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Is the vaping market too fragmented?
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Mark Benson Offline
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Is the vaping market too fragmented?
While the vaping industry has been around in some shape or form for many years now, it is only really since the start of the century that it has moved into the mass market. This is an industry which is expected to be worth in excess of $2 billion during 2015 in the US alone with the European market also growing in size and stature. There is no doubt that development has been at lightning fast pace and new products and flavours seem to be announced on a daily basis. However, there is growing concern that the market is too fragmented and will need to go through a bout of consolidation to fight the challenges from critics and the tobacco sector.

The power of the Internet

It may be debatable as to whether the market is too fragmented but there is no doubt that the Internet has allowed companies which would probably have gone unnoticed prior to the online revolution to now rank for valuable keywords. The fact that there are so many small to medium-size companies fighting for an online presence, keeping their cost base to a minimum, has created enormous choice for the consumer.

Critics and supporters of the vaping industry recognise that while the growth and development of the sector has been extremely fast to date there will inevitably be a period of consolidation.

Is consolidation good for the industry?

There are literally thousands of electronic cigarette companies around the world from the very small niche market players to those who have their tentacles across the worldwide market. History shows us that new technology and new services tend to mushroom in their early days and then undergo a period of consolidation when competition gets too intense. We have to a certain extent seen the beginning of this consolidation with tobacco companies taking stakes and buying some electronic cigarette companies outright. This is something of a special situation because of the challenge to tobacco cigarettes but nonetheless it is a clear sign that consolidation will come in due course.

There will always be a wide array of products available across the vaping industry from the stack them high and sell them cheap products to the more discerning quality items at the higher end of the price spectrum. In simple terms, these companies at the farthest ends of the spectrum are giving customers what they need and those in the middle are also fulfilling demand. However, consolidating relatively small companies to make a larger more financially stable operation has benefits for all parties in the long-term.

Finance is the key

To date the majority of finance raised by electronic cigarette companies has been invested directly into their operations. A mixture of increased capacity and advertising spend has pushed many companies into the limelight. However, the situation is changing with regulatory challenges, competition on all fronts and the reality that it will cost cold hard cash to fight the critics and tobacco industry in the future.

The industry is now moving towards the mass market and this brings with it an array of new costs and exposure. It will be interesting to see which companies merge together, which are taken over and which fall by the wayside. At the end of the day it will come down to the quality of products on offer and the individual company’s ability to keep up with the latest developments and consumer trends. Those with a swift turn of foot will grow stronger but those perhaps struggling to keep pace could have their future taken out of their hands by the investment vultures.

For more information on OK Electronic Cigarettes and the various products available please visit the OKCigs website.
11-03-2015 05:51 PM
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RE: Is the vaping market too fragmented?
Excellent, thought provoking article Mark!
11-03-2015 07:40 PM
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