In the spring of 2009, Zhangjia village in Shandong Province ushered in a wave of ‘refrigerators’. Zhang Quanjun and Xie Xiaorong planned to buy a Haier refrigerator before the summer vacation so that they could eat ice cream at home in the summer. Zhang Quanjun’s idea of buying a refrigerator originated from the ‘Home Appliances in Rural Households Policy’ implemented by Shandong Province in February 2009. Farmers paid for the electricity and the government subsidized 13% which impressed the rural population.
In the spring of 2019, Zhouzhuang of Jixian County, Huai’an City, Jiangsu Province, drove in a “caravan”. “Recycling old appliances, and the old ones were replaced by at least 400 yuan.” Zhou Fuquan and Shangying couple bought a 14-inch black-and-white TV set when they got married and now exchanged it for a 40-inch Skyworth TV.
In the past ten years, the home appliance market has changed dramatically. From ‘Home Appliances in Rural Household Policy’ to ‘old-for-new’, as a participant in the home appliance market for nearly 30 years, Suning is gaining insight into the mystery. When consumers became beneficiaries of the appliance policy, Suning had already seen the change.
Will the change in the policy work?
In 2008, the financial crisis from the United States quickly swept the world, and the export demand for Chinese consumer electronics products rapidly declined. In order to expand the domestic demand market, the state proposed the ‘Home Appliances in Rural Household Policy’ rescue plan.
Affected by the ‘Home Appliances in Rural Household Policy’ policy in 2009, as of the end of October 2012, the country had sold 283 million Home Appliances in Rural Household Policy and achieved sales of Yuan 681.1 Billion. Macroscopically, the rapid growth of social consumption has been promoted, the gap between urban and rural durable consumer goods has been greatly reduced, and the upgrading of urban consumption structure has been accelerated.
In January 2019, the National Development and Reform Commission and 10 other ministries and commissions issued the ‘Implementation Plan to Further Optimize Supply to Promote Steady Growth in Consumption and Promote the Formation of a Strong Domestic Market’. The plan proposes: Where there are conditions, it is necessary to promote the consumption of household appliances. Subsidizing old appliances and purchasing new appliances can be subsidized.
On March 6, any of the leaders of the National Development and Reform Commission said at the press conference that it is drafting a recycling policy including old cars and old home appliances to promote the further development of the circular economy.
Obviously, when the saturation of the home appliance market is close to the peak, ‘trade-in’ has become an important issue for the home appliance retail industry to sink.
Will the ten years old policy come back?
In 2019, the ‘Old for new policy’ will reproduce the glory of the ten years old policy.
We have seen the tremendous changes in the decade from Suning, the leader in the home appliance industry.
“Small squad” on the country road
In April, the lobsters in Jixian County were not popular in Jiangsu, Zhejiang and Shanghai. However red vest of Suning’s “old-for-new” squad had spread all over the country’s streets.
“Suning Tesco and the top ten brands to engage in “new against old for at least 400 yuan”, Suning’s “new for old” first focused on the township market. The three men wore red vests with the “new-for-old” slogan, and they went door to door ringing the bells of rural consumers.
Who are the rural consumers? Young people go to work in the city, knocking on the door to see the middle-aged and elderly. For them, Suning is still the “big guy”. This outdated brand cognition has become the advantage of Suning to open the township market. It is necessary to know that the consumer demand for middle-aged and old people is cheap and trustworthy.
In a month’s time, the county’s Suning store received 3,300 old machines, an average of 366 per day; the single-store sales of 429 home appliances in a single day, refreshed the record high. Facts have proved that without brand promotion, the “small squad” relied on the option to walk on the small roads of the ten towns of Jixian. It opened the Chinese home appliance market, “The new model.”
The old district of Shanghai
The share of household appliances in the first and second tier cities has been highly saturated. At the same time, the policy of restricting purchases and retiring the “raw house” will reduce the demand for new home decoration and home appliance purchase. The main consumption pull of the home appliance market can only be the replacement demand of the home appliance stock market. How to invigorate the city by the “new-for-old” activities of Suning, which has opened up the scene of townships and towns?
Suning first targeted the old community of more than 8 years, and together with the Shanghai Consumer Protection Agency and the major appliance brands, launched the “Great City Harvest” campaign, endorsed by the government, more reliable and professional; the layout advantage of the store creates a new and fast collection scene; Suning’s own “store+” collection evaluation system provides a more reasonable old machine evaluation system and solves the consumer’s concerns about the old price assessment.
As a typical urban activity, Shanghai’s “trade-in” is a service-oriented road. Although the performance may not be as good as the incremental market, the business idea of sinking into the community and revitalizing the stock market has already highlighted the new thinking of the old giants: reclamation and re-cultivation are all ways to go.
“Suning experience” from big to small
It seems that the “Home Appliances in Rural Household Policy” in 2019 is also to promote consumption and expand domestic demand. According to the data released by the National Bureau of Statistics, the total retail sales of consumer goods in the year 2018 was Yuan 380.87 Billion, an increase of 9.0% over the previous year. The growth rate was the lowest since 2003. According to data from the Suning Financial Institute, in the first quarter of 2019, the contribution rate of consumption to GDP was 65.1%, down 12.7 percentage points from the same period in 2018 and down 11.1 percentage points from the previous quarter.
Although the same policy of stimulating domestic demand to save the market, today’s home appliance market has changed a lot compared to a decade ago.
The market demand for colour TVs, refrigerators, washing machines and other home appliances has been weakening. According to Zhitong Finance APP, the number of washing machines and refrigerators has now reached 80/100 households, and the air conditioners have the lowest, reaching 50/100 households. Ten years ago, there were 50 washing machines/100 households, 30 refrigerators/100 households, and less than 10 air conditioners/100 households.
This shows that the model of large-scale exploitation as it was ten years ago can no longer adapt to today’s market, and Suning chooses small and refined towns and old communities. Suning successfully explored the “Suning Experience” for the development of a regional home appliance market. Suning’s big data shows that since the start of the trade-in business in February, Suning has collected a total of 287,000 pieces through the online and offline platforms, and the sales at the same time have been converted into Yuan 1.02 Billion.
The “Suning Experience” from big to small is an example of Chinese business seeking change. Chinese business in a changing environment, while catching up with China’s speed, seeing the micro-knowledge, perhaps creating another growth bubble.
[Blue Technology] Bai Qing
Translated by – Anushka Joshi