Since the Chinese government banned the online sales of e-cigarette on November 1, 2019, the once lucrative vaping industry has been suffering huge losses. In order to survive, the Chinese companies are now struggling to develop other markets.
According to a report by China’s prominent financial news website Caixin, half a year after the e-cigarette ban, investors focus on domestic offline and overseas vaping markets.
At home, with more money pouring into the offline market, the costs of investment to the e-cigarette industry have greatly increased.
“Now e-cigarette investors have to pay four to five times as much as before if they sell their vaping products in physical stores,” an anonymous source told Caixin.
“In the summer of 2019, the price for displaying four kinds of e-cigarette in a retail chain with 600 branches for a year is about 400,000 yuan ($56,551). But now it has skyrocketed to roughly 3 million yuan ($424,136).”
“Too expensive to afford,” the source said.
Except for restricted marketing channels, the fear of irking the Chinese government pushes up the costs of investment to the e-cigarette industry.
Wanda Group, one of the biggest property developers in China, announced on November 20 that they would stop leasing their properties to e-cigarette sellers, and as for their existing clients, they would not renew their housing lease contracts.
Wanda’s latest move is just a microcosm of Chinese landlords’ attitude towards the vaping industry. With less physical stores daring to cooperate with e-cigarette investors under the tough vaping ban, e-cigarette makers have to put more money to promote their products.
Huge Blow to Vaping Industry
China’s domestic e-cigarette sales increased by 175% to 11 billion yuan ($1.57 billion) in 2019, according to the Electronic Cigarette Industry Committee of China Electronics Chamber of Commerce.
However, the e-cigarette market abruptly cooled down after the State Tobacco Monopoly Administration and State Administration for Market Regulation imposed an e-cigarette ban last year.
“All shopping sites selling e-cigarettes should be shut down and all online marketing campaigns halted,” according to a statement issued by the Chinese authorities.
This e-cigarette ban aims to further reduce minors’ exposure to e-cigarettes, the official Xinhua News Agency reported.
China’s several e-commerce giants, including Taobao, JD.com, and Pinduoduo, then removed all e-cigarette products from their platforms.
The vaping ban have particularly affected China’s boomtown Shenzhen, where boasts more than 1,000 producers of e-cigarette equipments and components. Factories in the city’s Baoan District make 90% of global e-cigarette devices and 80% of the liquids used in them.
To make up for the losses, China’s e-cigarette investors now focus on the overseas market, especially for the United States which has more than 10 million e-cigarette users.
Once they have been seen as providing a useful tool to help smokers quit cigarettes, e-cigarette products are now banned by 27 countries including Australia, Argentina and Brazil.
Even some states of the United States are also mulling imposing a vaping ban after at least 50 people die from a mysterious lung disease and 2,500 others fell ill due to the use of the e-cigarette products.
All of these uncertainties have made earning money in the rising vaping industry much harder for the Chinese investors.