Gree overweight price war, can friends and merchants still carry it?
Double Eleven had never been addicted. On November 26, Gree launched another "ten billion yuan concession" event. This seems to herald a new round of price wars in the air-conditioning industry. Following Gree's consistent combat scripture style, Gree said in the announcement that this was to reduce prices to "combat low-quality and shoddy products" and to allow consumers to "enjoy a high-quality life." Unlike Double 11, there is no deadline for this time. Faced with Gree's continued price war, which brands are the most dangerous?
Have to fight the price war?
In the announcement, Gree has repeatedly emphasized that the price reduction is to "combat low-quality and inferior products" and to allow consumers to "enjoy a high-quality life." With this move from Gree, Midea, Haier, Hisense, Oaks and other air-conditioning manufacturers have responded. In addition to successive price reduction promotions, these manufacturers have also implicitly stated in various statements and posters that Gree has released such a large-scale price reduction promotion campaign in order to clear inventory and sell old energy-efficient products.
It is not known whether Gree's price reduction promotion is cleaning up inventory. However, the counter-attacks of other manufacturers do not seem to be groundless.
According to industry online data, in the first half of 2019, sales of home air conditioners fell by 1.5% year-on-year, and the overall inventory of home air conditioners reached 48.62 million units. In the first three quarters of this year, Gree's operating income and net profit increased by 0.03% and 0.66% year-on-year, respectively. Gree air-conditioning shipments from January to September were 36.77 million units, a year-on-year decrease of 5.8%. At the same time, Gree's inventory in the third quarter increased by 67% over the same period last year.
A study by Guosheng Securities pointed out that Gree Electric achieved rapid growth in 2018, resulting in the inventory level in the channel being at a higher level than other companies in the industry. Some experts believe that Gree not only has the largest volume in the air-conditioning industry, but also has the largest inventory pressure, and its inventory ratio may exceed 50% of the entire industry.
In an interview with "China Electronics News" reporter, industry observer Liu Buchen said that the air-conditioning industry has entered a "dynamic saturation" era. Air-conditioning sales not only depend on market retention, but also have a relationship with purchasing power. According to the statistics from the National Information Center, the size of the domestic air-conditioning retail market reached 60.56 million units in 2019, with sales falling by 7.59% year-on-year and sales falling by 9.95% year-on-year.
In Liu Buchen's opinion, after Double 11, many air-conditioning companies have reduced their prices, but sales have not increased much. In addition to the large amount of retained demand for the Double Eleven overdraft, the weak air-conditioning industry is the key.
"A double eleven is far from enough to solve the inventory problem. So Gree's price war is inevitable. Will there be a third or fourth time in the future? I think the possibility is very high." Liu Buchen said.
Oaks and Chigo are the most dangerous?
In Gree's unprecedented price cuts, the prices of some models were cut to 1,399 yuan and 1,599 yuan. Jia Dongsheng, general manager of Pan Borui Consulting, believes that if this is regarded as a "local war", then it is likely to see lower prices in the future and even develop into a systemic war, forming a second- and third-tier brand. "Dimensional Reduction Strike."
Jia Dongsheng said that the first-line brands such as Midea and Haier should be the least affected by Gree's price reduction. Because the first-tier brands are large enough, the scale effect is high enough, and the purchasing ability is strong enough, cost control ability and manufacturing efficiency can compete with it. However, the situation of second- and third-tier brands is relatively embarrassing. For example, Hisense, Chigo, Oaks, TCL, Changhong and other companies face great pressure.
An industry expert who declined to be named said: "In the future, many air-conditioning brands will not be able to continue to survive, at the expense of agents who have been following the enterprise's struggle, at the cost of seeking their own survival."
Liu Buchen believes that there will be two enterprises that will be affected the most in the future, namely Zhigao and Oaks. "In the past few years, although these two companies have a very high voice, they have a poor profitability, and now they are losing money and making a drink," he said.
On Double Eleven this year, the obvious feature of Gree Electric's promotional activities is that it treats online and offline equally, which is very different from Gree's previous "thick dealers and thin e-commerce" marketing strategies. Some industry analysts believe that this strategy clearly points to Oaks. On December 8th, Dong Mingzhu mentioned Oaks again at the 2019 Annual Meeting of Chinese Business Leaders: "I'm not trying to put Oaks to death, I hope it will turn to evil and use our own actions to create a fair environment."
In June of this year, Gree Electric reported on its official Weibo that Oaks air-conditioning production and sales of substandard air-conditioning products. During the Double Eleven, Gree announced with great fanfare that the price cut was to "combat low-quality and inferior goods". Oaks Air Conditioning has relied on e-commerce platforms to increase its market share and brand influence in the past two years.
Currently, 90% of Gree's overall sales still rely on offline channels. Compared with Midea and Oaks, Gree's development layout in e-commerce is relatively insufficient.
However, the effect of Gree's strategy change was more significant, and it finally won the top spot in the Double Eleven E-commerce Festival this year. According to data from Gree E-commerce and third-party e-commerce platforms, on the day of Double Eleven, Gree ’s entire network sales exceeded 4.1 billion yuan, with sales up 200% year-on-year. Sales of air-conditioning third-party platforms exceeded 3.64 billion yuan. The sales volume increased by 178% year-on-year.
According to Liu Buchen, the average unit price of Oaks air conditioners has been 20% -30% less than Gree, and the profit margin has been very low. Under the impact of Gree's sharp price reduction, its survival pressure can be imagined. In recent years, Chigo has firmly implemented industrial transfer. When the air-conditioning industry loses profit support, it may accelerate its withdrawal from the air-conditioning industry.
According to Wind statistics, Chigo Holdings' net profit in 2018 was -499 million yuan, a year-on-year decrease of 177.04%. In recent years, the number of days of inventory turnover has increased year by year, the inventory turnover rate has declined year by year, and the overall operating capacity is decreasing.
Liu Buchen lamented: "China's air-conditioning industry will face a major reshuffle. Even in 2020, at the latest in 2021, at least one of China's air-conditioning brands will withdraw from the market."