On May 13, China Household Electrical Appliances Research Institute and National Household Appliance Industry Information Center jointly released the “First Quarterly Report of China’s Household Appliance Industry in 2019” (hereinafter referred to as “the first quarter report”).
The “First Quarterly Report” shows that in the first quarter of 2019, the retail sales of China’s home appliance market reached 183.4 billion yuan, down 3.1% as compared to the last year. Most of the traditional products have declined.
“In 2018, the home appliance industry spent an extremely difficult winter. In the first quarter of 2019, the overall operating conditions of the industry continued the downturn in the fourth quarter of last year. In the main categories, in addition to the small increase in air conditioning, color TVs, refrigerators, and washing machines. The retail sales of the kitchen and electric appliance market have experienced different degrees of decline. Among them, the color TV market, which has always been highly competitive, has experienced the largest decline.” Wu Haitao, assistant dean of the China Household Electrical Appliances Research Institute and executive deputy director of the National Household Appliance Industry Information Center, said.
Will the continued downturn in the home appliance industry become the norm for the whole year? How to save the home appliance industry? The market environment is certainly an irresistible external force, but for the home appliance industry, there are two major problems.
Will there be a decline in the 2nd quarter?
In the first quarter, the home appliance industry was in a downturn, and in the second quarter, it still could not get out of the haze. you look for problems from the home appliance industry itself, there are actually problems such as serious homogenization and the inability of the opponent to pull away.
Song Jingxue, the head of the research department of the National Household Appliance Industry Information Center, said in the interpretation of the first quarter report that the product homogenization is serious on the main track of traditional home appliances, such as TV to enter the large size, air conditioner chasing higher energy efficiency, refrigerator with multiple doors shifting, washing machines maintain a trend of roller and large capacity. In these major trends, it is difficult for companies to shake off many competitors.
On the brighter side, product feature upgrades are the biggest differences in home appliance products in recent years. Therefore, companies have focused on upgrading product features. For example, the improvement of TV resolution, the richness of air conditioning health functions, the separation of the interior space of the refrigerator, the introduction of the air washing function of the washing machine, etc., the superposition of functions has become a common upgrade route for traditional home appliances.
In the first quarter of 2019, the home appliance market had the same downward trend as that was in 2018. Both the retail volume, retail sales, and unit price showed a sluggish situation. Therefore, the National Household Appliance Industry Information Center is not expected to be optimistic about the future home appliance market.
The upcoming 618- China’s major mid-year shopping festival which starts on 18th June is the largest promotion node in the second quarter. Referring to the situation in the first quarter, the online market sales of 618 will not be too high, and the overall market retail sales are expected to fall by 5% to 8%.
From the sales situation in April, the accumulated situation has improved slightly from January to March, but the sales pressure in the second quarter is still very large. The overall scale of the National Household Appliance Industry Information Center is expected to decline compared with the same period of last year. The rate is expected to be -2%.
The category with a large decline will be TV and ice washing products.
What are the new trends in the home appliance industry under adverse conditions?
In the first quarter, the overall downturn of the home appliance industry is a foregone conclusion, but from the perspective of sales, two significant features of the home appliance industry – health and intelligence – have become mainstream consumers.
Song Jingxue, director of the National Household Appliance Industry Information Center Research Department, believes that traditional home appliances have entered the stock market period, and the country has a large replacement base. Higher consumer acceptance and promotion of traditional home appliance sales are moving toward replacement and renewal, and consumers’ choices are toward smart and healthy trends.
From the perspective of smart home appliances, WIFI function is a prerequisite for home appliances to achieve intelligence. At present, there are more and more home appliances with WIFI functions. From TV, air conditioners, ice-washed products to kitchen and bathroom products, the National Household Appliance Industry Information Center data shows that there are more than 30 kinds of home appliances with WIFI function.
Another important selling point of home appliances is “health” feature, such as eye protection TV, refrigerator with better preservation performance, washing machine for sorting washing, a water heater with zero cold water, air purifier, water purifier, broken wall machine, etc. More innovations have been made, and the product features are also targeted at consumers, and many improvements have been made.
Diversified sales channels have obvious advantages
Although the sales of the home appliance industry declined in the first quarter, one of the phenomena that deserves attention is that in terms of sales channels, the advantages of diversified sales channels become more apparent.
Retail sales on the online market rose nearly 4% percent in the first quarter of 2019 from the same period last year to 34.9%, compared with an annual growth rate of 8.6% percent, according to a quarterly report. Color TVs, air conditioners, refrigerators, washing machines, kitchen and bathroom products, the offline market is still the main channel, and the dependence of small household appliances on the online market has increased significantly, and its online proportion is as high as 57.1%.
In the distribution of channels, the online market, Jingdong, Suning Tesco, and Tmall occupy most of the market share. The overall market share of these three channels totaled 95.7%, an increase of nearly 2 percentage points from 94.0% in the same period last year. These three channels further squeezed the market share of other channels, with Suning Tesco and JD.com expanding their market share by 2% and 1% respectively. The scale of the offline channel still showed a shrinking trend in the first quarter of 2019, with an overall scale of 119.5 billion yuan, a year-on-year growth rate of -8.3%.
Many products have declined, especially kitchen and bathroom products, which are still in the development phase. It is obvious that such products have also ushered in a turning point. In terms of channel distribution, national chain channels, local chain channels, department stores, supermarkets, and township retail stores constitute the entire offline market.
At present, the sales situation of “one super and many strong” has been formed. The number of stores under the Suning Tesco has exceeded 12,000, and the combination of “two big, two small, and more specialized” types of storefronts have been adopted.
In the online home appliance market, Suning Tesco took the first place with 17.1% market share, and there is a certain gap between the market share of other national chain and local home appliance chains.
The first quarter report shows that in all channel formats, Suning Tesco relies on its own online and offline full-scenario coverage model, which has achieved a market share of 22.3%.
This also fully shows that in the future home appliance market, the “offline experience, online order consumption” approach, or “online purchase, offline direct experience consumption” will form a mutual promotion. Only synergistic development between online and offline can build up their own advantages so that they can go more steadily and develop faster.
First quarter highlights and future trends
In the first quarter of the kitchen appliances, the dishwasher continued to lead the kitchen appliance market with growth rate of 22.7% as compared to the last year.This is also the highlight of China’s home appliances in the first quarter. In addition, another phenomenon worthy of attention is that the share of private brands continues to expand in the context of a year-on-year decline.This trend will not change. At the same time, as the brand effect continues to strengthen, the market share of the head brand continues to squeeze the market share of small and medium-sized brands. As long as we grasp the pain points of consumers and make differentiated and refined products in a targeted manner, we can take the initiative in the competition.
In terms of differentiation, companies must respond to the market’s development trends and respond to consumers’ rich and varied consumer demands, and match the corresponding differentiated products; while refinement requires companies to deepen their products, and they must have a reasonable product echelon. In addition, there must be deep excavation of product functions, such as the application of new TV display technology, the invention of new refrigerator fresh-keeping technology, and the innovation of new washing methods for washing machines.
Wu Haitao, assistant dean of the China Household Electrical Appliances Research Institute and executive deputy director of the National Household Appliance Industry Information Center, believes that although the breakthrough in the incremental market has been very difficult, the improved demand from the continuous increase in disposable income will usher in a large-scale freed.
[Blue Technology] Zhang Xin