A New Era in the Development of the Vaping Industry in 2021

2020 marked a new era for the development of the electronic vaporization industry in China. Among leading companies, product and development strategies have gradually become clearer, and the differentiated development of major brands is becoming increasingly evident.

The market faced setbacks, and a breaking point was imminent.

2018 was the inaugural year for the small vape industry in China, with thousands of electronic cigarette brands of varying scales and backgrounds entering the small vape market. At the same time, leading investment institutions such as Sequoia China, ZhenFund, and IDG Capital quickly accelerated their investments in several strong electronic vaporization companies. Meanwhile, the emergence of new brands and the rapid expansion of market size have drawn more attention to this previously niche category, leading to heated discussions in society regarding safety, health, compliance, and minor protection.

With the release of the "Online Sales Ban," electronic vaporizers and pods officially "disappeared" from e-commerce platforms, and corresponding product advertisements were banned from being published online. Since then, the Chinese electronic vaporization industry has experienced a peak and valley period, transitioning from a capital surge to a tide of regulation. The early accumulated user awareness of electronic vapor products also requires manufacturers to reassess. The industry and brand owners have been seeking change, developing more compliant and safe products, including the leading brand MOTI.

"Sitting and Watching One Person" - MOTI aims to adhere to the philosophy of "one step at a time," continuously innovating in product functionality based on overall R&D and supply chain collaboration, with a long-term vision.

A "veteran in the industry."

MOTI was established at the end of 2018, under the name Lei Yan Technology. Although the company was registered later than some "newly established vape brands," its core team consists of "industry veterans."

The company's founder, MG, entered the electronic vaporization industry in 2010 and became a core member of the veteran brand "21st Century Smoke" in the United States. Later, MG co-founded the "VAPORESSO" brand under SMOORE and represented the large vape brand "GeekVape," achieving global market shares ranking in the top two and three, respectively. In 2017, with MG as one of the co-founders, the MT and PHIX products entered the Chinese market.

In terms of industry development, both products have been very popular in China's small vape market.

"The electronic vaporization industry chain is mostly concentrated in China. From a historical development perspective, this industry has gone through four cycles," MG stated in an interview with 36Kr. He said, "From CIG-LIKE, APV, the rise of small vapes in China, to the current regulatory intervention leading to industry standardization, I and the core team of MOTI have experienced all four cycles."

In fact, discussions about "what kind of team and brand can succeed" have never ceased. The small vape industry in China is on the rise.

In this regard, MOTI has only been established for three years, yet it has managed to become a leading brand in the industry with a good reputation without primarily relying on capital injection, thanks to its development philosophy of "one step at a time, accumulating over time."

First, in terms of technology and products, MOTI's core team has explored countless innovative features related to large and small vapor over the past decade. However, consumers unfamiliar with this industry still find it difficult to distinguish the differences in current products.

MOTI.MEGAPRO.

"Including heating systems, temperature control systems, and e-liquid formulation, all physical inspection links are part of product strength. Product homogenization is, of course, a normal phenomenon. MOTI is also researching various possible technological directions, and we firmly believe that this series of products still needs time to continuously meet various consumer needs.

Based on this product concept, MOTI launched the MOTI·MEGAPRO in 2021, featuring a "dual inhalation mode" and "exclusive heating scheme for flavors," providing a new experience for most small vape users.

In today's increasingly homogenized small vape market, offering differentiated experiences that cater to different needs may mean higher costs and longer R&D times, but these products are what users need.

MG stated that the design and debugging of the oil tank chip and MCU chip have been ongoing for a long time, requiring significant time and effort to align with the supply chain. "Products must be 'infinitely close to 100%' to be delivered to consumers; any product flaw is irresponsible to consumers."

Second, in offline sales, MOTI has proposed a channel expansion strategy of "selecting quality B-end distributors."

Russen, 7-11, and other regional KA channels are one of the "battlegrounds" for electronic vapor brands. After a long period of layout in these channels, MOTI's own distributor channel has also become a major sales channel. MOTI does not adopt traditional distributor selection methods based on bidding or sales competition but instead selects mature distributors with long-term terminal store management capabilities as regional agents based on a long-termism and user responsibility philosophy.

"MOTI selects distributors based on their long-term management capabilities at terminal stores, with broad replication capabilities as a supplementary standard. The first-level distributors generally have experience and capabilities in managing and operating hundreds of stores; second-level distributors refine their operations in the local market. Additionally, as a brand, we assist distributors with our self-developed digital operation tool 'Magic Door' to complete marketing and inventory management, improving channel efficiency while providing a better franchise experience for terminal franchisees.

The positioning and hierarchical management of distributors ensure that MOTI's overall distributor quality is above industry standards, resulting in lower risks for mid and downstream operations. Although MOTI's expansion speed may not be as fast, the stability of terminal brand expansion is relatively high, leading to a lower "store closure rate."

On this basis, MOTI, as a brand with the most direct stores in the industry and one of the first to operate direct stores, has a strategy of maintaining close contact with distributors and new and old store owners through its store operation team, providing customized operational guidance and training based on regional or attribute differences, thus maintaining a long-term close trust relationship between the brand and distributors.

In addition to the domestic market, MOTI will also increase its investment in overseas markets.

MG stated that from the beginning of the brand's establishment, they considered going overseas and have now invested significant resources and manpower to promote overseas business. Maritime trade and brand building cannot be confused; trade involves many brand enterprises, as was the case when we previously focused on large vapes. However, building brand strength requires more investment, and it is essential to establish good retail locations and channel positioning based on local market R&D mechanisms.

In a phase of industry downturn, how can leading brands continue to develop?

Since the invention of electronic vaporizers nearly 20 years ago, the industry has experienced a peak period, with countless entrepreneurs falling during the downturn.

In terms of the entire industry, only a few companies like SMOORE can cross cycles and remain undefeated, and the key to SMOORE's success lies in its core philosophy of accumulating over time in technology, product, and manufacturing.

MG stated that the original intention of establishing a long-term sustainable company is reflected in product and channel aspects, based on the dual efforts of technological breakthroughs, product innovation, and channel service quality management. This is also the company's philosophy of working day and night, step by step, to build channels.

According to official statistics, MOTI currently has approximately 6,000 stores nationwide, with plans to complete the construction of 10,000 stores by 2021. It has entered 90% of S-level shopping malls, covering a multi-tiered market system from first-tier to third- and fourth-tier cities.

This channel achievement is not only due to the quality distributor management system but also the retail information system and refined store management system.

In addition to the previously mentioned information management system construction and optimization, the industry is under pressure, and sales are sluggish. Assisting merchants in sustaining operations and improving store sales will undoubtedly lay the foundation for the next stage of competition. Therefore, MOTI launched the "Storm Action" in August, investing 80 million yuan to subsidize stores. This 80 million subsidy will be used to strengthen the subsidy policy for old store activities, helping members attract new customers, encourage repurchases, and improve operations, alleviating store operational pressure and enhancing sales capabilities during tough times.

During this period, companies that can survive and maintain a good development trend, amidst the rise and fall of new vape forces, possess their core competitive advantages. Indeed, to catch up with leading brands, manufacturers like MOTI still need to continuously strengthen their overall capabilities, ensuring product experience while enhancing supply chain, downstream agency, and brand influence.

For new vape manufacturers, it is crucial to remain calm. MG stated, "MOTI is still a startup company that needs to address many shortcomings. In the future, we will focus on self-improvement and user service while actively embracing regulation, making MOTI a compliant and positive enterprise.

Today, the electronic vaporization industry has completed its journey from 0 to 1, with brands like SMOORE, RELX, and MOTI standing at the forefront of the industry, having established their core advantages and continuously moving forward.

We believe that in the future, MOTI, with its technological product advantages and supply chain management strengths, will further expand its territory and step onto the international stage.

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