What kind of business is e-cigarette?
Editor’s note: This article is from WeChat public account “Inspur new consumption” (ID: Lcxinxiaofei), author Cao Rui.
Since the second half of 2018, e-cigarettes have become a hot track, and under the background of capital stagnation and venture capital fever, it has brought a wave of “entrepreneurship.”
One night, dozens of hundreds of e-cigarette brands were established, and they all wanted to get a share of the budget of 315 million smokers in China. More than 30 of them got financing this year. But before the introduction of the “national standard” e-cigarette, the entire industry is still full of uncertainty.
What kind of business is e-cigarette? What stage has the e-cigarette industry reached today? In the face of the “Thousand Smoke Wars”, what is the core of brand breakout? What variables will Juul bring to China and what opportunities exist in the entire market?
Today, it is time to make a phased summary of the overheated e-cigarette. To this end, Inspur New Consumers Interview with Zhao Yangbo, Vice President of Qiqi Capital. In addition to investment, Zhao Yangbo even personally participated in the e-cigarette project and knew the hidden mines and hidden rules in the industry.
Zhao Yangbo, Vice President of Qiqi Capital
He recognizes that e-cigarettes will be a long-term market, but they are not optimistic about companies that burn cash flow. “In fact, everyone is waiting for the first bankruptcy, once there is a family.In the event of bankruptcy, this style of play is basically extinct. “
1. Product differentiation is the core, channel differentiation is nonsense
(1) What kind of e-cigarettes can dominate in the past two years?
The recent e-cigarette track is hot, and the entire e-cigarette market actually contains several types of participants:
1) Heating does not burn, the typical representative is IQOS, but this is not allowed to be sold in China;
2) The big smoke, the hottest market in the past few years, the typical representative is SMOK. However, because the concentration of nicotine is only a few thousandths or even a few ten thousandths, it cannot be used as a substitute for cigarettes;
3) Replacing the electronic cigarette, this is the most mainstream market now;
4) One-time electronic cigarette, which complements the smoke-changing bomb products. For a mature brand, both must exist at the same time, so why do we talk about it later;
5) Oil-filled cigarettes are considered to be spoilers. Generally, the cartridges of the e-cigarettes are disposable, and their cartridges can be reused by oiling.
In the past one or two years, the domestic e-cigarette industry has gathered so many people and capital, mainly want to participate, in fact, it is a change-type and one-time electronic cigarette, and other categories are not the main brands.
In terms of reversal and disposable e-cigarettes, the polarization of the domestic market is very obvious. On the one hand, like the Yueteng brand, the monthly sales can reach 200 million yuan, with a valuation of 2 billion US dollars. For other participants, it is a good brand to sell 2,000 to 30 million a month.
Why does Yue Yue have such a big advantage? One is that the online operation is doing well, and the other is that the line is capable of falling, and one thing is very important:Yuezheng is the first batch of feelm ceramic cores in China.
I think this is an inter-generational product, because when we look at the e-cigarette experience, the core is three points: reduction, throat and smoke. Why is the same type of smoke oil on the different product end, the effect is completely different? The problem is the heating element.
Before Yuet, the domestic e-cigarette market is all cotton core, no ceramic core. What is the difference between the two? The ceramic core is in the form of a sheet, the cotton core is flocculent, and the cotton core and the smoke oil are more closely combined, so the degree of reduction in taste is superior to that of the ceramic core.
But the cotton core is easy to burn, the power can’t be too big, and the ceramic core can. Taking the same breath, the amount of smoke and the throat of the ceramic core may be twice that of the cotton core, and the overall performance is much better.
So in the last year and the year before, YueThere are obvious advantages in engraving on the product.
(2) Technical barriers are flattened, and the core is product cognition differences
But this year, everyone’s products are on the same baseline. Some people do a little better, some do a little worse, but they don’t have such a big gap as last year. In other words, the technical barriers were basically flattened in 2019.
So the logic of all brands this year is the first channel. This logic is very simple. E-cigarette products have strong brand stickiness and user awareness. They feel that they will not easily migrate after they have occupied the user.
But I don’t agree with this at all, As a sticky, and carry-on item, how can users not compare? After comparison, users will have real brand awareness. Instead of saying that the user is the first to draw, they will close their eyes and only draw the brand.
When users start comparing, if you can’t guarantee that the product is always leading, then this logic will not hold.
So the core is the differentiation of the product, regardless of taste, shape, or overall brand tonality, you have to make the user feel that you are different from others, and some people may not catch a cold, but in fact It doesn’t matter, the most important thing is to stand out.
Many e-cigarette brands are known as differentiated channels, and I feel completely nonsense. I really don’t think there is a real difference in any consumer goods in China.
Like Estee Lauder and the perfect diary, although one depends on the mainstream platform and one on the social model, can you say that they are different channels? Is Estée Lauder unable to find a micro-business, or a perfect diary can not find the offline flagship store? Just say that your brand positioning and your product development route are the best match with what channel.
2. Channel logic of e-cigarette: “In-circle channel” is the mainstream
Like other consumer products, e-cigarettes currently have three main types of channels:The first is the “circle channel”, which is not just an e-cigarette shop or Agents, such as convenience stores, can be understood as an intra-circle channel if it has been in the e-cigarette business for half a year.
The second is a completely out-of-circle channel where terminals start to contact e-cigarettes. The third is foreign trade. This is a different matter from the domestic market, but many brands now focus on it.
But specifically, you can’t generalize, one-offAnd the smoke bomb products need to be taken apart.
Because of the retail price of one-time e-cigarette 40 yuan, it is a very standard fast-moving consumer goods, and the price of the smoke-changing bomb products is basically stuck at about 300 yuan, more similar to smart hardware, so Their cost structure and channel logic are completely two sets of things.
(1)Change the smoke bomb product
First talk about the change of smoke bomb products. If there are one million users of cigarette changers in China last year, then there will be a maximum of two or three million this year, which is not as fast as everyone thinks.
What is interesting? The core user of the reversing electronic cigarette will have a very high viscosity. When there was no good product last year, whoever has a Juul is already a veteran user. But after many brands come out this year, these users will basically have more than two, and it is normal to smoke a cigarette every day.
This involves a core piece of data: “Tobacco butts ratio”. After the user bought my refitable electronic cigarette, only he recognized my brand, he will continue to purchase the cartridge from me.
Brands that are not doing well, the “smoke rod smoker ratio” is generally only 1:3 – 1:4, that is, after the user has finished the two sets of attached cartridges, the most Buy it again and change it to another e-cigarette brand. It’s better done, it can be 1:20 or even 1:30, and it’s calculated on a monthly basis.
This indicator is a good indicator of your product and brand capabilities, but many people like to look at shipments or channel orders from the outside. The space for fakes here is actually very large.
In terms of channels, there are currently only three ways to change the smoke bomb products:
The mainstream one is “in-circle channel”, which is usually an online or offline integrated store; the second is 3C shop, because the customer price is high; the third is the brand direct store or franchise store. Although opening a store may be a loss, it can also produce some goods.
The best channel in the circle, because it has done this business, but is more concerned about your product quality and brand accumulation. It will compare your products, whether it is good or not, it is not easy to have problems, and then make a comprehensive consideration.
But in Internet cafes, bars, KTVs, convenience stores, it’s hard to sell cigarettes.
Because you go to the convenience store to buy a bottle of drink, it will cost three or five dollars. The most expensive one is to buy a box of milk and give it to people. It’s only six or seventy dollars. How can I buy a set of three hundred dollars in such a channel? Electronic cigarette? We have seen some high-end chain conveniences