Excessive marketing of Hisense TV may be the main reason for the decline in net profit

2017 was undoubtedly a difficult year for color TV manufacturers. To use a popular saying in 2017, "God knows what they went through."

The sluggish market has caused manufacturers a lot of headaches, and the complex market environment has brought unprecedented challenges to the profitability of system manufacturers.

Data shows that the longest period of panel price increase in history has led to a continuous increase in the cost of the whole machine, and the domestic demand has been sluggish, resulting in a 6.6% year-on-year decline in the domestic color TV market in 2017. Some brands even recorded a 13% year-on-year decline in the third quarter of last year. The real and common emotion of local TV brand manufacturers in 2017 was extreme anxiety.

2018 is the year of sports. The Russian World Cup, Asian Games and other events were held successively, which to a certain extent gathered positive forces on the demand side of the color TV market.

Domestic home appliance manufacturers have all taken matching actions, either becoming official sponsors of the World Cup, signing contracts with teams, signing football stars, or even developing customized mid- to high-end TV products.

Among them, Hisense is the most radical, investing heavily in sports marketing, but there is no successful experience to refer to for future market performance. Last year, Hisense Group and UEFA paid 50 million euros to obtain advertising space in the European Cup. According to media reports, Hisense's brand advertising appeared for 8 minutes in each game, and was "broadcast in 230 countries and watched by 7 billion people", but the distance between reality and ambition is not close.

Two of the 16 advertisements in each show used Chinese, indicating that Hisense's overseas appearance was actually discounted, and the description of "first" was also ridiculed in the industry and caused controversy in the advertising community.

Looking back at Hisense Electric's (600060) 2017 annual report, it achieved operating revenue of 33.009 billion yuan in fiscal year 2017, but its attributable net profit was only 942 million yuan, and its earnings per share fell by 46% year-on-year.

Zooming in on the TV business segment, Hisense's global TV business revenue increased by 6.83% year-on-year. However, when compared with its peers, it was found that TCL Multimedia, which was "not ranked first", had a full-year revenue growth of 22.4% year-on-year, while TCL's overseas business grew by 58.7% year-on-year.

In fact, Hisense's operating costs corresponding to its revenue growth also surged by 11.89% year-on-year. The market believes that this is the result of Hisense's violent brand marketing investment to alleviate the market downturn and create the illusion of market prosperity.

It is worth noting that this, to a certain extent, led to a 3.88% year-on-year decrease in the gross profit margin of Hisense's TV business. "Making a profit" is an accurate portrayal of the survival status of Hisense's TV business in 2017.

Of course, 2018 also presents opportunities for manufacturers that mainly produce color TVs. An analysis by Industrial Securities pointed out that domestic manufacturers such as Hisense are focusing on mid- to high-end products, taking advantage of the demand for televisions during the sports year. It is expected that the growth rate of domestic sales will increase in 2018, and performance is expected to bottom out and rebound.

As a winner of Toutiao's Qingyun Plan and Baijiahao's Bai+ Plan, the 2019 Baidu Digital Author of the Year, the Baijiahao's Most Popular Author in the Technology Field, the 2019 Sogou Technology and Culture Author, and the 2021 Baijiahao Quarterly Influential Creator, he has won many awards, including the 2013 Sohu Best Industry Media Person, the 2015 China New Media Entrepreneurship Competition Beijing Third Place, the 2015 Guangmang Experience Award, the 2015 China New Media Entrepreneurship Competition Finals Third Place, and the 2018 Baidu Dynamic Annual Powerful Celebrity.