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Vape enterprises fake data to get financed – Lose money to sell products

70% of vape startup company sales income is allocated to the sales channel

In the first half of 2019, the total amount of China domestic e-cigarette financing is about to reach 1 billion yuan, which is almost the total amount of e-cigarette financing in the whole year of 2018.

As to the intensive financing, some insider has disclosed, “The industry published financing data is much exaggerated compared to the actual account data. Lots of fake data there.”

Obviously, the electronic cigarette industry has entered the stage of cash burn. Relevant people said that the company mainly earns money from pods, while vape devices are sold at low prices. And even many brands provide free replacement service for devices from other brands.

“Capital companies know it very well that this subsidy war will burn a lot of cash. They usually pay attention to several brands at the same time, the amount of investment will be less than the amount of public financing data, but the brand exaggerates it to be very high. Moreover, most of the institutions inject capital periodically, trying to publish a higher amount of financing to the outside world, in order to boost the industry. If effective, they will continue to invest more capital, ” a person in the industry said.

Many professionals believe that e-cigarettes are an industry that depends on policy to eat. The frequent carrying out of regulatory policies represents the industry and begin to attract government attention. The future development of the industry is gradually oriented. Observing from the current situation of financing, entrepreneurs are optimistic about the future development of the industry.

Vape enterprises fake data to get financed

Money that cannot be earned by capital

“E-cigarettes are indeed profitable, but the profit may not be taken by ordinary capital organizations.” A reader posted online.

Looking from a broad perspective, electronic cigarette is a very interesting industry nowadays. Its characteristics are not only reflected in the stricter policy supervision, the more optimistic entrepreneurs, and the more exciting investors, but also in the brand side, the continuous investment of capital, and the lack of scale for C-end users.

“Profits are given sales channels, the brand end is basically doing a loss-making cry.” Shang Peng, an electronic cigarette entrepreneur, who once sold electronic cigarettes. He is also a vaper who has alter from traditional cigarettes. Shang Peng told us that the sheer cost of the sales channels accounts for up to 70% of the retail price of electronic cigarettes. He also mentioned, “the retail price of a head brand such as RELX is said to be a price customized according to market conditions, which is actually a price calculated according to the cost of delivery and sales channel costs.”

Conversely, the retail price of an electronic cigarette is 299 yuan, and 200 yuan are all paying for the sales channel. Even so, “the electronic cigarette market is still not working or growing up”.

“At present, almost all domestic e-cigarette projects are a B-end business, doing C-end is relatively hard, and can not tell a story.” Shang Peng said that a single shipment of B-terminal can reach tens of millions, and if this data is placed on C-terminal, I am afraid it will not be possible for three months’ sales.

Current status of electronic cigarette industry: too much emphasis on data, and ignore the product itself. The core reason is that investors place too much emphasis on data. Shang Peng’s project went bankrupt at the end of last year for no particular reason: not financed.

“Investors only value data, no data, nothing to talk about.” It is undeniable that at this stage, most of the electronic cigarette projects are struggling on boosting and faking data, only bigger or better data can get financed.

Vape enterprises fake data to get financed

Some projects are financed within a month or two of their establishment, and even some projects are sold before their trademarks have been registered, and the underlying construction has not yet been completed, but they rush in. The essence of all these actions is to make bigger data and please investors.

There are many ways to make bigger data, in addition to the traditional online and offline channels, there are also new Wechat-business players.

On June 26, a self-media article entitled “YOOZ electronic cigarette is suspected of pyramid selling, save soldier Cai Yuedong!”. In the YOOZ marketing system, directors and partners are at the top of the pyramid. They can get unequal benefits from the fission users. Except for YOOZ itself, they have gone beyond two levels.

We learned that YOOZ invited Chen Yuxin, the former CEO of Hanshu Wechat Business, to personally manipulate YOOZ Wechat business architecture. According to Chen Yuxin, in YOOZ distribution system, the whole distribution system is a hierarchy. The company only has cooperative connections with the first-level agents. The first-level agents can develop the second-level agents themselves, but the second-level agents have no direct cooperative relationship with YOOZ company.

YOOZ layouts a series of Wechat business practices, which are regarded as “pyramid selling” by the outside world. In view of why the Wechat business sector layout, Cai Yuedong believes that the channels of consumer goods should be diversified, and Wechat business is only one of them. After observing the composition of YOOZ’s sales, he found that social sales based on Wechat did account for a certain proportion.

Wechat business are a double-edged sword, which can quickly make a peak of sales, but also make prices collapse quickly. Liu Ziming, a senior executive of an electronic cigarette company, told us, “Many companies are generally reluctant to be Wechat business, fearing to hurt their brand image.”

“The advantage of being a Wechat business is that it can quickly ship goods, quickly aprroach the market and expand brand awareness.” At the same time, it is accompanied by risks. “Fast consumer goods are most afraid of arbitrary prices, once prices collapse, agents will not play anymore,” Liu Ziming said.

According to people familiar with the situation, “YOOZ’s whole wholesale trade link at present is losing money to deliver goods, they are desperately boosting the data”.

Vape enterprises fake data to get financed

At this time, the electronic cigarette market looks more like a capital game.

Its future direction is still unknown. Shang Peng said that electronic cigarettes could be classified as tobacco monopoly in the future. In principle, the State encourages export manufacturing, but does not allow the occupation of the tobacco market.

There is also a saying in the industry that all domestic e-cigarette exports will go through CITIC in the future. On June 12, China Tobacco Hong Kong, the first tobacco stock, landed on the Hong Kong Stock Market. The company is mainly responsible for the designated offshore platform of capital operation and international business development for China Tobacco International. As a wholly-owned subsidiary of China Tobacco Corporation, China Tobacco International undertakes the international business and operation of China Tobacco.

It is noteworthy that in the main business of CITIC’s international listing, the export of new tobacco products is specially included besides the import and export of tobacco products and cigarettes.

Electronic cigarette competition has entered the second half, some industry insiders said that the end of this year will usher in a wave of shuffling period, but the buffer time in the middle is not easy to tell.

In the “sub-health” electronic cigarette filed, it looks like having eaten the “ripening pill” of capital. Who is the winner is uncertain in the capital game, but speculative winners who harvest the capital are certainly not in the minority.

 

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The author who has 5 years of experience writing on vapes, stays in Shenzhen and follows the origin of vapes closely. He distributes the earliest vape news & reviews from most authoritative vape insiders. DISCLAIMER

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