[2FIRSTS] Experts Interpretation of the "Complementary and Substitution" from the Guiding Opinions on the Layout and License Management of E-Cigarette Retail Points

Industry Insight by 2FIRSTS
Jun.13.2022
Complementary refers to the fact that two commodities jointly satisfy a type of desire, such as mobile phones and internet as they jointly allow users to play mobile games; The substitution relationship indicates that two commodities can be substituted for each other to satisfy the same desire, such as mineral water and purified water, as they can be substituted to quench thirst.

Complement and Substitution

 
Complementary and substitution relationships can be distinguished between commodities.

 
Complementary refers to the fact that two commodities jointly satisfy a type of desire, such as mobile phones and internet as they jointly allow users to play mobile games; The substitution relationship indicates that two commodities can be substituted for each other to satisfy the same desire, such as mineral water and purified water, as they can be substituted to quench thirst.

 
There is a simple way to determine whether the relationship between A and B is complementary or alternative: when the price of A changes, the demand for B either shifts in the opposite direction or in the same direction.

 
If the price of good A increases, the demand for good B decreases; or if the price of good A decreases, the demand for good B increases proportionally, then the two are complementary. For example, if the price of gasoline increases to one liter for 100 yuan, sales of fuel-powered vehicles will likely plummet; if a movie ticket costs one yuan, sales of popcorn in front of the theater will increase dramatically. 


If the price of good A rises, the demand for good B will rise; or if the price of good A falls, the demand for good B will fall; then the two can be said to be have a substitution relations. For example, if McDonald's unilaterally increases the price by several times, KFC will likely sell well; Another example is the low-cost taxi activity of Hua Xiaozhu, which reduces the likelihood that passengers will continue to use Didi.

 
According to the above reasoning and the contents of the Guiding Opinions on the Layout and License Management of E-Cigarette Retail Stores, "The reasons for not granting the E-cigarette retail license also includes: the type of business that has no direct or indirect complementary marketing relationship between the main business and the E-cigarette retail business," we can comprehend why all provincial enterprises in the layout planning draft require that "If the business site has already applied for a tobacco monopoly retail license that is still valid, it shall not engage in the retail business of electronic cigarettes"?

 
Consider, if the cost of e-cigarettes for one year is 1 RMB, will this cause cigarette sales to plummet? If smoking of e-cigarettes is set to 100 RMB, will it result in electronic smokers coming back to cigarettes. Not only do e-cigarettes and cigarettes not have the complementary relationship required by the Opinions, they have the opposing relationship! 


The Two do not Complement One Another. Don't Forget That Many E-Cigarette Brands Were Created to "Replace Cigarettes."


Obviously, the relationship between complementary and substitution of commodities is not static; it can change as purchasing power, consumption habits, and other factors change. For instance, if a store introduces a 1 RMB special. It would result in the vast majority of customers ordering only specials, rendering other dishes unsalable; however, the introduction of 1 RMB special in shop B can also significantly increase the sales of other dishes. It is anticipated that one day e-cigarettes will be placed alongside traditional cigarettes on cigarette counters.

 

2Firsts’ Nine Global Turning Points: How 2025 Reshaped the Nicotine Industry
2Firsts’ Nine Global Turning Points: How 2025 Reshaped the Nicotine Industry
In 2025, the global nicotine industry reached a critical turning point. Regulatory realignment, category shifts, capital repositioning and technological intervention unfolded in parallel, loosening old structures while new ones took shape. 2Firsts reviews nine pivotal events that reshaped the industry’s trajectory.
Jan.14
Two Florida Bills Move: One Restricts Vape Advertising, Another Rewrites Cigarette Tax Treatment for Heated Tobacco
Two Florida Bills Move: One Restricts Vape Advertising, Another Rewrites Cigarette Tax Treatment for Heated Tobacco
The Florida Senate Industries Committee advance SB 980, the “Florida Age-Gate Act,” which would restrict advertising, promotion, and open displays of certain nicotine dispensing devices that lack FDA marketing authorization, with escalating penalties. Separately, the Florida House Ways and Means Committee advance HB 377, which would exclude heated tobacco products from being taxed like cigarettes.
Jan.28 by 2FIRSTS.ai
Virginia appeals to the Fourth Circuit over partial block on flavored vape ban enforcement
Virginia appeals to the Fourth Circuit over partial block on flavored vape ban enforcement
Virginia has asked the Fourth Circuit to overturn a district court order that partially blocked enforcement of the commonwealth’s flavored vape ban. In a notice, the state told U.S. District Judge David J. Novak it seeks to upend his December ruling that Virginia’s Chapter 23.2 statute is preempted by the Food, Drug and Cosmetic Act and the Family Smoking Prevention and Tobacco Control Act.
Jan.12 by 2FIRSTS.ai
PMI reshuffles U.S. footprint: Swedish Match to shut Richmond office in April; most staff may be relocated
PMI reshuffles U.S. footprint: Swedish Match to shut Richmond office in April; most staff may be relocated
Swedish Match, a unit of Philip Morris International (PMI), will close its office in Richmond, Virginia, in April 2026 and eliminate 135 positions. PMI said the move is tied to adjustments in its U.S. operating footprint.
Feb.03
Product | Vaporesso lists Vibe SE 2 on official site, offering leather/plated versions and a 1,400mAh battery
Product | Vaporesso lists Vibe SE 2 on official site, offering leather/plated versions and a 1,400mAh battery
Vaporesso has recently listed the Vibe SE 2, a new device in its Vibe series, on the brand’s official website. The product is positioned as an entry-level MTL device and features a 1,400mAh built-in battery with Type-C 1A charging. It is available in two finishes—Leather and Plated—while listings on online retail channels show prices of around $17.99 and £22.99.
Jan.30 by 2FIRSTS.ai
Product | ELFBAR launches new “4-in-1” e-cigarette kit: 4× (1ml + 5ml) design, 4 flavors per set
Product | ELFBAR launches new “4-in-1” e-cigarette kit: 4× (1ml + 5ml) design, 4 flavors per set
ELFBAR has launched the “4 in 1 Ultra 50 VAPE KIT” through multiple online sales channels in the UK. The kit combines four 1ml prefilled pods with four 5ml refill containers. The company claims it can deliver up to around 50,000 puffs, with a retail price of approximately £13.99.
Dec.31 by 2FIRSTS.ai