RELX’s Sunflower System
For the domestic e-cigarette industry, 2019 will undoubtedly be a year of ups and downs: at the beginning of the year, it ran wildly in the influx of capital, and in the middle of the year it gradually slowed down in the doubt of public opinion. At the end of the year, it was reflected under tighter supervision.
Especially after the “Notice on Further Protecting Minors from Electronic Cigarettes” on November 1, the electronic cigarettes will cause greater harm to human health, and flavored electronic cigarettes will attract more young people to smoke. There are two main voices of opposition.
A few days ago, the domestic electronic cigarette brand RELX held a press conference in Zhuhai, announcing that it would launch its independently developed intelligent protection system for minors, namely the Sunflower System. At the same time, in the global electronic cigarette manufacturing base in Shenzhen, the Electronic Cigarette Industry Committee of the China Electronic Chamber of Commerce sponsored the “2019 International Electronic Cigarette Summit Forum” and launched the Electronic Cigarette Quality Inspection Center.
From the end of the year, the two themes point to “electronic cigarette public safety and health” activities, it is not difficult to find that compliance is becoming an increasingly important topic in the electronic cigarette industry.
In this situation, how do e-cigarette players after 2019 go?
As industry compliance progresses: how to solve the problem of minor protection?
“Often when any new thing or new industry creates positive value, it also has certain negative external effects, such as the car accident accompanying the birth of the car, as well as electronic cigarettes.” Said Wang Ying, CEO of RELX, “Both brain development and respiratory system development of minors have not yet been completed. Nicotine in e-cigarettes will pose a threat to their health. This is a negative external effect of e-cigarettes, and companies cannot ignore them. ”
How to prevent minors from contacting e-cigarettes is becoming a difficult problem that affects the whole world. One of the answers given by RELX is its self-developed intelligent protection system for minors-Sunflower System.
According to the introduction, Sunflower System involves two links: “pre-emptive prevention” and “traceability mechanism”.
When the customer enters the RELX store, the smart camera in Sunflower System will recognize the age of the new entrant through image collection + cloud data analysis. As soon as a suspected minor enters, the store clerk will immediately receive a system warning alert, thereby stepping forward to discourage the kid to leave.
As for the purchase process, consumers can only make payment smoothly after they have passed the three stages of “name-document number-face”.
At the same time, Sunflower System has established a protective “traceability mechanism” in all aspects of store selection, sales operations, product use, and after-sales accountability.
For example, when consumers purchase e-cigarettes on smart vending machines, users must pass the authentication of the smart age-testing system; at the same time, the system also sets up electronic fences to ensure that no form of sales scene is set up in areas with high density of minors such as primary and secondary schools.
At the conference, Jiang Long, co-founder and head of sales channel of RELX, also announced the “Regulations on the Management of RELX” Guardian Plan “. The regulations show that agents who sell RELX products to minors on their own channels will recover up to 200,000 yuan in fines and adjust the authorized areas and sales channels. If the cases are serious, the cooperation will stop.
At the same time, the “2019 International Electronic Cigarette Summit Forum”, “Public Health and Safety, Standardized Development and Regualtion” was also considered to be the most important topic of the electronic cigarette industry in 2019.
However, unlike RELX, which took 7 months to independently develop a minor protection system, although other e-cigarette brands also have company regulations on protecting minors from e-cigarettes, they cannot match domestic electronics with capital, technology, and talent investment compared to RELX that take 60% of the vape market, .
An industry insider told Times Finance that from the perspective of market share, user mind share, R & D investment, and user favorability, the domestic e-cigarette market has been divided into two camps, “RELX” and “Second Group” .
The offline channel has become an important battleground for brands in the market. In order to implement its minor protection system, RELX has stopped cooperation with 54 authorized stores and 17,12 distribution outlets that do not meet the requirements. Its determination is not small.
As the integration progresses, new players face greater challenges, making it harder to enter the market
On the other hand, from the perspective of the production of electronic cigarettes, the entire industry is also experiencing a wave of transition pains from the survival of the fittest.
Vapes are generally composed of 4 parts: a pod (e-liquid storage place), an atomizing chamber, a sensor and control chip, and a lithium battery. These component manufacturers constitute the upstream of the electronic cigarette industry chain. Foundry manufacturers are located in the middle of the industrial chain, mainly responsible for product development and manufacturing, and downstream are brand owners responsible for product operation promotion and sales.
At the upstream of the e-cigarette industry chain, there are atomizer companies ALD,Smoore, e-liquid company Fanhuo Technology, e-cigarette chips and metal parts company Situo Microelectronics; midstream foundries include Heyuan Technology Skoll, and downstream brands RELX, SNOWPLUS, MOTI, vvild, etc., they are all concentrated in Shenzhen Baoan District or surrounding areas.
According to the data released by the Electronic Cigarette Industry Committee of the China Electronic Chamber of Commerce, Shenzhen Baoan is the first cluster of electronic cigarettes in the country, with more than 1,000 e-cigarette-related companies. There are about four or five hundred electronic cigarette related companies.
However, when Time Finance and Economics visited Shenzhen Shajing on the spot, it was found that some e-cigarette processing plants today are not so good.
When Times Finance came to the door of an electronic cigarette foundry factory in Shajing Town, half an hour before the factory was off work, several workers in blue factory uniforms hurried out of a factory around a man in black. They were employees who left the same day and were talking to men in black to settle wages.
Behind the workers is an e-cigarette manufacturing plant called “Kanger”. The old gray walls of the factory are blurred in the twilight. There is also a gray-green river in front of the factory. A manufacturing factory with a similar shape is located across the road and nearby.
Kanger’s full name is “Shenzhen Kanger Technology Co., Ltd.”, which was established in 2007. Its headquarter is located in Fucheng Road, Longzhu Community, Xixiang Street, Baoan District, Shenzhen. 10,000 square meters, the company’s official website shows that it has 1,700 employees, with monthly output of 19 million cartridges, batteries, KangerTech / Smaco brand and OEM / ODM products, which is one of the largest electronic cigarette manufacturers.
But Kanger, once known as “one of the biggest e-cigarette producers,” now seems to be crumbling.
“It’s going to dissolve. Today, exactly 20 or 30 people have resigned.” One of the resigned workers preached to Times Finance. Another employee who chose to resign just two months after entering the factory also said, “It was very busy before, but the order is not very good now.”
The man in black said, “Because the Tobacco Bureau previously banned the sale of e-cigarettes online, it is not that the order from one factory is not working, but the entire e-cigarette factory is not good.” Kanger recruits and pays employees at its on-site factories.
In fact, Kanger’s current poor operating conditions are obvious to all. Even the owner of the canteen at the factory said that since the e-cigarette sales on the Internet have been banned, Kanger’s orders have plummeted and employees have fled.
Leaving the Kanger factory and crossing the road to the factory of First Union, a larger e-cigarette manufacturer First Union in Tangwei, also was affected.
First Union Co., Ltd. was established in 2007. It has three e-cigarette manufacturing factories with a total production area of 120,000 square meters. It has over 10,000 employees and is a total e-cigarette solution provider.
A First Union employee who was also responsible for hiring revealed to Times Finance, “Three factories were hiring in July, and each factory could recruit about 100 people per day, but now the two factories on Shajing are no longer hiring. People are here, but Tangwei district is still recruiting, but it’s relatively small. Many small electronic cigarette factories in Shajing have closed. ”
A number of industry sources have revealed that due to policy changes, many factories that originally had thousands of employees are now left with only a few hundred people due to layoffs or employee resignations.
Lin Jin, the founder of an e-cigarette brand, told Times Finance that now, in addition to the brand on the head, it can attract talents, and the rest are copied in terms of technology and products. “Look at this product, just dismantle it and give it to the OEM factory. In the workshop, if you change the appearance of this product, and the logo inside this product, it is your new product. ”
In Lin Jin’s opinion, whether it is some brands or small e-cigarette processing plants, there are problems of poor management consciousness and low quality of employees. “They survive by copying other people’s products, and compete with primitive, low-level methods such as price wars. Now there is an urgent need to eliminate small electronic cigarette factories that produce inferior products.”
However, for the larger e-cigarette manufacturers, everything is not so bad. At least now factories such as GR and First Union are still recruiting people. In December, Kanger also ushered in a number of new orders.
“Head e-cigarette brands now rely on factories.” Lin Jin said so. For example, on December 19th, a prospectus application was submitted, and Smoore, an electronic vaping product manufacturer intended to be listed on the Hong Kong Stock Exchange, intends to use this to raise funds to establish industrial parks in Jiangmen and Shenzhen and implement automation of new production bases. Production and assembly lines to increase their production capacity.
When the bloody offline fight is underway: When will brands return to rationality?
In addition to competition in terms of compliance and manufacturing, the competition for offline channels of e-cigarette brands is even more turbulent. RELX co-founder and head of sales channel Jiang Long used the word “bloody” to describe the war.
“RELX is now facing more brutal competition. For example, we are a normal price system in a Chaoku chain, but our competitors only sell half the price, and also pay a high entrance fee. At the same time, when each kit is sold, it will also give the staff a sales reward of 30 yuan. “Jiang Long also revealed that some brands even gave entry fees up to 700,000 yuan to enter a store, which was difficult to make a profit.
After experiencing various problems such as e juice leakage and delay in construction due to the production of e-cigarettes in small processing plants, Lin Jin’s first e-cigarettes will finally be available at the end of this year. However, facing the anxious offline competition for sales channels In this situation, she can only express her helplessness to Times Finance and said, “Take a step then take a look at it, and we have not come up with a better way.”
However, Jiang Long believes that in the Chinese retail system that has been rich in bloody battles, today’s retailers have returned to a smart and rational stage. They can distinguish which brands can make a little money and which brands can cooperate for a long time.
“What is reflected in this is brand value. For example, when RELX products have quality problems, how do we cooperate with retailers, and when its sales have stagnated, how does RELX do regional and scenario marketing activities to help gain more new customers in retail, this is not the ability that every brand has. “Jiang Long said,” RELX will not enter the sales channel by self-harm. ”
RELX CEO Wang Ying told Times Finance that “the vision needs to be longer-term. There will be competition among peers in the short term, but in the long run, the short-sighted approach to quick success will be useless and will disappear in the vast crowd.”
In fact, as many countries have become clearer about the regulation of electronic cigarettes, on the whole, the production, sales, and marketing of electronic cigarettes will be subject to certain regulations and restrictions, with competition in brand value, product quality, research and development technology, and user mindset, the superior companies will stand out and will occupy a larger market share, leading further industry integration in the near future.
However, for now, the bigger problem facing the entire e-cigarette industry is public panic and doubt about e-cigarettes.
Constantinos Farsalinos, an internationally renowned doctor of cardiologists and an e-cigarette expert, said at the International E-cigarette Summit Forum that many people ignored the spirit of harm reduction being advocated by many countries, especially the United Kingdom. E-cigarettes are becoming a harm-reduction product. This is the result of current scientific research and it is necessary to raise public safety awareness.
“Who is the enemy, the enemy is the heart, and the camp with different views. Competition is always there, but this industry needs to be promoted by introversion to make its industry more and more sunny, and it is necessary to overcome those negative external effects. “Wang Ying said bluntly.