Home Appliances: Product upgrades, smart home ideas draw consumer interest
Housing regulations impact appliance category
The value of the home appliance category doubled, primarily because of the change in the valuation of Haier, which now includes the brand’s many businesses that together form an electronics ecosystem. The ecosystem strategy is intended to stabilize growth in a volatile market, countering softness in the real estate sector and appealing to consumers looking for smart systems rather than individual products.
Without the Haier change, the home appliance category grew 6 percent in value, based on the performance of the five ranked brands. Three smaller home appliance brands dropped from the ranking this year, pressured by the slower expansion of the Chinese economy and government’s efforts to curtail real estate speculation, which reduced home purchasing, at least in top-tier markets, impacting appliance demand.
At the same time, the consumer interest in trading up stimulated the introduction of more innovative, well-designed smart home products to sell in China and also abroad. Consumers interested in trading up increasingly favored built-in appliances. Air conditioner sales were especially strong, which benefited Gree, a large air conditioner manufacturer. Home appliances sales increased 13.1 percent, with profits up 15.9 percent, during the first half of 2018, according to China’s Ministry of Industry and Information Technology.
Driven by the purchasing power of the middle-class, the sub-category of robotic vacuums experienced strong sales, reflecting the consumer interest in smart home technology, the importance of convenience in China, and the high priority placed on artificial intelligence development. Major domestic brands, like Haier and Midea, which invested heavily to develop artificial intelligence capability, competed with imports for the robotic vacuums market share. And ECOVACS, a robotic vacuum brand, entered the BrandZ™ Top 100 for the first time. In an effort to advance its smart home strategy, Midea planned to acquire Little Swan, a manufacturer of washers and dryers.
Brands specializing in small appliances, like Robam and Supor, whose offering includes rice cookers and pressure cookers, also were affected by the overall slowdown. Government regulations that prevented owning a second home for investment purposes, in certain upper tier cities, especially impacted Robam, which concentrates in those markets. Supor, which increased in value, emphasized innovation in its marketing communications.
As with shopping across most categories in China, people increasingly purchased their appliances online. Along with consumer electronic products, appliances were among the top five products sold during the Double Eleven shopping holiday. Over one-third of home appliance shopping happened online in 2018, compared with only 7.6 percent just five years ago in 2013, China’s Ministry of Industry and Information Technology reported.
As the domestic market slowed, overseas growth become more important. Haier continued to invest in international growth, particularly in developed markets, with the acquisition of an Italian home appliance maker and a major investment to expand the dishwasher and washer and dryer production capacity of GE, the US brand Haier purchased in 2016. The purchase of the Italian brand, Candy, is expected to strengthen Haier in Europe, especially in its smart home efforts.
Intending to serve the growing demand for air conditioners in India, Midea began construction of a center for conducting R&D and building appliances in the state of Maharashtra. Uncertainty about the China-US trading relationship impacted prospects for future overseas growth for Chinese appliance brands, however. Portable appliances, such as vacuum cleaners are more likely to feel the impact rather than refrigerators, washing machines, and air conditioners, according to the China Household Electrical Appliances Association.
Interest in smart home
shapes shopping journey
Chinese middle-class consumers are attempting to upgrade, which includes an interest in smart home initiatives. Consumers are looking not only for individual products, but for integrated systems. That interest shapes the shopping journey. The smart home shopping journey begins earlier, with a detailed planning stage that anticipates all the connectivity needs and the appliances, which increasingly are built-ins. Consumers seek functional excellence and emotional experience. Reaching these consumers depends on engaging content, sometimes created by the brand, sometimes by consumers. Effective selling increasingly requires a partnership between a sales person to explain how the product functions and a designer who can explain how it solves problems in the consumer’s life.