Companies Monopolising E-cigs ......

[cozzicon]

So you think it was good that there was an exclusive agreement - yet also think it was good that the exclusive agreement was broken ...... intriguing contradiction, I salute you sir !!

Seriously dude, are you saying that if there was no exclusive agreement, there would have been no competition ?? In essence, are you truly saying that monopolies are a good thing ?? I'm curious, have you ever had any formal education in Economics or Market Dynamics ??

The same way the market is dealing with vaping - by slowly getting it banned ......

Actually, my economics professor was at Kellogg School of Management at Northwestern University. I aced the courses.

The point is well explained in my original post. But I'll explain another way:

Since the barrier to entry for a competing cartomizer solution is still low, an exclusivity deal would have allowed another solution into the market because ALL the other vendors would have to compete against one vendor. Who was locked into one product. Since 99.9 percent of the vendors would not initially have a competing solution, *someone* would be lured by that market to manufacture competing solution. (good)

Since the exclusivity deal failed, the market is open for all resellers to resale the same product. Also good.

Because of the nature of this particular market, low barriers to entry, and an inelastic demand curve- either scenario is healthy for the market.

However, if diversity of product is considered the *best* condition for a market to be in, scenario one (an intact exclusivity agreement) would have actually created more diversity of competing solutions in the market. This is of course counter intuitive. But true.

The Dogma of monopoly, is only valid when the item being monopolized cannot be replaced (think coal, oil, etc). However, in a market like e-cigs, an exclusivity deal on one item, makes it more compelling for a competing manufacturer to create a competing cartomizer, and sell it to the 99.9 percent of resellers who do not have access to the monopolized product.

So in this case- whatever condition exists- the market will work.

Regarding "banning" and the market function... Considering companies like njoy are taking up the cause against the FDA voluntarily, companies like Cignot are making large donations to lobbying organizations, and many other companies seem to be getting involved in one way or another, the "market" (as you are misidentifying it) does seem to be working to ensure that personal vaporizers as a nicotine delivery system are *not* banned... but perhaps regulated.

 

[xg4bx]

Business is business. How can you carve a niche or differentiate yourself if you have the same stuff everybody else does? As a gamer I'm no stranger to the concept of exclusives when it comes to titles or developers, it's what drives the competition to produce something better.

 

[v1John]

A U.S. re-seller would differentiate his/her self by lowering prices.
Lower your prices and you attract more customers.

But when the kr808d1 carto was not available to the U.S., no other U.S. re-sellers would have been able to lower their prices because they themselves would not have been able to carry it. Royal Smokers indicated that you cannot buy the CE2 from anyone else in China other than their 3 companies.

U.S. re-sellers (and vapers who buy direct) would have still been able to purchase the CE2 from people in other countries though, but the more they get sold and re-sold, the more they change hands, before finally finding a mouth, the more they will cost. The business contract to temporary ban to sell to U.S. people was apparently only temporary, and ONLY for the U.S. During that brief, 'temporary' business practice (or lack thereof), U.S vapers could still enjoy M-series and Joye-MiT 510s (and the odd 808 non-D).

 

[garyinco]

Huh? Businesses setup exclusive agreements all the time. Try calling BurgerKing and telling them you want to order a bunch of their ingredients and you have a right to sell Whoppers or whatever they call them these days. Or call Pepsi and Budweiser and try to order a truckload of their products.

When a manufacturer and distributor enter into an agreement it usually means each is investing something and taking some risks. No harming in them making commitments to each other for doing so. Why would I want to invest my time and resources in your product(s) if you were going to sell to every Joe that contacted you.

Taking it a bit further - why should only you be able to make that product? I should have the right to make what might be something similar and call it your product. Who would you be to say I can't. Then if something goes wrong I can say it was yours and walk away while I destroyed your brand.

I don't see the logic here.

 

[5cardstud]

I'm just upset I didn't think of it first. : Just kidding. I don't care who has them as long as I can order them when I need them and V4L has always treated me right. Personally I like their premiums better in the long run.

 

[BuzzKill]

LMAO, Me too 5card !

 

[Dawolf]

Every business has vendors or products that have exclusivity agreements. Without them, there is no incentive for a reseller to really get behind a product and push it. When a manufacturer comes out with a new product, if they are smart, they are going to go to one of the bigger reseller companies and get them behind their product and have them "push" and market their product above all others to create buzz and value. The tradeoff is the reseller says, give us exclusivity in our market and we will get behind it and use our marketing resources to build the brand.

Lets say that my company has 2 years invested in R&D developing a Cartomizer that is the same size as todays Cartos, but somehow we developed a way to make them last 10 times as long, hold twice the Juice, and vapes more consistently than anything on the market. The Super Carto 500 also costs the same to manufacture as a regular carto. Before I try to go and compete on price, and also before some other Chinese clone factory got their hands on it and duplicated it, we have to try to recoop the 500,000 dollars it took us to design, test and produce it in the first place. So we need to sell them at a premium for as long as we could, I would seek only the biggest and most respectable resellers to help us build the value and get the higher price and more importantly get the numbers out there. The key here as is in most product based businesses is that it becomes a race. I we went to V4L and told them we are going to sell the Super Carto 500 to you exclusively and noone else but you have to make a commitment and order 500,000 of them at 2 dollars each. Now if the Super Carto 500 were real and it was that superior I believe that they could sell for 7 bucks each. Thats a pretty good profit margin, and V4L now has an incentive to make the commitment.

"A U.S. re-seller would differentiate his/her self by lowering prices.
Lower your prices and you attract more customers."

v1John, I am sorry but a good business does not differentiate themselves by competing on price, they differentiate themselves by providing a good value and service. Actually quite the opposite is true, if you go into business and decide that you are just going to go in and just sell the same thing as your competitors but for less, you will be out of business soon enough. Unfortunately, most of the smaller Vape resellers out there are run out of a college dorm, or a basement (No offense to any of them, we love you all), all compete out there based on price. This is the reason that we would not sell the Super Carto 500 to just anyone, because we do not want to drive down the value.

Now lets summarize this by assuming that my Super Carto 500 is insanely successful, everyone has one and more importantly everyone LOVES them. Sure by now some company has come out with a knock off, and now we have to lower the price etc. etc. We now have incentive and funds to go into R&D again and build an even better Super Carto 1000! And make even more money so that we can make the Super Carto 2000 and so on. This is not called being greedy, it is the motivator of innovation.

I did get a little wordy, but just think Apple and the iPod. When it first came out, it was like 250 bucks for like 8 GB of music. At the same time iRiver, Creative Labs had MP3 players that were like 150 buck for 16 GB of music. Apple never lowered their prices, never let anyone else but a few select industry giants sell it......I think we know how the rest of the story goes. But without the success and MOST important, Profitability of the iPod, there would be no iPhone or iPad, and that would be a shame.

 

[v1John]

Good value and service?
Yes, that's excatly what I meant, and if yoou sell me a carto-k5 for $5, but I can get it for $1.25 from a seller that differentiated himself from you, then I'll go there instead. It's the same reason cigarette buyers like to buy their packs where they're $2 to $4 cheaper. If you sell Marlboros at $12 a pack, and the gas station one block away sells them at $8 a pack, I get the $8 one. You can get the $12 one though
It's healthy market competition. Most of the rest of the service is just delegated to the usps either way. And you as a carto-k5 reseller are not even into building them, let's say that the seller at $1.25 is actually the one who is into making them, so you see? If I buy it from them, I'll be helping them make the carto-k6. If I buy them from you for $4 more, the only thing I'm helping is to transfer my wallet to you.

 

[Dawolf]

From a consumer perspective you are correct, if you are selling products that everyone has on the internet, then unfortunately price inevitably will become a factor and the profitability goes in the toilet. As a smart businessman, I want to find a product that only a few competitors carry (Assuming that distribution is restricted by exclusivity agreement) that is profitable and allows me to remain in business.
At the end of the day, a consumer does not benefit from their preferred vendor, selling the cheapest supplies going out of business.

This is a young industry right now, when this starts getting regulated, most of the smaller businesses, especially the American Liquid suppliers will be pretty much over. The only ones that will survive are the ones that are profitable enough to get compliant. The consumer will end up paying alot more for stuff like e-liquid, but at least consumers will have peace of mind that they are buying a higher quality.

 

[Bombenhagel]

Monopoly capitalism is gonna kill us... ugh.

 

[cozzicon]

From a consumer perspective you are correct, if you are selling products that everyone has on the internet, then unfortunately price inevitably will become a factor and the profitability goes in the toilet. As a smart businessman, I want to find a product that only a few competitors carry (Assuming that distribution is restricted by exclusivity agreement) that is profitable and allows me to remain in business.
At the end of the day, a consumer does not benefit from their preferred vendor, selling the cheapest supplies going out of business.

This is a young industry right now, when this starts getting regulated, most of the smaller businesses, especially the American Liquid suppliers will be pretty much over. The only ones that will survive are the ones that are profitable enough to get compliant. The consumer will end up paying alot more for stuff like e-liquid, but at least consumers will have peace of mind that they are buying a higher quality.

Dawolf,

Nice rant.

There was one other thing I wanted to mention along with your points.

Pure price competition is a pretty bad state for a market to be in because it favors only those vendors with deep pockets. I suppose in a weird way a market with a sole manufacturer where resellers compete on price only could be considered a market with a high barrier to entry- since a wise business person would stay out since it's a losing bet.

But then again, retail internet sales is a losing bet anyway.

The most successful e-cig suppliers have either a branded product with strong identity or a juice line which is exclusive (Does anyone want to claim that as a monopoly?).

 

[Dawolf]

Dawolf,
The most successful e-cig suppliers have either a branded product with strong identity or a juice line which is exclusive (Does anyone want to claim that as a monopoly?).

Amen to that. This is what I am referring to as value. There is Value in the brand. Having an exclusive juice line is not a monopoly, it is smart business.

 

[Pav]

What makes me curious about this thread is patent laws in the USA. As far as I know none of the sellers like V4L have a patent on the hardware they're selling. Anyone ever heard of any patents on cartomizers or battery types for ecigs? I don't know if any of the sellers even could get a patent since they aren't the ones designing the hardware (modders are the exception of course) and I'm not sure how this hardware coming in from China is regulated under US law currently.

Copyrights for branding which is added to the China hardware could be had as far as I know though. Pretty sure a seller like vapor 4 life has copyright protection. If they don't, they should.

Wasn't there a copyright disagreement over the Vapor King name (V4L sells their KR8 as the VK. But there is also another seller called Vapor Kings).

 

[Dawolf]

The Copywrite thing is a whole different thread here, but I agree. Because the main Manufacturers for e-cig products all reside in China, to my knowledge no one has designed and patented any designs here in the states, its kind of the wild west.
The China based companies are just selling these and OEMing them. Anyone can OEM an eCig for a minimum order quantity with whatever brand you want. And you would essentially be selling the exact same thing as V4L or Volcano, Blu etc etc. The differentiator is in the brand that is being built not the technology. This is what makes the e-cig market complex and flooded. There will be some cleansing as companies die off, the only ones standing will be the stronger companies with strong branding and exceptional service.

 

[Perfectionist]

I think the reason some of us view it a little differently is that we don't see the CE/2 cartos as a unique product, but a product similar to other cartos already on the market. If they had tried to corner the market on all cartos, yes, that would be a terrible thing, but they were just trying to grab one small part of the market.

True, but my point is that this isn't a good sign for the future ...... today one company may try to corner "just one small part" of the market ...... ten years from now we may well see a handful of companies Monopolising the "entire" market ...... this is what Big Business always does, if not kept in check ...... like I said in my original post, replacing one set of Greedy Corporations with another

Another way to look at it is like the laptop computer market. If you want a MacBook, you have to get it from an Apple dealer, but that isn't the only laptop out there. Toshiba and HP both make very good laptops too, but the are a little different. What Apple did by bringing out the MacBook was set the line on features a little higher, so that has pushed the other laptop manufacturers to add features to their laptops. Apple hasn't stopped everyone from selling laptops, they just control who sells their particular flavor of laptop.

Apple is a good example, but there are many major differences too ...... for example Apple invests in and develops it's own products and has a retail chain of it's own that it has the right to protect, as well as it's own patents and copyrights etc ......

V4L on the other hand is not a manufacturer or designer or innovator in any way, it is merely a retailer, a middleman (albeit one that focusses on a single particular niche) ...... think if WalMart decided to gain an exclusive agreement to be the one and only vendor in America to sell the Marlboro brand of cigarettes ...... that would be great for the Walton family, but would it be good for all the Marlboro customers ??

Now I do like the new cartos, currently using one of the plastic cup ones and am waiting on the ceramics to ship, but I don't see them as a unique product. When the CE/2 cartos were announced, the older cartos didn't stop working or disappear. I see the new cartos as an improved product which is going to force the other manufacturers to step up their game if they want to compete. And that's what I'd like to see, improvements on the product and more choices.

As far as I'm aware (and please correct me if I'm wrong) this was the first time a deal like this has been attempted ...... E-cigs have developed just fine for all this time without any exclusive agreements ...... it would be better if that was the way it continued ......

If V4L had tried to get an exclusive on all versions of the new cartos and tried to stop vendors from selling all cartos except theirs, I would agree with you, that would be a very bad thing and people should be upset.

It'll only be a matter of time until somebody tries dude !!

 

[Perfectionist]

I guess I don't understand the problem here. The only way for a company to secure market share and separate itself from it's competition is by offering exclusive products. This happens in almost every type of business on the planet, and its not a monopoly. I think it was a smart business move and would have no problem with it whatsoever. If it was such a great product others would make their own version and progress in design would happen due to competition in the marketplace.

This is the web definition for Monopoly: (economics) a market in which there are many buyers but only one seller; "a monopoly on silver"; "when you have a monopoly you can ask any price you like"

If V4L had exclusive rights that made it impossible for anyone to sell ANY e-cig products in the USA, that would be a Monopoly. If they owned the rights to the atomizer therefore making it impossible for anyone else to construct an e-cig, that would be a Monopoly. I think having an exclusive cartomizer style, flavor, battery style, PCC, or even an exclusive product line is just a good business move.

Absolutely, this was a master-stroke by V4L !! No doubt they and many other big vendors will be trying similar deals in the future !! ...... You see I'm not questioning whether this move was good for the business, I'm questioning whether it was good for the consumer

Of course they wouldn't have gained a Monopoly on the entire E-cig market - but they would have on the specific 808 market ...... why do you believe it is better for the consumer to have just one vendor as opposed to many vendors all competing against each other ??

 

[Perfectionist]

I suspect this isn't worth the time, but what the hey, I've some time to waste.

Companies work out exclusive deals all the time. The plan, at the inception at least, is that they both get some greater benefit from it. Supplier A gets a better unit price for the product, Distributor B gets exclusive marketing rights over that product and, presumably, some advantage over the competition. I see this on an almost daily basis.

It rarely seems to work out to the complete satisfaction of both parties. You see, there are always hidden factors and stipulations. The product may not actually be as good as A says it is, B may be restricted to solely marketing the newly discovered to be mediocre product and unable to rectify the situation by dropping the line, consumers may get cheesed off and stop buying from B, the competitors may come up with a superior mousetrap which B is prevented from obtaining by contractual agreement and loses market share as a result, etc., etc. The list of pitfalls is nearly endless.

All sorts of things can happen when 2 greedy parties team up in this way for "mutual benefit".

It's not illegal either unless they attempt to control the entire market and that's not what was attempted, apparently.

So why the seeming crusade? Do you have a beef with the operation of free markets? Some kind of government regulation to propose, perhaps? Maybe you just don't like V4L?

Forgive me for asking. It just seems a mountain made from a molehill and begs the questioning.

Crusade ?! Likewise, does the fact that you're defending V4L mean you have some kind of ulterior motive too ??

Dude, it's merely an Internet thread where someone posted an opinion, not a declaration of War !! This is a discussion board, so feel free to agree or disagree or to completely ignore ...... and I don't have a "beef" with V4L in particular, as you can see I didn't put their name in the thread title ...... I'm talking generally about this kind of business move, and wondering why consumers don't seem to have any problem with it ...... just having a debate bro, that is all !!

 

[Perfectionist]

Actually, my economics professor was at Kellogg School of Management at Northwestern University. I aced the courses.

The point is well explained in my original post. But I'll explain another way:

Since the barrier to entry for a competing cartomizer solution is still low, an exclusivity deal would have allowed another solution into the market because ALL the other vendors would have to compete against one vendor. Who was locked into one product. Since 99.9 percent of the vendors would not initially have a competing solution, *someone* would be lured by that market to manufacture competing solution. (good)

Since the exclusivity deal failed, the market is open for all resellers to resale the same product. Also good.

Because of the nature of this particular market, low barriers to entry, and an inelastic demand curve- either scenario is healthy for the market.

However, if diversity of product is considered the *best* condition for a market to be in, scenario one (an intact exclusivity agreement) would have actually created more diversity of competing solutions in the market. This is of course counter intuitive. But true.

The Dogma of monopoly, is only valid when the item being monopolized cannot be replaced (think coal, oil, etc). However, in a market like e-cigs, an exclusivity deal on one item, makes it more compelling for a competing manufacturer to create a competing cartomizer, and sell it to the 99.9 percent of resellers who do not have access to the monopolized product.

So in this case- whatever condition exists- the market will work.

Regarding "banning" and the market function... Considering companies like Njoy are taking up the cause against the FDA voluntarily, companies like Cignot are making large donations to lobbying organizations, and many other companies seem to be getting involved in one way or another, the "market" (as you are misidentifying it) does seem to be working to ensure that personal vaporizers as a nicotine delivery system are *not* banned... but perhaps regulated.

Dude, perhaps you should have studied at the London School of Economics like I did ...... or at least you might want to think about going on a refresher course !!

Seriously I can't believe you actually tried to justify a complete contradiction AGAIN !!

If you were a Doctor about to perform an operation, you'd say the following to your patient :
a) well if you survive the operation, it's good because you can live a long and fruitful life full of love and happiness !!
b) but if you die during the operation, it's still good because you'll no longer have to suffer the torture of existence and go directly to Heaven !!

I salute you once more Sir, for being an accidental comedian !!

Maybe you could answer the question in it's simplest form = Do companies like exclusive agreements because ......
a) it is best for the Consumer
b) it is best for the Company



As to your second more sensible point, the market (as I am correctly identifying in it's widest scope) is being manipulated by the biggest players for their own self-interest ...... Tobacco and Pharma (with the blessing of the Government as they need the Tax Revenue these industries generate) are doing everything they can to cripple, sorry, to "regulate" Vaping as it is effectively a threat to their long-term profits ......

Now seeing as E-cigs have been "banned" in so many other countries ...... do you consider this to be a "free-market" that is (in your opinion) "working" ??

Out of curiosity, do you foresee this fight against the "regulation" of Vaping in the US being successful ?? If indeed this "regulation" is passed, do you see it being applied in a fair and reasonable manner, or do you feel it could be too restrictive and possibly even destructive to Vaping in America ??

 

[brandon555]

Who cares. V4L is for newbs anyway.

 

[MacTX]

Studying at the London School of Economics is what causes the type of thinking you are immersed in. What you simply cannot understand is that there was no contradiction at all. EVEN with your example - you can't get past the "one must be better than the other - a or b" mentality to understand that often there IS no "better" one. There are pros and cons to each. Your imaginary doctor's statement was contradictory at all - simply an explanation of the best benefits of either scenario.

A company should be concerned with one and ONLY one thing - making money. That means producing a product consumers want to buy and will buy. Sometimes it means getting patents and copyrights. "What is best for my consumers" is never on a good businessperson's mind. Rather, "What will my consumers buy and what can I do to get them to buy more of it" is what they should be thinking, along with "how can I be the only one or one of a very few who sells it". But maybe I'm being too free-market oriented and capitalistic for a London School of Economics student