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VUSE Introduces Subscription: Conquering the "Last Mile" of Delivery
Does it contradict its original intention of being introduced to Britain as a "harm reduction product"?
The days of having milk and newspapers delivered to your door every morning seem like they were just yesterday, except now the newspaper delivery person has been replaced by DPS employees in uniform or freelance delivery drivers in their own cars. And when it comes to "subscription", the younger generation's first reaction is likely to be Netflix and Spotify.
However, the range of products available for order is certainly not limited to this. Now, pods can also be delivered straight to your doorstep.
Recently, 2FIRSTS has discovered that VUSE, an e-cigarette brand under British American Tobacco, has launched a subscription service in the UK. This service claims to offer savings on purchases, with three tiers available: "Bronze" (5-9 pods per month), "Silver" (10-14 pods per month), and "Gold" (15-30 pods per month). The prices for each tier are £5.79 ($7.36), £5.29 ($6.72), and £4.79 ($6.09) respectively.

VUSE has also launched a similar "subscription" service in Canada, offering 15-30 products per month with potential savings of up to 35%.

VUSE provides several subscription plans, divided into three tiers: "Standard," "Extra," and "Premium.
The standard package for subscribing to pods is between 5 to 9 per month, priced at 13.11 Canadian dollars each. However, if you choose to purchase the premium package, which includes 15 to 30 pods per month, the price per pod will be reduced to 11.36 Canadian dollars.

In contrast to the UK, the Canadian market allows for a larger number of disposable products. As a result, subscription plans in California include more choices compared to those in the UK. The standard subscription for the VUSE GO EDITION 5000 disposable product, which includes 5000 puffs, offers 5-9 units per month at a price of 19.49 CAD per unit. However, opting for the higher-tier subscription allows customers to receive 15-30 units per month at a reduced price of 16.89 CAD per unit.

The standard subscription for disposable VUSE GO XL products is 5-9 units per month, priced at CAD 14.99 each. However, opting for the highest subscription tier of 15-30 units per month enables a reduced price of CAD 12.99 each.

In addition, there is a subscription option for the disposable product VUSE GO. This is the most affordable option. The standard subscription includes 5-9 units per month, priced at $7.49 CAD per unit. If you choose to buy the highest tier, which includes 15-30 units per month, the price per unit can be lowered to $6.49 CAD.

Regardless of whether it is in Canada or the United Kingdom, the subscription process is reportedly very straightforward. In the monthly subscription category, consumers choose a minimum of 5 pods or disposable products and add them to their shopping cart. The subscription plan can be paused or cancelled at any time, and the type of products subscribed to can also be changed before shipment is made.
Purchasing Power of Suburban City Clusters
The above-mentioned VUSE offers subscription services in the UK and Canada. These developed economies have a slightly different urban layout pattern compared to China: a considerable number of middle-class individuals with significant purchasing power reside in the suburbs, which are relatively distant from city centers. According to statistics from 2015, 55% of residents in England and Wales live in the suburbs.

This has created a "essential goods market that requires a certain level of logistics capability". Take the UK for example. Daily supplies for suburban residents, including groceries, fresh produce, and everyday goods, are covered by both Amazon and local supermarkets. Customers order their products online, and these businesses are responsible for stocking the goods at the nearest fulfillment center and waiting for delivery drivers within the area to accept the order. It is worth mentioning that, instead of using employees, delivery services have recently become popular by utilizing a crowd-sourcing model, where independent drivers with their own vehicles are hired and paid per order.
In terms of sales volume, even the most prestigious e-cigarette brand would struggle to compare to Amazon. However, according to the latest statistics, 10% of the population in the UK regularly or occasionally use e-cigarettes, and the estimated market value for the new tobacco industry in 2022 is $2.05 billion. Considering this urban and rural ratio, the business opportunities in the outskirts alone could reach around £1 billion, making the potential not to be underestimated. Furthermore, the entire delivery process and logistics chain could provide valuable insights for brands considering the implementation of a subscription model.
This sales model presents a cost-effective channel for the e-cigarette industry. It eliminates the need for rental expenses associated with physical retail stores and provides a relatively stable control over inventory turnover compared to online retail. With known demand and delivery schedules, businesses can make optimal adjustments in procurement and staffing.
Essential Goods with No Expiry Date
Although e-liquid falls under the category of consumable items like fresh food, it doesn't have an immediate expiration date. Therefore, it might be more appropriate to compare it to daily-use products and consumables such as paper rolls and cleaning supplies. These products have regular and rigid demand but no strict requirement for freshness. Subscription services for these daily-use products provide regularly scheduled deliveries of the same items, catering to subscribers' inflexible everyday needs.
Not only can content products such as audio, knowledge, and apps be subscribed to, but nowadays, even industrial products like machinery and flooring, as well as everyday items like razors, diapers, and cosmetics, can also be easily subscribed to. According to statistics, in the past six years, subscription-based companies have seen revenue growth that is over eight times higher than that of Standard & Poor's 500 companies.
However, the subscription model is not just a shift in payment method; it requires a reversal in mindset and business operations. Unlike the traditional focus on product manufacturing and sales, as well as one-off linear transactions, the subscription model fosters a reciprocal dynamic between businesses and subscribers. By collecting and analyzing data, subscriptions enable companies to gain a better understanding of consumer profiles and insights into customer needs, allowing them to offer tailored services and ultimately enhance the consumer experience.
"Whether it is through physical stores or regular online shopping, it's all a one-time transaction," a professional told 2FIRSTS. "But subscribing to a service is considered a form of repeat purchase, which indicates that your brand has already partially won the customer's loyalty."
In the past, the key factor influencing consumer purchasing decisions was the functionality of the product itself. However, nowadays, consumers place more emphasis on the additional value that a product can provide. Consumer consumption patterns have gradually shifted towards a self-centric approach, which has led to the resurgence of subscription models in the market as a new business model. The shift from a one-time purchase mindset of products in the past to establishing long-term relationships with subscribers through continuous service is the true panorama of digital transformation.
Additionally, the predictable and zero-waste closed-loop logistics service model offers consumers both convenience and an environmentally friendly solution. This, in a time when corporate ESG practices are increasingly being emphasized, has also led some industry experts to have a positive outlook on the subscription-based future.
How is the "Last Mile" Covered
Going from theory to practice, the biggest change in implementing a subscription system for e-cigarette products will be the arrangement of storage and logistics points. Taking the UK as an example, subscriptions need to be guaranteed. While larger tobacco companies in the UK and US may have the capacity to operate multiple warehouse locations, smaller brand distributors may struggle to maintain more than one inventory point or overseas distribution center in a single country during the initial phase.
In addition, the management of customer data storage is another concern. Some consumers may not want others to know about their nicotine consumption. Managing subscriber data and protecting privacy is undoubtedly a new challenge that the tobacco industry (both traditional and new) needs to urgently address, considering its past habits of "one-time deals".
Another issue is the barrier to entry. It used to be that e-cigarettes could be purchased as individual items in physical convenience stores, retail outlets, and online platforms. However, e-cigarettes are not products that require extensive knowledge to purchase. In the subscription model, consumers are looking for a more personalized experience. VUSE captures this by offering subscribers the option to "create their own combinations." Taking inspiration from the popular trend of random snacks on subscription services in Taiwan, this approach might provide subscribers with an added sense of novelty.

However, while providing personalization, this subscription purchasing model also adds another hurdle for consumers to overcome before making a purchase. How to convince consumers to take the first step into subscribing remains a key issue for brands. No matter how easy it may be described, registering as a member and paying a monthly fee upfront are still seen as a series of "unnecessary steps" for buyers, which will significantly reduce their willingness to consume. The balance between these two aspects still needs to be observed.
2FIRSTS has made attempts to inquire about the performance of the VUSE ordering system since its launch but has not received a response from BAT as of the time of writing.
Returning to the fundamental issue, the "subscription model" is a transaction method where subscribers make bulk purchases of goods or services beyond their immediate needs in order to obtain a lower unit price. In return, businesses give up a portion of their profit to gain customer loyalty, along with relatively stable purchase frequency and quantity.
But this most essential "loyalty" introduces another contradiction: in the UK, as a "nicotine harm reduction product," the ultimate goal is to assist former cigarette smokers in using the power of new tobacco to eventually break free from nicotine dependence.
However, concerning VUSE's subscription plan in the UK, the highest-tier minimum is 15 units per month. Calculated at a concentration of 10mg/mL and 2mL per unit, the monthly nicotine intake of 300mg is arguably beyond the bounds of a healthy range.
Does this incentive for consumers to purchase more nicotine products and the marketing strategy of prepayment run counter to the original intention of the UK government? After reaching a certain volume, will it spark another round of debates in British society?
2FIRSTS will continue to monitor the development of subscription-based sales methods for new nicotine products.
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