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JOURNEY · DETAIL
RELX: China's E-cigarette Leader from Offline Channel Expansion to Regulatory Compliance Transformation
Founded: Wang Ying, Jiang Long, Wen Yilong · RLX Technology (RELX)
JOURNEY
Key Fields
FIELD STAMPSIndustryFood & Drink
RegionChina
ScaleGiant
ChannelOther
Origin
Founded in 2018 by Wang Ying after leaving Uber China, RELX targeted the window of opportunity as the Chinese e-cigarette market shifted from online e-commerce to offline experiences. The team identified e-cigarettes as fast-moving consumer goods (FMCG) that rely on experience and repeat purchases, concluding that offline channels were essential for building brand awareness and user stickiness. Initially, the company scaled rapidly through platforms like JD.com and Tmall, while simultaneously establishing brand-exclusive stores and shop-in-shops to capture the market.
Milestones
2018
Founding Turning Point
Wang Ying, along with Jiang Long and Wen Yilong, founded RLX Technology and launched the RELX brand. The founding team, with backgrounds at Uber and P&G, initially relied on online e-commerce channels to scale quickly, opening brand stores on JD.com and Tmall while building nearly 100 online communities to drive early user acquisition through social sharing. By the end of 2018, offline distributor sales already accounted for 60.2% of revenue, proving that offline channels were the core revenue driver from the very first year.
2019
Offline Expansion Growth
RELX aggressively deployed offline specialty stores, shop-in-shops, and vending machines. According to CIC reports, RLX Technology's market share in China reached 48% by retail sales in 2019, with offline distributor sales rising to 73.5%. The company maintained high growth even after the online sales ban, as offline channels became its moat. That same year, Wang Ying pushed for standardized operations in brand stores and established a tiered distributor management system.
2019
Online Sales Ban Failure
The State Tobacco Monopoly Administration and the State Administration for Market Regulation issued a notice requiring e-cigarette companies to close online sales channels and remove products from online platforms. RELX was forced to withdraw entirely from JD.com, Tmall, and other e-commerce platforms, and its online community operations ceased. The industry landscape, which previously relied on online sales for over 80% of revenue, was shattered, forcing the brand to pivot entirely to offline channels.
2021
US IPO PMF
In 2021, RLX Technology listed on the New York Stock Exchange under the ticker symbol RLX. The prospectus showed that its market share by retail sales had climbed to 62.6% in the first nine months of 2020, with full-year 2020 revenue of approximately 3.82 billion RMB and a net profit of about 850 million RMB. Its market cap exceeded 45 billion USD on the first day of trading, making it one of the most valuable Chinese companies in the e-cigarette sector. However, the stock price declined steadily post-IPO as investors grew concerned about regulatory risks.
2022
New Regulatory Rules Failure
In 2022, the 'Administrative Measures for E-cigarettes' were officially implemented, bringing e-cigarettes under the tobacco monopoly system. RELX was required to obtain a tobacco monopoly production enterprise license. The sale of fruit-flavored pods was banned, leaving only tobacco flavors, which directly cut off RELX's most attractive product line. Statistics indicated that fruit-flavored pods previously accounted for over 70% of RELX's revenue, and the flavor ban led to a sharp decline in terminal sales. That same year, a consumption tax was introduced, with a 36% tax rate on production and 11% on wholesale, further compressing profit margins.
2023
Quota System Adjustment Inflection Point
The Tobacco Monopoly Administration implemented a production quota system for e-cigarette pods, with RELX receiving a quota of approximately 329.8 million pods. Brand owners shifted from rapid expansion to competing for existing market share. The number of distributors shrank from a peak of over 50,000 stores to fewer than 20,000. RELX began promoting refined channel operations, closing inefficient stores, and attempting to expand into overseas markets. Domestic revenue declined for two consecutive years following the tightening of regulations, with a year-on-year drop of over 40% in 2023, a trend that continued into 2024.
2026
Overseas Expansion and Compliance Turning Point
RLX Technology released its 2026 semi-annual report, showing revenue of 2.6 billion RMB, but a 18% year-on-year decline in net profit. Overseas expansion became the new growth engine, with the company establishing direct-to-consumer and distributor networks in Southeast Asia and Europe, where overseas revenue accounted for over 30% for the first time. However, the domestic market has yet to bottom out under the dual pressure of the quota system and consumption tax. Compliance costs and channel subsidies continue to erode profits, and the company must reconstruct a sustainable profit model within policy boundaries.
Turning Points
- The 2019 online sales ban forced RELX to pivot entirely from e-commerce to an offline specialty store and distributor system.
- The 2022 fruit flavor ban destroyed RELX's most competitive product matrix.
- The 2021 NYSE IPO brought a brief capital peak, but subsequent long-term stock price decline exposed regulatory risks.
- The 2023 pod quota system shifted the focus of competition from channel expansion to operational efficiency.
- In 2026, overseas revenue exceeded 30%, marking RELX's transition from a single-market brand to a cross-regional brand.
Failures & Pitfalls
- After the online channel ban, the brand assets built through early online communities and e-commerce were wiped out.
- The fruit flavor ban caused a sharp decline in terminal sales, leading to severe inventory backlogs for distributors.
- Continuous stock price decline post-IPO led to long-term valuation pressure due to policy risk pricing.
- Excessive offline channel expansion led to surging subsidy and management costs, with many inefficient stores dragging down profits.
- The combination of consumption tax and the quota system compressed domestic gross margins from over 40% to less than 25%.
关键成功要素
- Treating offline distributors as a core channel rather than an auxiliary one from day one.
- Rapidly establishing consumer awareness and channel control through standardized brand store operations.
- Iterating product lines quickly based on user flavor preferences, with fruit flavors serving as the early growth engine.
- Completing capital accumulation and scale expansion before regulatory shifts, buying time for the compliance transition.
- Shifting overseas market strategy from passive regulatory response to proactive pursuit of a second growth curve.
Lessons
- A channel-heavy model is extremely vulnerable to policy shocks, though channel assets themselves hold migration value.
- Growth during a regulatory arbitrage phase is unsustainable; companies must switch business models before policy windows close.
- Over-reliance on a single product feature amplifies the impact of policy crackdowns; the lesson of the flavor ban is a warning for all FMCG companies.
- An IPO is not the finish line; policy risk pricing will suppress valuations long-term, and founders must manage capital market expectations.
- Quota systems and tax tools reshape industry competition; the true barrier for leading companies lies in compliance operational efficiency.
Core Data
- 2019 Market Share：48% (Based on public data, not independently verified)
- Market Share in first 9 months of 2020：62.6% (Based on public data, not independently verified)
- 2020 Full-Year Revenue：3.82 billion RMB (Based on public data, not independently verified)
- 2020 Full-Year Net Profit：850 million RMB (Based on public data, not independently verified)
- 2021 IPO First-Day Market Cap：45 billion USD (Based on public data, not independently verified)
- 2023 Pod Quota：329.8 million units (Based on public data, not independently verified)
- Peak Offline Store Count：Over 50,000 (Based on public data, not independently verified)
- 2026 H1 Revenue：2.6 billion RMB (Based on public data, not independently verified)
- 2026 H1 Net Profit YoY：-18% (Based on public data, not independently verified)
- 2026 Overseas Revenue Share：Over 30% (Based on public data, not independently verified)
Competitors / Peers
RELX's main competitors in the domestic market include brands like MOTI, YOOZ, and LINX. MOTI also faces heavy regulatory pressure, but its product line is primarily tobacco-flavored, making it less impacted by the flavor ban. YOOZ gained capital support after being acquired and competes with RELX in Southeast Asian and European markets. Additionally, Smoore International, as an upstream contract manufacturer, holds pricing power in the supply chain due to its ceramic atomization core technology, exerting continuous pressure on the procurement costs of brands like RELX. The China Tobacco system is also gradually launching its own brands, which may squeeze the survival space for third-party brands in the long term.
Sources
- https://www.digitaling.com/articles/880116.html
- https://m.21jingji.com/article/20210928/herald/f3aebbfa242a27c01b9bfa7562c23282.html
- http://www.21jingji.com/article/20220628/herald/ba3f0a8ac6792646004957ddd6dc19f2.html
- https://www.vapenews.com.cn/details/uprv6-1hw.html
- https://ag.yueniuzq.com/insight/relx-impact-industry-chain-restructure/
- https://www.guanyunwang.com/4377.html