CEO Interview | Ailem CEO Lai Yongcong: An idealist's four-year sprint, from a small overlord in Southeast Asia to the world's number one in openness

CEO Interview | Ailem CEO Lai Yongcong: An idealist's four-year sprint, from a small overlord in Southeast Asia to the world's number one in openness

Recently, 2Firsts interviewed Lai Yongcong, CEO of Ailemi. In four years, he built OXVA from scratch into a leader in the open e-cigarette market. Despite the fierce competition in the e-cigarette industry, he remains optimistic about the future of the industry. Ailemi will deploy a closed e-cigarette product system in the fourth quarter of this year and officially enter the full-category market.
Preface

After experiencing explosive growth in the past five years, the global e-cigarette industry has come to a historical crossroads. Policy risks have intensified, social responsibility risks have emerged frequently, product innovation prospects are unclear, excessive low-level competition has distorted the industry value chain, and corporate debt crises have become prominent. Facing these challenges requires thinking, hard work, facing risks, and sometimes taking on failures. If all of the above are brought together into one group, that is - entrepreneurs.

As a media and think tank responsible for reporting on the global atomization industry, 2Firsts has launched a series of interviews with CEOs of atomization companies. We hope to have dialogues with global atomization entrepreneurs to convey their thoughts on major industry issues, their judgments on future development trends, and more importantly, their confidence in the development of the global industry. I believe this will be the best content produced by 2Firsts to date for global readers.

Industries have ups and downs, companies have successes and failures, but the light of entrepreneurship will illuminate the way forward for the industry.

--2Firsts co-founder, CEO Zhao Tong

Idealist Lai Yongcong:

Ailemi's four-year entrepreneurial journey

From a small overlord in Southeast Asia to the world's number one in open

Text | Two Supremacies

Editor's note: Lai Yongcong calls himself an idealist. From the media's perspective, he and his company are more like a maverick and focused runner.

In just four years, he built Shenzhen Ailemi Technology Co., Ltd. (hereinafter referred to as Ailemi) and its subsidiary OXVA into a successful case that flies against the "big trend" and "big trend" of the industry.

In just four years, his mad rush quickly earned him different "labels" that highlight his industry status, such as "Southeast Asian Little Overlord", "No. 1 in the Middle East" and "Open Leader", and he used continuous mad rush to break the limitations of these "labels" one by one...

It seems difficult to define him and his company Ailemi and brand OXVA by staged success.

If we define the founders of old-fashioned e-cigarette companies who seized the opportunity of this emerging industry after the advent of e-cigarettes in 2003 as the "first wave of e-cigarette entrepreneurs", Lai Yongcong, who was born in 1988, founded Ailemi at the end of 2019 and should be regarded as the second (or even third) wave of e-cigarette entrepreneurs. Unlike the era when the predecessors were a group or a wave of people moving forward in sync, Lai Yongcong has almost no peers, not to mention the blue ocean dividends of leveraging industrial development...

The idealist Lai Yongcong is more like a rational lone ranger. He said, "...I will do things with a very high degree of certainty. I only enter areas that are sure and competitive..." At the same time, he will affirmatively say, "...the e-cigarette industry is still in its early stages...I estimate that there is still dozens of times of room for development in the future."

Lai Yongcong, CEO of Ailemi, who has a professional background as a product manager, still exudes the "tension" and aura of a product manager. In the more than two-hour interview, he always uses product logic to deconstruct problems. He said:

"...If a product's product power is not good, we will resolutely not make it."

"We never do projects with too low profits."

"It is not a good thing to launch too many products, which means that you have lost your direction..."

"...You cannot find your own future in the trends of others..."

[Two Firsts Original] Founded at the end of 2019, Ailemi and its e-cigarette brand OXVA have developed rapidly in just four years. After becoming the first in the market share of open-type e-cigarettes in Southeast Asia, it quickly became the first in the Middle East and strongly entered the first echelon of the European market with the highest market maturity. In addition, Lai Yongcong, CEO of Ailemi, also expressed that he is very confident that he will become the world's number one by the end of 2024.

At a time when the e-cigarette industry is experiencing intensified market competition, industrial changes and product iterations, and even overcapacity, what are the reasons and special features of Ailemi's success? For this reason, 2Firsts interviewed Mr. Lai Yongcong.

Lai Yongcong believes that Alemi will be the first in the open-type e-cigarette market by the end of the year | Source: 2Firsts

From "the little overlord of Southeast Asia" to "the leader of open-type e-cigarettes"

2Firsts: Alemi has been born for four years and has also developed rapidly for four years. It is more like a process of creating miracles against the industry development cycle. It was even once called the "little overlord of Southeast Asia" in the industry; then as the founder and "operator" along the way, how do you view Alemi's role and status in the industry?

Lai Yongcong: By the end of this year, we are confident that we will be the first in the field of open-type e-cigarettes.

In 2022, OXVA followed the consumer trend of the transformation of e-cigarette products from large bodies to small bodies and became a hit.

Before 2023, peers' impression of Alemi was "the little overlord of Southeast Asia".

In terms of the open-type field, Alemi is definitely the first in the entire Southeast Asian market, far ahead. We have obtained a very high market share in markets such as the Philippines, Vietnam and Indonesia.

In 2022, our team began to "go to" the Middle East and European markets. Now we should also be the number one in the total open market in the Middle East market.

Looking back at the development of Ailemi over the past four years, although we started late and some peers thought we had no chance of winning, we are now rising.

Reasons for choosing the "open" track: "I only enter areas that are sure and competitive"

2Firsts: You founded Ailemi at the end of 2019, which was also the early stage of the disposable e-cigarette wave, and in the more than four years of rapid development of Ailemi, it was also in a cycle of one-time explosion. In such a torrent of "big trends" and "big cycles", why did you choose "open" as your entrepreneurial track, and you can persist in this track without temptation to become a "leader". What kind of product concept and belief makes you determined to run all the way?

Lai Yongcong: First of all, the rise and outbreak of disposable e-cigarettes did not cause a decline in the total market of open e-cigarettes. In fact, there is a watershed in the industry. Before the rise of disposable e-cigarettes, open e-cigarettes have always been the main ones. It was not until later that disposable e-cigarettes began to occupy more market share. But in fact, the total market volume of open e-cigarettes has not declined.

Of course, this is only the category relationship at this stage. I don't think that open electronic cigarettes can replace the market share of closed electronic cigarettes in the future.

Choosing the open electronic cigarette track is related to my previous career accumulation and rational style of doing things. Before I founded Ailemi, I worked as a product manager in Kikna, and my experience and cognition were in the field of open electronic cigarettes. Around 2020, my entire team and I didn't know much about disposable electronic cigarettes. We think it is not so easy to design an excellent disposable electronic cigarette product, and it takes a lot of time to learn. I don't think that entering the field of disposable electronic cigarettes at that time would be a hit.

I am a steady and very rational person, so I will do things with very high certainty. I only enter areas that are sure and competitive. I think that using my advantages to deepen the field of open electronic cigarettes will definitely create excellent products. Facts have proved that we have overcome the weaknesses of our opponents, and OXVA quickly occupied the top of the mountain.

In mid-August, OXVA officially opened its first overseas experience store in Jakarta, the capital of Indonesia | Source: OXVA

Change the label of "open leader", we want to do all categories

2Firsts: The choice of category track has always been an extremely important factor in the development of enterprises in the e-cigarette industry. Each round of iterative upgrades of categories is "projected" to the specific enterprise level, and some enterprises will be able to develop rapidly, and some enterprises will be abandoned by the trend. As an innovator, Ailemi chose the "open" track to start a business "against the trend" in the "one-time big cycle", and quickly became the first in Southeast Asia, the first in the Middle East... and is about to become the first in the world in openness. So what do you think of the development trend of e-cigarette categories? How will Ailemi, which you "operate", lay out in the dimension of category strategy? Will there be new big moves? Or stick to the "open" track?

Lai Yongcong: From the overall pattern of the industry, I think there will be no open brands, closed brands or one-time brands in the market in the future. Two years later, I believe that all e-cigarette companies in the market will have overlapping categories.

Specifically speaking of our own product strategy, Ailemi will officially enter the full category market. In the fourth quarter of this year, you will see Ailemi's closed electronic cigarette product system, which will gradually change everyone's inherent impression of us as an "open leader".

Focusing on the specific product level, my own judgment on the industry is that all electronic cigarettes on the market in the future will be closed cartridges.

For example, among the various solutions for closed cartridge electronic cigarettes, the "2+10" solution in the British market is definitely the most advantageous and cost-effective. If the "2+10" can comply with local policies and regulations in the future and improve user experience at the same time, it will be the mainstream solution in the future.

Why is this the case? The underlying logic of the product must be at the consumer level. A careful analysis will find that in the closed electronic cigarette product system, the cost of e-liquid is relatively low, which means that the body quality of the electronic cigarette can be made better. Looking back on the history of electronic cigarette development, I found that many consumers are pursuing higher and higher quality and experience of electronic cigarettes. In order to give these consumers a better product experience, increasing costs and selling prices is a must.

The current overcapacity and the expected development space of dozens of times in the future

2Firsts: The current e-cigarette industry is already in a state of intensified competition. The competition at the international market level has been transmitted to upstream brands, manufacturing and supply chains. Even this year, some companies have begun to go bankrupt and liquidate. How do you view the current status of the industry? Does it affect your judgment on the development of the e-cigarette industry? Are you still optimistic about the development of the electronics industry?

Lai Yongcong: I have been working in the e-cigarette industry for more than ten years. Every one or two years, I hear people say that the industry prospects are bleak. This year, some colleagues also expressed pessimism about the industry when they talked to me, but I always remain optimistic about the e-cigarette industry.

At the end of 2019, I started my own business, founded Ailemi, and led the OXVA project. We think we are so lucky to fall into the "gold pit" of e-cigarettes.

Now, I still think that the e-cigarette industry is in its early stages. At present, the market share of e-cigarettes is still very low, and I estimate that there is still dozens of times of development space in the future.

As far as the current industry situation is concerned, competition has intensified and even some companies have withdrawn. In my opinion, this is an inevitable process, and many industries will have overcapacity.

In the e-cigarette industry, RELX attracted a lot of capital in the past few years. Now, disposable e-cigarettes are "hot", and many people have entered this field to get a piece of the pie. This reflects an inevitable process in the e-cigarette market. It will "come up with new things" and then let supply and demand reach a relative balance. From overcapacity to supply and demand balance, then to resource scarcity, and then to overcapacity, the market will always be such a repetitive cycle.

At present, what I can see is overcapacity in the industry. So the market needs to be "cleared", some (enterprises) need to be eliminated, and some (enterprises) need to be withdrawn to reach a new state of supply and demand balance.

OXVA's booth at WORLD VAPE SHOW (Dubai), which has now achieved a leading position in the open market in the Middle East | Source: 2Firsts

Product Power VS Channel Power

2Firsts: As you said, in such an adjustment period of overcapacity, the fierce competition has reached the point where capacity must be eliminated through the survival of the fittest. In your opinion, what kind of enterprises with advantages can win this round of competition, and what type of enterprises will be eliminated?

Lai Yongcong: From the perspective of enterprises, I think this issue still needs to return to the topic of building the core competitiveness of enterprises. The future market will focus on companies with strong competitiveness and strong strength, such as those with top talents and clear product thinking. For those companies that "walk and watch", many may be slowly eliminated.

2Firsts: At present, in terms of competition, we can see that some companies choose to increase investment in the channel link, and even adopt the "consignment" model; some companies bet on the product side and use the development of new products to gamble on the success rate of the market. So, how do you view the importance of the two dimensions of channels and products in competition? What strategy does Ailemi use to deal with this round of competition?

Lai Yongcong: People usually discuss whether product strength or channels are important. In fact, I think there is no need to discuss it. There is a fixed thinking behind it. The dissemination path of a product is from the manufacturer to the distributor, then to the store, and finally to the consumer. The link from the store to the consumer is the most important. The store must hope to place the products with high conversion rates in the place where consumers are most likely to contact them. Therefore, the products that can survive in the market in the end must be products with high sales conversion rates.

In a fully competitive market, it is impossible for distributors to force a product. Maybe it can be done in the short term, but it will definitely not work in the long run. The fundamental reason why distributors successfully promote a product is that the conversion rate of the product itself is very high, which is in line with business logic and will continue to convert at a lower cost. So I think the core is not consignment, but to build product strength itself.

If the product strength of a product is not good, we will resolutely not do it, even if the distributors tell us that they have this demand, we will not do it. Because we are always user-oriented, the products are ultimately sold to e-cigarette users. The key to building product strength is how to collect real, effective and comprehensive information from consumers; in addition, the company's product decision-making mechanism is also very important, how to present and implement advanced product concepts. So to make a good product, the key is to deeply analyze user needs.

"Too many product launches are not a good thing, indicating that the direction is lost"

2Firsts: We have observed that there are too many new products in the past year, and various e-cigarette products are emerging in the market. Some companies have clearly adopted a high-frequency and large-scale new product launch method to try to win market opportunities by accumulating quantity. In your opinion, is this situation due to collective anxiety in the industry? Do you and your company have similar emotions? What is the number and rhythm of your development of new products?

Lai Yongcong: Every e-cigarette company needs to survive. If a product is not "hot", it must immediately launch another product, and gain a sense of security through the continuous delivery of new products. But I think that if an e-cigarette company launches too many products, it is essentially because the company has lost its direction and does not have a definite direction, so it seeks to "bloom everywhere" and use the advantage of quantity to reduce anxiety about uncertainty.

How does Ailemi do it? Generally speaking, we will make some judgments on the current situation. If there are five roads in front of us, I might choose three of them and launch four or five products. But if ten new products are presented on the same road and customers are asked to choose, I think it is a fallacy.

When designing e-cigarette products in the same direction, I think a relatively reasonable configuration can be calculated. Through collective discussion, logical reasoning and other efforts, the optimal solution or the better solution can be found.

At present, the products launched by Ailemi are relatively few compared with other e-cigarette companies in the industry. Among the large-scale open brands, our product variety is the least.

Lai Yongcong (center) is drawing product pictures with his colleagues | Source: Ailemi

"You can't find your own future in other people's trends"

2Firsts: What do you think of the large-screen e-cigarettes that are popular in the market?

Lai Yongcong: Screen innovation is an outlet for the homogenization of e-cigarettes. I think the starry screen (GEEKBAR PULSE X) recently launched by GEEKBAR is a good innovation. This has also brought new thinking to our team. In the future, we will pay more attention to communication with supply chain manufacturers, such as working with screen manufacturers to plan better solutions and present better products.

New visual effects are always popular, and large screens represent a trend in a certain period of time. But Ailemi is not going to follow behind and make larger screens, which has a very low winning rate. The direction of our thinking is always how to find the next trend.

I think the explosive growth of a product is essentially because it leads a trend. When a product represents a trend, it is unstoppable, but I don't think it is necessary to follow it or move towards it. On the contrary, I think innovation is a subversion of existing products. If you can't find your own future in the trends of others, that's the future of others.

I think the full screen must not be a stable form. On the one hand, the user's visual freshness will produce a rebellious psychology over time, and on the other hand, the large screen will lead to an increase in cost or size. I believe that at some point in the future, the large screen trend of e-cigarette products will have a turning point.

"I don't consider building my own factory at the moment"

2Firsts: From the invention of e-cigarettes to the present, the e-cigarette industry has gone through more than 20 years of history, and has also created a group of outstanding entrepreneurs and their companies; unlike the first generation of entrepreneurs who mainly produce in factories, the "leader" or "unicorn" company you built in just four years focuses on the brand link. So, what is the current production and manufacturing model of Ailemi? After having achieved remarkable phased success, would you consider shifting the focus to the manufacturing link? Would you consider building your own factory?

Lai Yongcong: At present, we have four OEM factories. Moreover, our OEM factories are mainly engaged in the production of Ailemi products, and they all regard us as their lifeline. In terms of quality, they are all "veterans" in the industry, who have been deeply involved in the industry for more than ten years, and have good management and systems.

Ailemi's products are produced by OEM factories, but the products are fully controlled by Ailemi, and the product quality is managed by Ailemi from beginning to end. The quality of our products is not determined by the OEM factory at all, and the final testing standards are all set by Ailemi.

At present, we will not consider building our own factory. We may consider acquiring a factory, but only for reserve considerations, and will not focus on building our own factory. Because, in fact, building a factory by ourselves is not as simple as imagined. Excellent factory managers and production talents are very important. At present, Ailemi does not have these talents. I will do things with very high certainty.

If we really need to build a factory in the future, we will adopt a co-construction approach. Ailemi will be responsible for investment, but Ailemi will not be responsible for managing and operating the factory.

OXVA peripherals displayed inside Ailemi | Source: 2Firsts

Upstream and downstream ecology: "Everyone must make money, and the entire ecology is healthy"

2Firsts: The e-cigarette industry is shifting from the previous high-profit seller's market to the buyer's market model with intensified market competition. Without high profits as a "lubricant", competition is transmitted from the market to the upstream. For many companies, the relationship with the upstream and downstream of the industry has to come out of the previous "comfort zone". So how does Ailemi define the relationship with upstream and downstream companies? How to optimize the sustainability of this ecology?

Lai Yongcong: I am an idealist.

The phrase "no business without fraud" is very glaring to me. This is a completely short-sighted behavior. Long-term development requires more cooperation. Others can get more commercial benefits from you before they are willing to cooperate with you for a long time.

Ailemi is a company that pursues simplicity and purity. We actually sell e-cigarettes, and we are also a product-centered company. Our responsibility is to pursue the creation of the best e-cigarette products.

We never "paint a pie" for suppliers.

We never do projects with too low profits. Too low profits mean that the salary I can offer to employees is relatively limited, which is not conducive to attracting talents internally; externally, I also have to consider whether my suppliers can obtain ideal profits. If the profit is too low, it will inevitably put pressure on suppliers. The greater the pressure on suppliers, the greater the probability of quality problems in the products.

In the product dimension, we adhere to the boutique strategy. Our product life cycle is very long. While Ailemi is selling e-cigarettes, suppliers are also continuously producing, which can reduce the loss caused by downtime.

In addition, in our view, the supply chain and products directly empower each other. For example, the XLIM PRO we launched should be the sales champion of the entire open electronic cigarette single product in 2023; judging from this year's sales, it is definitely the sales champion of the single product in the entire industry. This product is very interesting, and its success has brought zinc alloy patches to the fire. This is the reverse empowerment of good products to the supply chain.

In 2022, OXVA's XLIM was very "hot" in some countries in the Middle East and Europe. In 2023, we launched XLIM PRO and quickly became the sales champion. Before this, the body material of electronic cigarettes was mainly aluminum, which created a smooth metal texture. The use of zinc alloy material can create a groove design, so as to carry out patch processing, making the visual effect more high-end.

XLIM PRO is placed in the center of the Ailemi exhibition hall. Source | 2Firsts

Before the advent of XLIM PRO, zinc alloy patches may have been on the verge of "extinction" because of their high manufacturing price. We are not the first to create zinc alloy patches, but XLIM PRO has brought zinc alloy patches back to the mainstream design. Now everyone is using (zinc alloy patches), and almost every open electronic cigarette brand has such products (using zinc alloy patches), which has become the standard of the category.

Some zinc alloy material suppliers told us that XLIM PRO saved them. Of course, another important factor in this process is that the supplier has improved the zinc alloy process and brought down the cost price, so we have overcome this problem together, which is a complementary process.

My core team and I have always adhered to the principle of mutual benefit and symbiosis, which runs through every link of the foundry, supply chain, customers and the company. First of all, equal respect in personality, Ailemi does not allow them to be superior. In addition, once a problem occurs, Ailemi will take the initiative to solve the problem with them. Then in terms of payment, Ailemi always pays on time. The most important thing is to ensure their profits, because I believe that everyone must make money, and the entire ecosystem is healthy.