The home appliance industry is struggling to sink into the market! Manufacturers' "Great Bloodthirst" Promotion to Retain Customers, Channel Merchants Accelerate Expansion of Stores

In 2023, the sinking market has become one of the main battlefields of home appliance competition, coinciding with the important nodes of "Golden Nine Silver Ten" and "Double Festival". Home appliance manufacturers and retailers have not wasted great promotional opportunities. A reporter from China Times visited several county home appliance stores in Yangquan City, Shanxi Province and found that in order to promote consumption, the local government and stores have offered various promotional activities, such as issuing consumption vouchers, greatly reducing product prices, and smashing golden eggs to give away small home appliances.

Due to changes in supply and demand, the home appliance market has already entered the stock market. Home appliance manufacturers and retailers have had to find new growth points, and sinking the market has become their focus in recent years. However, in the view of industry insiders, sinking the market cannot fundamentally solve the problem of supply and demand in the home appliance market, and it is uncertain whether channel platforms can truly penetrate into mature acquaintance business circles such as county-level and township home appliance markets.

Home appliance exhibition activities are in full swing

In a county town in Yangquan City, Shanxi Province, the "Excellent Environment, Promoting Consumption, Benefiting People's Livelihood" home appliance exhibition and sales special event is in full swing. Our reporter visited multiple home appliance stores and found that banners for home appliance exhibition and sales activities were hanging at the entrance.

Entering a Suning e-commerce store, the staff warmly introduced the promotional activities during the holiday period to our reporter, and stated that purchasing large appliances can participate in the Golden Egg Smashing activity and have the opportunity to obtain a small appliance.

It has to be said that the "11th" holiday is the best time for consumers to purchase home appliances, and the prices of most home appliance products are much lower than usual, especially mainstream brands such as Midea, Haier, and Konka.

In this store, a Midea four door refrigerator that usually sells for 7999 yuan is currently priced at only 5899 yuan, with a price reduction of 2100 yuan. Another double door refrigerator priced at 5499 yuan is currently priced at only 4299 yuan, which is 1200 yuan cheaper than usual; In the TV exhibition area, Konka TV is also heavily discounted. A 75 inch LED color TV has a list price of 8999 yuan, and the current price is only 5899 yuan, with a price reduction of 3100 yuan. Another 65 inch color TV with a price of 6499 yuan has a special price of only 2699 yuan, which is more than half of the original price; A Skyworth OLED color TV that usually sells for 15999 yuan, with a current price of only 7500 yuan.

At another local chain home appliance store, "Tianyuan Home Appliances," the discount on the product is equally attractive, and there is no need to smash the golden egg after purchasing the home appliance. The store will directly give small gifts.

The store area of Tianyuan Home Appliances is significantly larger than that of Suning Yigou, and the product quantity is also more diverse. A Meiling drum washing machine priced at 4599 yuan is currently only priced at 2899 yuan, with a discount of 1700 yuan. Another Meiling washing machine priced at 2999 yuan is priced at 2199 yuan, with a discount of 800 yuan; In the air conditioning exhibition area, Haier also offers significant discounts. A 1.5P hanging air conditioner priced at 5399 yuan is currently priced at only 4499 yuan, with a discount of 900 yuan. The other air conditioner priced at 4899 yuan is even more discounted, with an activity price of 3399 yuan, with a discount of 1500 yuan.

However, not all products have discounts. Our reporter found that the majority of home appliances with special price tags are large appliances such as color televisions, refrigerators, washing machines, and air conditioners. Small appliances such as induction cookers and rice cookers do not have much preferential treatment due to their low price base.

It is worth mentioning that the delivery scope of these two home appliance stores has already covered most townships and rural areas. The store staff said that once the order is placed successfully, the store can arrange for delivery to their doorstep.

Sinking the market into a competitive target

Home appliances have been known as the sunset industry for many years, and this is particularly evident in the sluggish sales data of the past two years.

Taking color TVs and air conditioners as examples, they were all in a downward trend in the first half of this year. According to AVC's omnichannel promotion data, the sales volume of China's color TV market in the first half of 2023 was 14.67 million units, a year-on-year decrease of 12.2%, and the sales volume was 48.7 billion yuan, a year-on-year decrease of 8.5%; In the first half of 2022, the retail sales of air conditioners through all channels reached 72.7 billion yuan, a year-on-year decrease of 15.3%; The retail volume was 21.54 million units, a year-on-year decrease of 20.9%.

However, although the overall market is sluggish, statistical data shows that the sinking market has a greater increase compared to the first and second tier markets. According to offline monitoring data from AVC, due to the high proportion of newly added popularity demand in the fifth tier market, the retail sales of air conditioning in domestic county-level markets increased by 17.63% year-on-year in the first half of 2023. The year-on-year growth rates of air conditioning retail sales in the first, second, third, and fourth tier markets were only 8.38%, 6.27%, 6.78%, and 5.28%, respectively.

In addition, in terms of policies, relevant departments have been promoting the movement of household appliances to rural areas. Since the beginning of this year, departments such as the Ministry of Commerce and the National Development and Reform Commission have successively issued documents proposing to "solidly promote the development of green and intelligent home appliances in rural areas" and "continue to promote the development of home appliances in rural areas".

Mainstream home appliance manufacturers have formulated expansion plans for the sinking market. In February of this year, Haier Tmall Youpin stated that in 2023, it will achieve retail breakthroughs by transforming and upgrading from five aspects: digital products, digital touchpoints, digital marketing, digital reputation, and digital operations. Midea Group recently disclosed a record of investor relations activities, indicating that under the guidance of a new round of consumption promotion policies, channel and brand merchants have concentrated their efforts to sink into the market. High quality home appliance products have become an important aspect of meeting consumers' needs for a better life. The continuous enrichment of healthy and intelligent functions of home appliances is driving the transformation of domestic home appliance consumption concepts from having to being excellent.

Zhang Jianfeng, Secretary General and spokesperson of the China Home Appliance Business Association, told our reporter that the fifth and sixth tier markets have always been an organic component of offline channels for home appliances. Currently, in response to the sinking market, e-commerce channels such as JD, Suning, and Tmall are mainly integrating distributor resources in offline township markets.

Home appliance retailers are indeed more active in this round of efforts to target the sinking market, with Suning Yigou, JD Home Appliances, and Tmall Youpin rapidly expanding their sinking stores. Taking Suning E-commerce as an example, according to statistical data provided to our reporter by the relevant person in charge of the company, during the Double Festival period, Suning E-commerce opened 392 new and refurbished stores on top of 10000 stores nationwide. Through the comprehensive coverage of Suning E-commerce, Suning E-commerce flagship stores, Suning E-commerce selection stores, and retail cloud stores, it provides convenient services for home purchases in the golden autumn.

Anxin Securities released a research report stating that sinking channels will boost sales for home appliance companies. According to calculations by Anxin Securities, by 2024, there is still room for growth in the sales scale of major home appliance categories in sinking channels. In the long run, the number of sinking stores is expected to grow rapidly.

Difficulty in fundamentally changing the supply and demand relationship

Although several home appliance stores in the county town were empty during our reporter's visit, and only occasionally one or two customers came in to inquire, the staff of Tianyuan Home Appliances stated that recently, many customers have purchased a complete set of home appliances due to new house renovation, and overall sales are higher than usual.

From the data released by Suning eBay and JD, it can be seen that the sales data for the first half of the holiday is still quite encouraging. The person in charge of Suning Yigou introduced that based on the transaction situation of the stores, the demand for one-stop home decoration increased from September 28th to October 1st. Many consumers placed one-time orders for front end appliances such as central air conditioning, water purification, heating, and smoke stoves, while also booking services such as whole house cabinets, balconies, and partial kitchen renovations. The "one-stop purchase" orders for home appliances and home decoration in the stores increased by 112% year-on-year.

During the Double Festival period, the "home consumption" in the county and town markets showed a trend of prioritization and quality improvement. From September 28th to October 1st, Suning Yigou's retail cloud channel dishwasher sales increased by 134% year-on-year, dryer sales increased by 66% year-on-year, and brand sales in the cleaning category increased by 229%.

According to JD's consumption data, from September 29th to October 1st, there was a significant increase in large and set consumption, which is in line with the recent demand during the decoration season - the demand for decoration services increased by 114% in the first three days of the holiday; High end trend categories drive the overall market, such as the growth of integrated washing machines, dishwashers, and mite removal devices; During the National Day holiday, the consumption of extended warranty services for household appliances increased by 65%.

However, in Zhang Jianfeng's view, the sinking market demand cannot fundamentally solve the sluggish problem of the home appliance market. This is determined by the supply and demand relationship of the entire industry chain, which has entered a new development cycle. The entire industry has also entered a resource consolidation period, and the incremental market is limited.

Whether it is home appliance enterprises or home appliance channel providers, they will inevitably encounter many challenges in the process of penetrating the sinking market, "Zhang Jianfeng pointed out. Firstly, China's rural market is vast, with a large distribution radius and scattered village distribution, which poses certain challenges to the resource allocation of brand enterprises and channel enterprises; Secondly, whether the brand can provide good products to users in the sinking market is crucial, as some companies may have to transport eliminated, outdated, and poorly performing products to the sinking market; The biggest challenge comes from the acquaintance business formed over the years in townships and rural markets. At present, the rural market is still dominated by wholesale and monopoly, with acquaintance business as the main business. The dealers and couple stores in the township market are doing well, with a fixed territory and a relatively stable consumer group. The leading electric channel merchants are paying attention to the sinking market, which will exacerbate the level of competition

Zhang Jianfeng suggests that whether in primary or secondary cities or rural areas, home appliance enterprises and channel providers should follow the path of commercial competition, provide good products and services, and not lower product and service standards in rural areas. They should develop new users, maintain old users, and prepare customer reserves for future secondary and multiple sales.