Most people may not know that although e-cigarettes are not yet popular in China, they were first produced there. **** In 2003, a pharmacist named Han Li developed the world's first e-cigarette, "Ruyan," which at its peak sold nearly 1 billion yuan annually. However, in 2006, after being exposed by CCTV for false advertising, Ruyan's sales suffered, and it eventually had to abandon the domestic market and expand overseas. After 2018, e-cigarettes returned to the public eye and showed a trend of concentrated growth. According to the latest statistics, as of June 5, 2019, 14 domestic e-cigarette companies had completed financing, with a total amount of about 574 million yuan, far exceeding the total financing in 2018.Cigarettes are a trillion-level market, and e-cigarettes are being regarded by the industry as the next big trend worth chasing. Since it is a big trend, competition is inevitable. In competition, price wars are unavoidable. Because e-cigarettes are still in the early stage of market education, sales mainly rely on channel profits. Channel resources are limited, which means scarcity, and this is a zero-sum game. Brands are engaged in fierce price competition for channels. Brand manufacturers compete with each other in discount intensity, intensifying vicious competition. They are struggling under the weight of difficulties such as difficulty in distribution, cost coverage, and profitability. Recently, New Distribution interviewed Mr. Jiang Long, co-founder of RELX, a leader in the e-cigarette field. Mr. Jiang Long graduated from Tsinghua University and is the 02nd employee of RELX. We hope to hear his views on brands, channels, and the industry from his perspective. As one of the earliest entrants in the e-cigarette field, RELX was established in January 2018. Within less than a year, RELX grew into a leading e-cigarette brand in China. Many people think that RELX's astonishing growth rate is because it caught the e-cigarette trend. In fact, when RELX entered the e-cigarette market in 2017, the industry was still barren. China is a major producer of e-cigarettes, producing nearly 90% of the world's e-cigarettes, but there was no Chinese brand in the market. User value is the competitive barrier There are three main logics for brand growth: First, use marketing to gain consumer awareness; second, use concessions to grab channels; third, focus on product development and impress consumers by creating user value. Based on the particularity of the e-cigarette market, marketing cannot be used, and channels are easy to fight for but competition is too fierce. In the end, RELX chose the third path: building the brand with product quality. In terms of product positioning, RELX targets 1 billion smokers worldwide, with the Chinese market as the core, gradually expanding to global markets, providing target smokers with a healthier and more enjoyable way to smoke. Therefore, at the beginning of the brand's creation, RELX invested tens of millions of yuan to build a research and development center in Shenzhen. Jiang Long said that the most correct thing RELX did was to choose to drive the brand with mission and values, adhering to the principle of product first. When encountering difficult decisions, everything is easy to solve by aligning with values. For example, when designing product packaging, e-cigarettes on the market all had small packaging and foreign-language instructions. RELX chose large packaging and Chinese instructions, which no one favored. Since RELX wants to serve Chinese smokers, it must think from their perspective. Today, RELX's packaging has become the mainstream design. Jiang Long said that consumers are easy to impress, but the key is whether you are attentive and pay attention to details. In the early days, RELX launched a crowdfunding campaign and pulled participants into QQ groups and WeChat groups. At that time, a service response mechanism was established, requiring that any question raised by users must be answered within 30 seconds. Even a customer service staff member went without going to the bathroom for more than ten hours to answer questions. Last year, due to production capacity issues, RELX encountered a quality crisis: e-cigarettes leaked oil. People in the know understand that this is a very serious accident. However, because consumers had established an emotional connection with RELX, after the crisis broke out, consumers not only did not abandon RELX but also enthusiastically helped RELX propose solutions. User value is the competitive barrier because when a brand creates enough value for consumers, consumers cannot leave and will spontaneously bind with the brand. Channels can be taken away, but consumers' emotions are difficult to invade. Today, RELX's requirements for user service are still demanding: customer satisfaction must reach 99.8%. The supporting force behind this is the team with consistent values that Jiang Long repeatedly mentions. Two-way empowerment, proactive attack · In the e-cigarette market, offline channels are another red ocean competition besides brands. Although where there is more money, there is more competition, how to make channels earn more money is a big problem. Because, in essence, channels are to improve the availability of goods, that is, whenever consumers want to buy a product, they can buy it at any time. However, e-cigarette products have a natural weakness: they lack silent selling power. RELX's methodology is as follows: e-cigarettes lack silent selling power at the terminal because the market has not completed education, and consumers have too little awareness of e-cigarettes. Then, as long as we attract consumers and bring them to the terminal, the problem can be solved. Based on this idea, RELX's channel strategy is a dual channel empowerment system. Top-down empowerment from the RELX brand side to channels, mainly through product empowerment. By creating user value, consumers establish brand loyalty. At the same time, give agents sufficient profit guarantees, such as a return on investment far higher than similar industries. Bottom-up empowerment from the consumer side to channels, mainly through city integrated marketing empowerment, building a communication bridge between retailers and consumers, and cultivating user awareness. Examples include pop-up stores, new product testing, trial smoking, and other offline activities. According to Jiang Long, in 2018 alone, RELX conducted over 10,000 ground promotion events. Assuming each event covers 100 people, it covered a total of 1 million users. Through the establishment of a complete channel empowerment system, RELX has accumulated 20,000 terminals offline, while generally well-performing companies only have 3,000. In terms of overall channel layout, online includes Tmall, JD.com, and other e-commerce platforms; offline includes self-operated stores, traditional channels, convenience stores, Carrefour, Yonghui, and other KA channels, as well as new retail channels. Jiang Long said that the purpose of self-operated stores is mainly to provide consumers with better service and experience. Currently, RELX has opened 200 stores in 50 cities across 19 provinces, including new first-tier cities such as Suzhou, Shenzhen, Guangzhou, and Chengdu. In the future, RELX expects to open 1,000 stores. Stay open, embrace change Currently, the scale of China's e-cigarette market is about 4 billion yuan, accounting for only 5% of the global market. Although the market share is small, in terms of supply, China is the world's largest producer and exporter of vapor e-cigarettes. Among the top 5 brands in the U.S. market for small e-cigarette sales, 3 are produced by Chinese e-cigarette companies, and the top 5 in open e-cigarette sales are all produced and exported by Chinese companies. The future of China's e-cigarette market is promising. However, for the market to prosper, policy regulation is essential. Recently, the most concerning thing for e-cigarette industry practitioners is the introduction of e-cigarette regulatory bills. Jiang Long said that RELX is very much looking forward to the publication of the national standard to better regulate the market and products, which is good for the entire e-cigarette market. At the level of market competition, due to the low technical barriers of e-cigarettes, it is easy to fall into price war competition. This depends on whether brand manufacturers want to make quick money in the short term or operate for the long term. RELX advocates focusing on long-term value. Because a healthy market must not be one where bad money drives out good. Therefore, as long as the product is differentiated, unique, and can create user value, then for consumers, you are a unique brand that is difficult to replace. RELX believes that the domestic market is still in the stage of educating the market, and the entire industry must not be short-sighted. Everyone should work together to educate the market to promote further development. If there is homogeneous competition, price wars, and actions that harm user experience, that is harmful to the entire industry. For example, there is a saying in the industry that 5 million yuan can build a brand, but it should actually mean 5 million yuan to build a product. However, the experience of such a product is hard to say. From the consumer perspective, there are currently 350 million smokers in China, all of whom are potential consumers of e-cigarettes. What RELX needs to do is to deeply understand consumer needs. RELX will think about why users smoke? Because users need nicotine, and they need the dopamine produced after nicotine enters the body. So what role should e-cigarettes play? Jiang Long believes that e-cigarettes are a harm-reducing substitute for cigarettes, so RELX advocates a healthier way of smoking. Of course, smokers are also divided into "real smokers" and "fake smokers." For "fake smokers," RELX will launch nicotine-free e-liquid to satisfy consumers' feeling of "smoking." Written at the end The e-cigarette trend is just beginning. Consumers' awareness of e-cigarettes is gradually spreading. With the upcoming introduction of the new national standard, small brands and small workshops will inevitably be eliminated, and leading companies will move towards better quality and more correct values. Existence is reasonable, but to gain long-term value, original intention is important! Scan the QR code to register for RELX's 2019 new product launch and partner meeting, and let us "win with winners"! Tips will be paid 400-2000 yuan once adopted. China FMCG + Internet professional new media Committed to FMCG manufacturers' transformation and upgrading and channel digital solutions