Real estate slowdown meets COVID lockdown
Premiumization and penetration drive revenue
The home appliance category rose 15 percent in value in part because of premiumization, with unit price increases offsetting the sluggish sales resulting from slower housing turnover and the impact of the COVID-19 lockdown.
Home appliance brands developed new strategies for selling bundles of products, improving penetration in lower tier markets and expanding overseas, where brands both operated as OEMs and invested in brand building. To satisfy Chinese consumers desire for new products, the Chinese brands work at a faster product cycle than some overseas competitors.
Sales and profits varied by sector during 2019, with air conditioners and refrigerators performing relatively well, as reported by the China Household Electrical Appliances Association. In early 2020, the COVID-19 lockdown curtailed sales of major appliances requiring installation, but demand from people cooking while quarantined at home drove sales for small kitchen appliances.
The lockdown also accelerated the growth of online, with online retail driving over 50 percent of home appliance sales for the first time, according to CHEAA. Home appliance manufacturers continued to adjust to channel changes and improve both their online and offline presence.
By April, when China’s economy reopened, more consumers returned but with revised priorities. Chastened by the pandemic, they sought refrigerators features that kept food fresh and protected from bacteria. Washing machines with bacterial functions also became popular.
Along with the interest in smart appliances, another trend driving home appliance sales is the growth of lower-tier cities. And with the rise of young people deferring marriage and living alone, the home appliances brands are developing communications and products for the expanding singles market, including smaller appliances for singles’ households.
Supor, a maker of small appliances, performed well in lower tier markets because of its physical store presence and favorable pricing. Increasing 53 percent in value, Supor benefited from the COVID lockdown surge in home cooking and was one of the BrandZ™ China ranking’s Top 10 Risers. The slowdown in the real estate market in upper tier markets impacted the sales of Robam, another maker of small appliances.
Midea launched a new premium brand called Colmo, which features a range of stylish, AI-empowered appliances, including air conditioners and washing machines. International expansion has also increased in importance for Midea, both for OEM products and brand building opportunities. Gree, the leader in air conditioning, expanded its mix and drove online sales by extending deep discounts after Singles’ Day.
The BrandZ™ home appliances category contracted from six brands a years ago to these four brands—Midea, Gree, Supor, and Robam—because one brand dropped out, and BrandZ™ now ranks Haier in the new IoT ecosystem category.