China Vape Companies Enter The Era Of Comprehensive Niggard

At 11pm, the lights on the 13th floor of an office building in Bao’an District, Shenzhen were still on. Smoke is swirling in the conference room of an vape manufacturer, and several executives from company are fiercely discussing. Not about how to expand the market, nor about researching new product releases, but about debating whether to participate in industry exhibitions next quarter.
“Last year, we spent millions of dollars participating in the exhibition, but brought in less than 20 effective customers, with an average cost of over 70000 yuan per customer acquisition. ”
The CFO pushed his glasses and asked,” Can this ROI continue? ”The conference room fell silent, with only a low buzzing sound coming from the air conditioning. Someone suggested raising the air conditioning temperature by one degree to save electricity costs, which was adopted.

Chinese vape company become mature or are they experiencing financial tightening

The China vape industry used to be known for “burning money”. Burning cash intentionally to accelerate growth. During the golden period from 2018 to 2021, new brands emerged like mushrooms after rain, financing news kept emerging one after another, and market promotion was not stingy. From subway advertisements to live streaming of internet celebrities, from industry exhibitions to overseas expansion, every penny is spent with great courage.

Now, everything has changed. Vape companies are entering a comprehensive “Era of Niggardly”. This change has two meanings:
On the one hand, it may indicate that the industry has entered a mature stage, and enterprises are shifting from wild growth to refined management.
On the other hand, it also reflects changes in the market environment – policy tightening, intensified competition, and slower growth, forcing companies to tighten their belts.
In this era, every decision made by a company revolves around the return on investment. Attending an industry exhibition is no longer a “must attend” face saving project, but a business activity that requires precise calculation of customer acquisition costs. Attending an exhibition is no longer about brand exposure, but about directly generating traceable sales conversions. Refined operation has become a necessary condition for survival.

The business rule of reducing costs in vape factory is running through the entire process

Walking into the office of an vape factory, you will be surprised by the ubiquitous “stingy” details. The default settings of the printer have been changed to double-sided printing. The lights in the corridor light up one after another. The whiteboard pens in the conference room were carefully inserted back into their caps to prevent premature drying. A supply chain manager revealed that his recent main job is not to search for new materials or technologies, but to “negotiate prices with suppliers”. The same atomizer core was purchased for 4.8 yuan last year, but this year we talked about 3.9 yuan. It’s not that we don’t want to use a better one, it’s that the market doesn’t allow us to use it anymore. “In the purchasing department of vape factories, there is a popular saying now:” Comparing prices from three companies is not enough, we need to compare prices from ten companies. From packaging materials to electronic components, from logistics services to office supplies, every procurement process involves multiple rounds of price comparison and negotiation.”

Vape companies are now using salary cuts, strict recruitment, and reduced commissions to save money

Recruitment notice for vape R&D director with an annual salary of one million yuan. It was not uncommon to see job postings in vape company in China. Nowadays, such high paying positions have almost disappeared. Not only has the salary level significantly decreased, but the recruitment threshold continues to rise.
A headhunter revealed, “In the past, vape companies almost always welcomed technical talents, and as long as they had relevant experience, their salary requirements could basically be met. Now it’s completely different, there may be dozens of people competing for a position, and companies can carefully select and lower salaries.”
The changes in the sales side are even more obvious. A regional sales manager gave a bitter smile and said, “In the past, commissions could reach 3% of sales revenue, but now they have dropped to 1%, and the assessment standards are becoming increasingly complex. Completing basic tasks can only earn a basic salary, and those who want high income must exceed sales targets.”
Salespeople found that companies have begun to strictly review every reimbursement, compress travel standards, and even set strict limits on customer entertainment expenses. The sales strategy of “expanding the market first, then considering costs” in the past is gone forever.

Some vape enterprises are starting to reduce employee benefits, and employees are also starting to invest their working time

More and more vape enterprises are implementing a single day off or 1.5 days off work week system, and although there is no official document, “voluntary overtime on Saturdays” has become the norm.
An employee helplessly said, “If you don’t come on Saturday, then next week’s performance evaluation may ‘reflect’ it.”
The frequency of the company moving into the new office has significantly decreased. Many companies choose to renew their existing premises instead of pursuing larger office space or more luxurious decoration. Even after moving into a new office, the decoration style has become extremely simple – exposed ceilings, simple partitions, and second-hand office furniture have become standard.
Research and development investment is also shrinking. Previously, we would launch 2-3 new products every quarter, but now we may launch one or two truly new products a year, “revealed a product manager.” Most of the ‘new products’ are just adjustments to the color or taste of existing products, and there are fewer technological innovations that truly require a lot of research and development investment.
This situation is common in the industry. An industry insider analyzed, “The technology of vapes is relatively mature, and it is difficult to have breakthrough innovation in the short term. Enterprises are more willing to make minor adjustments within the existing technological framework rather than investing a lot of resources in basic research.”

The transmission of “stingy” across the entire vape industry chain

The “stingy” of vape manufacturer in China not only affects themselves, but also affects the entire industry chain. From upstream raw material suppliers to downstream channel partners, everyone has felt this chill. The sales representative of the exhibition company, Xiao Zhang, clearly felt that the enthusiasm of vape companies to participate in the exhibition had declined: “In 2019, it was difficult to find a booth for vapes, and companies were willing to pay a high price to grab a good position. Now, we have to proactively call for sales and provide various discount plans.”
The supplier of cotton, the main material for the atomization core, also felt the pressure. From 2022 until now, cotton core procurement prices have been decreasing every year, “sighed a cotton core supplier. ” Manufacturers not only demand price reductions, but also higher quality requirements. Profit margins are getting smaller and smaller. ”
Vape display screen suppliers are also facing difficulties. In previous years, the end of the year was always the peak season, and companies would stock up on new products for the coming year. However, this year is quite unusual, with a significant decrease in order volume and even fewer inquiries. “A sales manager from a display screen manufacturer was puzzled,” Is everyone just looking?”

Final summary

The vape manufacturer meeting on the 13th floor of the office building in Shenzhen ended at 1am.
The executives ultimately decided to reduce the scale of the exhibition in the next quarter and only retain one standard booth.
Use the saved budget to optimize the online consultation function of the official website and strengthen the maintenance of existing customers.
The CFO closed his notebook and whispered, “This may not be our most glorious time, but it may be our most sober time.”
The hallway lights had already been turned off halfway, and the conference room air conditioning had already automatically turned off. There are far more than one vape company in this building that discusses how to “stingy” late at night like them.

The reason for these phenomena is due to strict regulation of overseas market policies. Taking the United States, the largest market, as an example:
The vape industry in the United States is currently undergoing a significant transformation phase.
The vape industry here has been hit on a large scale by illegal, flavored disposable vapes (usually from China), leading to a serious market chaos, shortage, and promoting compliance.
Now, with the increasing enforcement efforts, legitimate brands are experiencing some recovery, and the industry is subject to strict FDA PMTA supervision of approved products. The future growth potential is huge, but the competition is fierce and the situation is constantly changing.

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