How to continue the story of the depressed market in the Small appliance industry?

How to continue the story of the depressed market in the Small appliance industry?

In the past two years, the performance of Small appliance enterprises has undergone significant differentiation. In addition to Xiaoxiong Appliances, the market growth of traditional Small appliance brands such as Jiuyang, Supor, as well as enterprises such as Xinbao and Beiding, which have risen in recent years, has slowed down significantly.

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Performance differentiation of Small appliance enterprises due to weak market

Taking Jiuyang as an example, in 2022, it recorded a revenue of 10.176 billion yuan, a year-on-year decrease of 3.45%; Entering the first quarter of 2023, the company's revenue continued to decline, recording a revenue of 1.892 billion yuan during the reporting period, a year-on-year decrease of 18.74%. Coincidentally, in 2022, Supor's revenue also declined by 6.55% year on year, recording 20171 million yuan; In the first quarter of 2023, Supor recorded a revenue of 4.963 billion yuan, down 11.56% year on year.

And the revenue performance of newly emerging internet celebrity companies Xinbao Co., Ltd. and Beiding Electric Appliances is not good either. In 2022, Xinbao Group achieved a revenue of 13.696 billion yuan, a year-on-year decrease of 8.15%; In the first quarter of this year, it recorded a revenue of 2.829 billion yuan, a year-on-year decrease of 22.32%. And Beiding Electric's revenue in 2022 and the first quarter of 2023 also showed varying degrees of decline.

In comparison, Xiaoxiong Electric's performance in the past year has been decent, with a realized revenue of 4.117 billion yuan in 2022, a year-on-year increase of 14.18%; In particular, in the first quarter of this year, among a group of Small appliance enterprises with declining performance, Cubs achieved a revenue of 1.251 billion yuan, an increase of 28.07% year on year, which is quite unique.

As for the performance of the above Small appliance enterprises, Long Fei, an industry online analyst, believes that since 2022, the Small appliance market, especially the kitchen Small appliance market, has experienced an overall correction, with weak domestic sales; In addition, due to the tight demand in Europe, America and other regions, the overall export market has also experienced a significant decline.

From the perspective of individual enterprises, Xiaoxiong Electric Appliances has performed well, which may be related to its solid domestic sales foundation. In addition, Xiaoxiong Electric Appliances' sales focus is still on the domestic market, which is less disturbed by overseas markets. Xinbao and Beiding, both of which started from overseas OEM, still rely heavily on the overseas market. Taking Xinbao as an example, their revenue from overseas sales accounts for about 70%, thus their performance is also affected by the overseas market. In the past two years, Europe and the United States have experienced serious inflation and a poor consumption environment. In addition, the export of Small appliance in China surged in 2020-2021, resulting in a serious inventory backlog in the two major regional markets. Since 2022, the export of Small appliance such as electric ovens, microwave ovens, coffee makers and other table top appliances has declined significantly. The import proportion of the two major markets in Europe and the United States can account for 30% -40% of the export market of Chinese kitchen Small appliance, which has a relatively large impact. Then there is the decline in the performance of traditional Small appliance enterprises such as Jiuyang and Supor, which may be more related to the iterative speed of the enterprise's own products and the response speed to meet consumer demand. In terms of consumer demand sensitivity, there is still a gap between traditional Small appliance enterprises and emerging Small appliance enterprises.

This can be traced back to Little Bear Electric. At present, Little Bear Electric's business categories include both emerging and traditional categories, but it has made scene segmentation in many categories, such as sandwich machines and egg boiling machines for breakfast scenes, milk boiling machines and juicers for mother and baby scenes, all targeting the unique consumption pain points in contemporary young people's lives; At the same time, in terms of product appearance and price strategy, it better caters to the needs of young people, which constitute the comparative advantage of Little Bear Electric.

In addition, compared with traditional Small appliance enterprises, the rising stars, including Xiaoxiong, Xinbao and Beiding, mainly stand out from online channels. Although Jiuyang and Supor have achieved full online and offline coverage, in the current market environment, the operating costs of offline channels may become a burden for these enterprises. In terms of flexibility of market strategy, emerging Small appliance enterprises are better than traditional Small appliance enterprises.

Of course, observing the performance changes of Small appliance enterprises can not be separated from the analysis of the current market environment. A person in the industry of Small appliance told China Home Appliance Network that since this year, the market has seen an obvious consumption degradation, the recovery of residents' consumption ability was less than expected, and the youth unemployment rate has risen. The products, including Small appliance and kitchen appliances, are value-added appliances. If the demand is not urgent, consumers will choose to postpone or cancel the purchase of these optional products. In addition, consumer price acceptance is also declining. Previously, they may prefer high-quality Small appliance, but now they prefer affordable products. In fact, since this year, the recovery degree of air conditioners, even ice washing and other newly needed large appliances has actually been better than that of Small appliance.

Wind chasing fever of Small appliance ebbs

At the 2022 annual general meeting of shareholders, Midea mentioned that in 2022, Midea Group closed and merged some Small appliance businesses, sorted out more than 90 product categories and more than 900 SKUs, and the total loss of these businesses was about 20 million yuan. Paul Fang, the chairman and president of Midea Group, said frankly that Midea has made a wrong decision in Small appliance business in recent years. Many Small appliance products are not suitable for Midea. These products are fast in updating and iteration, and have a short life cycle, which does not conform to the characteristics of Midea itself. Fortunately, we conducted timely reflection and self negation, and corrected this mistake in a timely manner, "he said. Midea will refocus on core categories and core markets, and strengthen brand building.

For Midea's reflection on Small appliance business, industry insiders said that Small appliance, especially many popular online Small appliance, had a special market background in the past few years. "Take the kitchen Small appliance as an example. Their popularity is largely related to the longer people stay at home during the closure period. Many young people cannot cook, and these kitchen Small appliance can help them cook a meal simply and quickly. In addition to the participation of modern means of communication such as short videos and live broadcast, these online Small appliance can quickly affect their audience, and there will be a sharp increase in sales in a short time. Now, as life moves into The normalization track reduces the time young people can spend on cooking, and demand will indeed undergo significant changes

Moreover, in addition to our traditional familiar conventional Small appliance such as Rice cooker and microwave ovens, online celebrity Small appliance themselves represent a particularly detailed demand, which is the embodiment of some trends, such as breakfast appliances, pet appliances, massage Small appliance, etc. However, in terms of market development and demand itself, their consumption concept is not mature, consumption elasticity is great, and the industry has not yet established scale effect, which is likely to cause market ups and downs. Of course, this does not mean that these products will not have a market in the future, but rather that they will need time to accumulate in order to achieve a certain level of support.

For comprehensive home appliance enterprises such as Midea, the strategic tendency has always been to achieve "top two" in specific categories. That is to say, once they choose to enter a certain product track, it means that the enterprise needs to invest a lot of resources to achieve the brand's market share in that category. However, in the face of too many and too detailed categories of long tail Small appliance, as well as the small market size, the input-output ratio is often disproportionate. In addition, many emerging Small appliance emerged in recent years, and many products are not high in technology. Once the number of entrants increases, the price of products will inevitably fall, and the market will easily enter the stage of excessive competition. Therefore, the direction of Midea's return to "focusing on the core" is still clear and clear.

However, the "fever reduction" in the Small appliance industry is not entirely a bad thing. Industry insiders believe that, with consumers' pursuit of quality life and a better life, there is still room for growth in products that meet the needs of segments. However, at present, the demand for emerging Small appliance is not stable, but the industry has experienced reshuffle and is moving towards normalization and standardization, which is conducive to opening wider space. In addition, the current consumption environment has not been adjusted, and consumers may be more interested in low price and good quality. In the future, with the recovery of consumption capacity, the previous demand for high-quality and high-end Small appliance should return.

When conducting investor research, Little Bear Electric stated that although the competition is fierce, the industry space is not closed after all, and there is no need to worry too much about the trade-off. There are many new categories and incremental dimensions of new demand. The growth of sales scale of Small appliance brands is closely related to category strategies, including the improvement of market share, the development of new channels, and the enhancement of operational capabilities.

Wang Chao, General Manager of Philips Home Appliances Greater China, also stated that due to the impact of the consumer environment, sales of some categories have indeed declined this year, but there are still some categories such as coffee machines and floor washers that have performed very well. He mentioned that everyone solved the problem of just need for life, while Small appliance solved the problem of quality of life. When the economy gets better, the sales of Small appliance will be very good. At present, due to the low entry threshold for Small appliance, many new brands and products have emerged, and the market is in a dazzled state. However, the Product lifecycle under this state is also relatively short, with short life and low use frequency. The final way out for the Small appliance industry is to promote new products and sell more to meet more and more detailed needs, or to meet high-end, boutique needs. In recent years, Philips has set up several R&D centers in Foshan, Shanghai, Suzhou and other places to solve the problem of insufficient R&D capability of Small appliance. He also believes that with the recovery of consumption, the Small appliance industry will usher in new upgrades and new demand peaks.

On the other hand, Xinbao Group mentioned that based on feedback from overseas customers, the inventory of major overseas customers in the first half of the year has been basically cleared, and order demand is expected to gradually recover in the second half of the year. Customers are also more active in negotiating new projects. In addition, from the perspective of the domestic market, the company will continue to increase its product update and iteration efforts. For example, in response to the growing demand for coffee from domestic consumers, the company has launched its own coffee machine brand, Barsetto, which has achieved good growth in China. Through IPO, the company's fundraising investment in steam pressure coffee machine technology transformation project is steadily advancing, and it is expected to lay a solid foundation for the company's coffee machine business growth in the future.

Analysts from Deppon Securities believe that since this year, due to the sluggish demand in the weak economic environment, high inflation in export sales and destocking, the kitchen Small appliance, household appliances and other sectors have been under pressure, but the demand for floor washing machines, pet appliances and other sub scenarios has performed well. With the arrival of intensive consumption nodes in the second and third quarters, and the end of overseas destocking, the Small appliance industry is expected to gradually improve. In addition, with the price of raw materials entering the downward range, the enterprise's Gross margin is expected to be improved and the income elasticity is expected. They suggested that investors should focus on structural opportunities in the Small appliance industry in the second half of the year.