In the international e-cigarette industry, the Chinese supply chain’s prerequisite for mass production gives it a cost benefit in bulk buying 40k vape. Let us take Shenzhen as an example. The monthly output capacity of local e-cigarette contract manufacturers is typically over 500,000 cigarettes. Mass production is capable of lowering the cost per cigarette to between 8 and 12 yuan, 30% to 40% less than the European and American firms. For instance, as SMIC’s 2023 financial report shows, the automation rate of its ceramic atomization core factory reached 92%, and unit production cost reduced by 18% year on year. If 40k vape is purchased, the per-unit cost of buying in bulk can be reduced to less than 9.5 yuan per unit. And it provides ODM customization (e.g., e-liquid ratio 0-5%, battery capacity 500mAh-1200mAh).
By purchasing 40k vape from cross-border e-commerce B2B platforms (such as 1688 or Global Sources), businesses can save middleman commissions (usually 15%-20% of the sales price). According to Alibaba International Station statistics, in 2023 e-cigarette wholesale orders, 37% of the buyers purchased more than 30,000 cigarettes in one order. Of which, 30% applied FOB Shenzhen shipping mode, reducing the logistics time to 7-12 days and lowering the freight cost by 45% against bulk orders. For instance, a North American distributor bought 40k vape in bulk through 1688 and the open oil-injected type approved by the FDA. The CIF price inclusive of tax was kept at $2.8 per unit, 52% lower than the wholesale price at home, while the gross profit margin was increased to 65%.
Policy risks and compliance costs need to be examined concurrently. According to the “2023 Global E-Cigarette Regulatory White Paper”, in order for Chinese manufacturers to ship 40k vape into the American and European markets, the PMTA (US) or TPD (EU) certification fee is approximately 8% to 12% of the cost. Let us use the EU market as an example. The test fee for a single model of TPD certification is approximately 12,000 euros. But if a certified manufacturer (like a cooperative contract manufacturer of RELX) is selected and 40k vape is bought, the qualification documents can be provided. Once the cost of compliance is borne, it only rises by 0.6 yuan per unit. Moreover, developing markets in Southeast Asia (like Indonesia and the Philippines) have import tariffs on e-cigarettes of less than 7%. In the first quarter of 2024, China’s export of e-cigarettes to ASEAN increased 23% year-on-year. Some companies have launched disposable 40k vape kits that comply with the ISO8317 standard, and the retail profit margin can reach 80%.
Cost control needs to monitor the volatility of raw materials as well. During the fourth quarter of 2023, the price of lithium batteries (18350 model for 40k vape) reduced by 14% year on year, and the purchase price of nicotine salt in e-liquid (20mg/mL concentration) fell to 0.08 yuan /mL. When the JIT (Just-in-Time) supply chain model is adopted, the 40k vape inventory turnover days could be lowered from the industry average of 45 days to 28 days. The cost of capital for occupation can be reduced by 19%, and the return on investment (ROI) can be raised to 22%-25% within one year. For instance, a European brand obtained a 40k vape futures order from Yiwu Small Commodities City at a price of 30% deposit to secure the price for six months in order to avoid the increase in logistics cost caused by the Red Ocean crisis during Q1 2024 (with the peak increase in ocean freight at 120%).
However, in purchasing at cheaper prices, one has to be careful against the threat of quality. Shenzhen Customs’ 2023 random inspection data shows that 6.7% of 40k vapes exported have fake battery CE certification or heavy metal-laden e-liquid (lead content >0.01μg/g). Foreign market regulatory authorities imposing a penalty for this could mean a loss of more than 200% of the buying price in one batch. It is recommended to choose suppliers with passed CNAS laboratory testing (e.g., atomized particulate matter diameter ≤2.5μm) and ≥12-month warranty. Even if the unit price increases by 1.2 yuan per item, after-sales claim rate can be reduced from 8.3% to less than 1.5%.