RELX appears at the convenience store expo: specialty vape shops may face a wave of closures

From May 12 to May 14, RELX made its debut at the China Convenience Store Conference, while also discussing the imminent entry of e-cigarettes into the tobacco monopoly system, predicting the future direction of the e-cigarette market. It is highly likely that, like cigarettes, e-cigarettes will soon be available in major convenience stores, supermarkets, and tobacco and alcohol counters. Specialty e-cigarette shops may face a wave of closures.

For existing e-cigarette specialty shops, I believe over 90% of shop owners have clearly felt that business is far from the rapid growth seen in 2020. According to statistics from Landhole New Consumption, 85% of e-cigarette specialty shops have seen their sales continuously decline since entering April this year. The reasons for this decline, in my opinion, are as follows:

First, negative news about e-cigarettes has been rampant on major social media platforms. Opening a webpage or platforms like Douyin is filled with negative news about e-cigarettes. This has led the public to have insufficient understanding of e-cigarettes, with the immediate reaction being that e-cigarettes are harmful to health, toxic, carcinogenic, and even more toxic than traditional cigarettes.

Second, the frenzied development of e-cigarettes. After two years of wild and reckless growth in the e-cigarette industry, the entire sector has lost its rationality. Due to low investment, low barriers to entry, and high profit margins, a massive influx of capital and manpower has entered the e-cigarette industry, with the number of specialty shops exceeding 40,000 nationwide within just a year.

Third, the influx of new users is far from meeting the production capacity and scale of the e-cigarette industry. Due to ongoing negative news and national policies regarding e-cigarettes, the number of new users has sharply decreased, while the number of specialty shops continues to rise. This has led to the number of specialty shops far exceeding the number of new users.

Fourth, the impact of micro-businesses. With e-cigarettes not allowed to be sold on e-commerce platforms, micro-businesses have become the best online trading model for e-cigarettes. Conservative estimates suggest that the sales volume of e-cigarettes through micro-businesses may have already surpassed the total sales volume of physical stores. This is a fatal blow to physical specialty shops.

Surveys have found that many specialty shops in major cities have daily sales of less than 100 yuan, indicating that many e-cigarette specialty shop owners are continuously losing money, especially new shop owners. Due to insufficient customer accumulation, it is difficult to maintain store operations, and many small brand e-cigarette specialty shops have begun to close.

Opportunity: RELX's participation in the convenience store conference, combined with the current situation facing the e-cigarette industry, suggests that e-cigarettes are likely to enter major supermarkets, convenience stores, and tobacco and alcohol counters like traditional cigarettes, with taxes on e-cigarettes continuously increasing and profits decreasing. Many specialized e-cigarette shops, due to their limited product offerings and thin margins, will face a fatal impact once e-cigarettes are stocked in supermarkets, convenience stores, and tobacco and alcohol counters.

Therefore, I suggest that many unprofitable e-cigarette specialty shop owners consider transferring their shops or cutting their losses. Of course, shops in better locations and with better business can maintain their current status.