From wild growth to intensive cultivation? Chinese white goods companies collectively focus on the high-end market

Data from Aowei Cloud Network shows that in 2016, the retail volume of China's washing machine market reached 34.28 million units, up 2.2 percentage points year-on-year; the retail volume of the air-conditioning market reached 47.79 million units, up 9.1% year-on-year; and the retail volume of the refrigerator market reached 34.62 million units, down 0.7 percentage points year-on-year.

From the data, we can see that the domestic white appliance market has said goodbye to wild growth and the ceiling has appeared. Coupled with the rising costs of raw materials, the calls for consumption upgrades from domestic users, and the arrival of the wave of intelligence, Chinese white appliance companies are facing new challenges.

The tide of consumption upgrade is coming and high-end becomes the mainstream direction

"The concept of low prices is being challenged. The future consumption concept will no longer be about cost-effectiveness, but quality." This is from financial writer Wu Xiaobo.

With the improvement of people's living standards, the main consumer group has shifted to those born in the 1980s and 1990s. The "consumption upgrade" that has been repeatedly mentioned on many occasions represents the change in user consumption habits.

The same is true in the field of white goods. People are no longer just concerned about the functionality of products, but are beginning to pay more attention to the added value of products and the substantial improvement in their quality of life.

For example, when it comes to washing machines, consumers' focus has shifted from "clean washing" to "sterilization" and "eliminating cross contamination"; when it comes to refrigerators, in addition to the basic function of preserving freshness, they must also "ensure nutrition", "separate storage of dry and wet areas", and "stable constant temperature"; when it comes to air conditioners, in addition to adjusting the temperature, they must also be proficient in skills such as "removing PM2.5" and "removing formaldehyde".

On the one hand, it caters to consumers' new demands for product iteration, and on the other hand, it responds to the country's call for supply-side reform. The high-end development of white appliances has become a general trend under the market and policies.

The cost of raw materials is rising and the original game is out

Faced with the squeeze from strong foreign brands such as Samsung and Siemens, domestic white goods companies have also used the tried and tested weapon of price.

However, by 2016, the price war not only failed to work, but the collective rocket-like rise in raw material prices once again pushed up the average price of white goods, even setting a record high.

As of November last year, the main raw material copper rose by 40%, remaining at 49,000 yuan/ton, steel prices rose by more than 200%, and plastics and aluminum prices rose by more than 30%. In addition to the increase in raw material prices, transportation costs have also increased greatly. After the implementation of the "Regulations on the Management of Highways for Overloaded Transport Vehicles" promulgated in 2016, transportation costs have also increased by nearly 40%. Transportation is interspersed in the upstream, midstream and downstream of the industry, and the impact it has caused cannot be ignored.

According to data from China Market Research, in the first two months of 2017 alone, the average price of white goods has risen across the board, with air conditioners rising by 4.9%, washing machines rising by 6.5%, and refrigerators rising slightly by 1.9%. The price increase is caused on the one hand by the high-end and intelligent products, and on the other hand by the increase in upstream product and transportation costs.

It is undeniable that the means of expanding the market by lowering prices still effectively stimulated the overall sales of white goods. However, due to the low technical barriers in the white goods industry, the final result of the price war not only further compressed the profit margins of its own low-end products and lowered the brand image, but also made it easier to give up the high-end market.

Excluding the factor of rising costs, we can see that in recent years, the overall trend of the white goods market is "general decline in the industry, and increase in high-end prices."

More and more white goods manufacturers are beginning to realize the importance of impacting the mid-to-high-end market.

The high-end smart home of white goods is both a problem and an answer

Another unavoidable topic on the road to high-end white appliances is the interpretation of the intelligent trend of white appliances.

Experts believe that users’ future smart life will be divided into three main scenarios: mobility, travel and home.

Regarding "smart home appliances", the relevant person in charge of the China Household Electrical Appliances Association explained: "The concept of smart home appliances refers to home appliances that have the functions of perception, analysis, self-learning, and interaction after the microprocessor, sensor, network communication and other technologies are introduced into home appliances. The connotation of smart home appliances will continue to expand with the advancement of technology."

In other words, smart home appliances are far from as simple as realizing the "Internet of Things". Wei Jun, general manager of the white appliances business unit of China Market Research Group, once said: "The final stage of intelligence needs to be combined with the ecosystem and cover more content."

In the era of the Internet of Things, the interconnection of smart home appliances is the primary prerequisite. In the past, China's smart home appliances lacked a unified interface standard. During the AWE2017, the first group standard for the interconnection of smart home appliances was officially released. The main contents of the "cloud-to-cloud interconnection" standard include user access, device access, service interface, device function model, information security and other requirements.

The mobile Internet era has entered its second half and has created countless myths; however, smart cars and smart homes are still in the exploratory stage. Faced with user learning costs and hardware costs in terms of functionality, how to achieve positive returns is still a problem.

Although there is currently a lack of killer features that can solve users' absolute pain points, moving towards intelligence is undoubtedly the only way to make white goods more high-end, and it is also the inevitable development direction of white goods in the future.

In the white goods industry, where core technology has stagnated for many years, intelligence is likely to be the only ticket to the high technical barriers built in the future high-end market. Today, as the industry ceiling appears, the competition among white goods companies will undoubtedly enter a more brutal stage. Under the Matthew effect, there will be very few manufacturers in the industry that can achieve profitability in the future. Whether these star brands will be "made in China" depends on the hard power of Gree, Midea, and Haier.

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.