E-cigarette startup Snowplus has laid off a significant portion of its employees, TechNode has confirmed, as China’s vaping industry struggles to stay afloat after being limited to offline sales in November and as customers dwindle amid the outbreak.
Why it matters: The epidemic has delivered another blow to an industry already in turmoil due to new regulations.
- E-cigarette companies were forced to rely on physical stores to sell products, according to recently implemented Chinese regulations.
Details: Reports of Snowplus’s layoffs circulated on Chinese media on Saturday night, which the company confirmed today in a statement shared with TechNode. The Shenzhen-based startup said it is conducting “staff optimization” which is a “natural part of the growth of any business.”
- An employee who was recently laid off told TechNode that the layoffs started in November and accelerated after the extended Spring Festival holiday, which officially ended on Feb. 3. The employee wished to remain anonymous over fears of having severance payments withdrawn.
- Snowplus has now fired about half of its staff since November, when the company became low on cash, the employee said. The Chinese media report also spoke of a 50% reduction in staff.
- Snowplus said it has laid off 20% of its support staff, but didn’t specify a time period for the firings. It also said that 450 employees, not counting its on-the-ground sales staff, remain employed.
- The Covid-19 epidemic has worsened the cash crunch with declining revenues, the employee said.
- The employee said that because of the company’s work-from-home policy, the recent layoffs took place online.
Context: Home to 300 million smokers, China was expected to be the next big market for e-cigarettes, which have taken off in the US. But the country’s many vaping startups are facing a stricter regulatory environment because of tax and sales regulations, including a ban on online sales that came into effect on Nov. 1.
- Snowplus is considered one of the e-cigarette industry’s rising stars. Its Series A was the biggest investment in a Chinese startup in the field, led by tech heavyweight venture capital firms like Sequoia Capital China and ZhenFund.
- Relx, another prominent Chinese e-cigarette startup, said that it has not laid off any staff and has set up a RMB 20 million ($2.86 million) fund to support stores whose sales are adversely affected by the virus. It has also donated RMB 1 million to support the mental health of medical staff at the front lines of the epidemic.