choice will have the opportunity to surpass peers. Now, when the market closes its eyes to choose brands, only a few self-service characteristic brands can better help you sprint into the market.

Sosoul designs healthier flavor vapor products for young people and provides the right value guidance for them. To create electronic vapor products with the highest aesthetic level and best flavor, the product positioning focuses on rich flavors and extreme tastes. At the same time, SOSOUL is not only an electronic vapor product but also a fashionable single product for young people.

Why does SoSoul have opportunities?

Looking at many brands, doing well is inseparable from:

Brand characteristics.

Attractive store design.

User engagement.

Interesting marketing.

Strategic layout.

The ultimate result of retail is product strength, brand strength, and channel operation management capabilities.

Brand characteristics.

Sosoul's brand strategy focuses on the core value of products to users, emphasizing three key values: good-looking, good-tasting, and easy to find, creating high-value electronic vapor products that stand out among many products. Good-looking primarily refers to the main product value, store style, and surrounding design; good-tasting mainly describes the ultimate flavor of the product; easy to find focuses on the operation of offline brick-and-mortar stores.

Store design.

Soul collaborates with well-known domestic design companies and top designers from home and abroad to break through traditional e-cigarette sales models, providing a comfortable, purchasable, and check-in offline experience. In the future, we will continue to achieve breakthroughs in offline retail experiences and services, centering on users to provide an overall advanced brand experience.

User engagement and design.

Interesting products come from users. SOUL's communication strategy revolves around personalization, entertainment, and interaction; using users as brand ambassadors, establishing user circle interactions through personalized communication, making interesting product designs come from users.

Collaborations with artists.

Marketing.

Sosoul's soul is fashionable and interesting. Sosoul will collaborate with global fashion brands and creators for cross-border design. A series of fashionable toys based on electronic vapor products will be continuously launched, including creations in music, comics, movies, and crafts.

Brand cohesion.

The Soul team has found that future young people will be the main consumer force for electronic vapor products. As a team with years of accumulated experience, they hope to create better products in terms of product safety, quality assurance, flavor, and taste, guiding young consumers towards the right values.

Of course, the development of all core souls of this brand is inseparable from an interesting and popular product system and user experience. It is understood that the Chinese e-cigarette industry is in its infancy. Sosoul has an advanced flavor research and development system, advanced product innovation, and high product standards. With industry experience in over 30 markets globally, it has tailored various products for the Chinese market and consumers, from customization, fashion, to a variety of disposable specialty flavor series. Due to the wide variety of products,