Summary of China's White Goods Market in the First Half of 2024

Preface

In the first half of 2024, the external environment is still full of uncertainty. Experts have analyzed that "the Chinese economy is still in the L-shaped range, and it is difficult to see a strong rebound in the short term. In the L-shaped channel of economic growth, investor behavior and asset price adjustments are the fastest, leading to a decline in asset prices and a return to real estate valuations. The impact of the real estate downturn on the home appliance industry is twofold: on the one hand, it reduces the willingness to purchase homes and suppresses new market demand; on the other hand, changes in real estate valuations lead to a deterioration of household balance sheets, coupled with a decrease in both household income and income expectations, further resulting in a decrease and downgrade in consumption.

Micro viewing is a rational choice for residents; Macro viewing, this is the trend that cannot be reversed. In such a context, policies that encourage and stimulate consumption are bound to be twice as effective as before

Overview of White Power Market Performance

In the first half of 2024, the structure and prices of the white goods market will both decline, and the development cycles of different categories will be staggered

According to AVC's overall data, the retail sales of white goods in the first half of the year were 231.9 billion yuan, a year-on-year decrease of 7.0%, and the retail volume was 77.74 million units, a year-on-year decrease of 3.6%. The retail volume of the 618 online market was 22.71 million units, a year-on-year increase of 5.2%, with a retail sales of 49 billion yuan, a year-on-year decrease of 2.5%. Driven by consumer downgrades and a significant decrease in air conditioning prices, the overall market has shown a downward trend in both structure and price.

Faced with the same external environment, the performance of the air ice washing industry varies. We believe that the growth and decline of a certain market should be viewed from the perspective of the industry cycle.

The air conditioning industry experienced a strong market year from 2022 to 2023, and entered the replenishment stage in the second half of 2023. However, after the replenishment space was exhausted, the overall retail demand was weak in 2024, coupled with the significant impact of weather factors this year, especially the long-term rainy weather in the main areas of South and East China. Although industry enterprises unanimously predicted a market downturn at the beginning of the year and had psychological expectations for the market trend, the peak season was not prosperous, and the industry entered a rapid adjustment cycle in April. High inventory, decreased turnover, and price competition initiated by the top during the 618 period brought huge anxiety and pressure to the entire industry.

The cold industry is still in a demand driven channel, gradually releasing demand under the old for new driving policy, and the overall market is stable. This year, it is worth paying attention to the bottleneck of supply driven structural upgrading in the refrigerator market under the background of consumption downgrade. The mismatch between the demand and supply sides has caused the overall structure and prices of the industry to decline, and this decline may continue for a considerable period of time, bringing new challenges to the industry logic of high-end products and high-end brand driven growth.

During the epidemic period from 2020 to 2022, consumers' travel was restricted and they spent most of their time at home, resulting in a decrease in demand for clothing care and significant suppression of consumer demand. The upgrading of clothing replacement lags behind next year, and the care industry is relatively sluggish from 2020 to 2022. In 2023, the market has recovered to some extent, but due to the strategic adjustments of top enterprises, the overall competitive pressure in the market will not decrease. However, after entering the 2024 rhythm adjustment of the washing and care industry, the early outbreak of consumer washing and drying sets and the overall structure will be significantly downward. At the competitive level, the industry leader's strategy is stable this year, and the retail observation of the washing and care market performance will optimize the industry as a whole.

However, in the context of consumer downgrading, the structural upgrading of various categories of white goods has encountered bottlenecks. At the same time, this year is the year with the most obvious channel differentiation and game, especially in the online market. Various e-commerce platforms are occupying users' minds with low prices, and offline platforms are also running at special prices. The market order and price order of brand owners were basically disrupted during the 618 period. During the 618 period, in the air conditioning industry, leading brands took the initiative to lower prices, and brands such as Xiaomi, Hualing, AUX, and TCL accelerated their follow-up; In the refrigerator industry, Haier has accelerated the adjustment of its product structure, increased the supply of flow machines and low-priced imported products, and other companies in the industry have also quickly adjusted their strategies, lowering the retail prices of their main sales models. In the context of insufficient demand, the industrial technology upgrading path lacks effective support, and the market clearance and active competition behavior of top enterprises increase. We predict that the structure of white goods products will further decline in 2024.

Summary of the Air Conditioning Market

Excessive pullback has caused confusion for enterprises and channels, and has also caused significant disruption to the home appliance market

Overall judgment:Weak demand, high inventory, price wars, and overall market pressure.

Frequent rainfall in the main sales area, pressure on demand in the air conditioning market, and imbalanced structure of retail stall products

The continuous decline in real estate prices has led to a decrease in demand for new air conditioning installations. This year, China's climate has shown obvious characteristics of southern flooding and northern drought. Although frequent high temperatures in Beijing, Hebei, Henan and other places have stimulated the release of some demand, the main sales areas of air conditioning, represented by Guangdong, Guangxi, Jiangxi, Fujian and other regions, have experienced continuous rainy and even flood weather since April this year, and the market of relying on weather for survival has basically not appeared this year. According to the offline regional monitoring data from AVC, the North China and Northwest regions were relatively resilient in the first half of the year, but the sustainability was not strong. However, the East, Northeast, and Southwest regions have experienced a significant decline, and the overall market is under significant pressure.

Overall, according to AVC's omni channel sales data, the air conditioning market sold 33.15 million units in the first half of 2024, a year-on-year decrease of 11.0%, with a sales volume of 111.4 billion yuan, a year-on-year decrease of 14.5%.

Consumption downgrade and sluggish demand coexist, air conditioning price war erupts, and the downward trend of the structure exceeds expectations

The early shipment schedule at the beginning of the year, coupled with the sluggish retail market, has led to high inventory levels in the air conditioning industry: as of early June, the industry's inventory was about 50 million sets, reaching the highest inventory level in nearly two years. Both brand owners and channel owners are feeling immense pressure. From the perspective of consumption, the adjustment of real estate valuation in this round has led to the deterioration of the balance sheets of some households, while the income and income expectations of residents have both decreased, resulting in a downgrade of consumption.

In this context, the 618 air conditioning market is expected to experience a price war. According to AVC monitoring data, the average online price of air conditioning during the period of W21-W25 was 2604 yuan, a year-on-year decrease of 6.9%. The 618 price war this time mainly focuses on entry-level and main selling models of various brands: taking 1.5P first level energy efficiency products as an example, Midea Cool Energy Saving's retail price on e-commerce platforms has fallen below 2300 yuan; Gree took the opportunity to launch a new Tianyi product, priced at 2399 yuan; The price of Hualing products once reached 1599

Even with a significant decline in prices and an extended time cycle, the air conditioning market still struggles to break through last year's highlights: according to AVC's overall data, during the 618 period (W21-W25 5.20-6.23), the online sales of air conditioning decreased by 19.7% year-on-year, and the omni channel sales decreased by 16.1%.

From the perspective of price structure, industry consumption will show a K-shaped differentiation feature in 2023, and this year it will completely move towards structural downgrade. Taking online 1.5 horsepower AFK as an example, the sales volume of products below 2000 yuan in the first half of the year reached 22.8%, an increase of 6.1 percentage points year-on-year. The proportion of products priced above 3500 yuan in the offline 1.5 horsepower hanging machine structure has decreased from 49.6% in the same period to 41.9%.

Failure at critical nodes, the trend of the air conditioning market can have a ripple effect

Based on previous years, May and June accounted for 30% -35% of the annual sales volume; Even with the experience of driving industry growth through explosive growth in July and August 2022, we still hold a conservative attitude towards the market trend for the whole year of 2024. Forecast a year-on-year decline of 7.5% in omnichannel sales for the whole year. It is highly likely that the domestic sales of air conditioners will experience an excessive pullback this year and enter a downward trend. The air conditioning industry, as the largest category in the domestic home appliance market, has not developed well this year, which has put pressure on the performance growth of industry leaders such as Midea, Gree, Haier Hisense, and has a huge impact on the entire home appliance market. At the same time, due to the slow digestion of inventory in the distribution channels, air conditioning products have a significant impact on the capital of distributors and dealers, which also affects the market rhythm of other categories. The development of the air conditioning industry can be described as having a ripple effect.

Summary of the Refrigerator Market

Differentiation of online and offline channels, significant structural volume correction

Overall judgment:Demand is under pressure, scale is slowing down, the pace of 618 is stalling, and there is pressure on the market trend throughout the year. According to AVC's overall data, in the first half of 2024, the omnichannel retail sales of China's refrigerator market reached 65.2 billion yuan, a year-on-year increase of 0.4%, with a retail volume of 19.36 million units, a year-on-year increase of 0.8%.

Significant differentiation between online and offline

After February, offline channel demand came under pressure and the scale continued to decline; Online channels maintained stable growth before 618, driving the overall channel scale relatively steadily; After the start of 618, online channels almost showed a "cliff like" downward trend, and the driving effect of promotional nodes on the first half of the year weakened.

Under pressure of demand, enterprises pursue scale demands through price reduction strategies

From the results, the downward trend in prices is relatively evident. According to AVC monitoring data, in the first half of 2024, there was a varying degree of decrease in the average prices of cross, French, and split products in the core segmented markets online and offline. Among them, the average price of French products in the online market dropped by 7.0%, the average price of cross products dropped by 5.1%, and the average price of French products in the offline market dropped by 2.7%.

The increase in penetration rate of embedded products is accompanied by a decrease in dividends, and mid-range competition is relatively saturated

According to AVC monitoring data, the proportion of online embedded refrigerator retail sales in the first half of 2024 was 12.4%, a year-on-year increase of 7.1%; The retail sales of offline embedded refrigerators accounted for 37.8%, a year-on-year increase of 19.5%. The proportion of embedded products is gradually increasing, but the average price of various segmented markets is declining.

Dual system as a differentiated product is receiving renewed attention from enterprises

Under the leadership of domestic enterprises, the proportion of offline dual system product retail sales remains stable at around 10%, expanding to 13% in the second quarter of 2024, while the proportion of online retail sales fluctuates to 15.2%.

Market forecast:We still hold a relatively conservative judgment on the market in the second half of the year and expect the downward trend to continue. According to AVC's forecast data, the retail sales for the whole year of 2024 will be 132.5 billion yuan, a year-on-year decrease of 0.6%, with a retail volume of 38.27 million units, a year-on-year decrease of 0.1%, indicating a downward trend in price structure.The trend of volume correction continues.Large capacity refrigerators with a capacity of over 550L have seen a decrease in market share due to a decrease in the value of their double door products and a transformation in their supply side product strategy. Subsequently, it was determined that the volume structure will continue to decline, and the proportion of 400-500L refrigerator products will expand.

Summary of the Wash and Care Market

A small rebound in demand and a new engine for package growth, without disrupting the market, will usher in a small window period

Overall judgment:The retail market is under pressure, and the essence of insufficient demand since April has gradually been exposed. The suit has become a new growth engine for the washing and care industry. According to AVC's overall data, the retail sales of the washing and care industry in the first half of 2024 reached 49.4 billion yuan, a year-on-year increase of 3.6%, with a retail volume of 20.29 million units, a year-on-year increase of 6.2%.

Continuous growth of the set

According to AVC's overall data, the retail sales of online washing and drying sets in the first half of 2024 reached 4.34 billion yuan, a year-on-year increase of 43.6%, with a retail volume of 541000 units, a year-on-year increase of 64.1%. The sustained high-speed growth of sets for three years has undoubtedly become the engine driving industry growth.

Price competition

The lifecycle of the care industry continues to shorten, and industry wide price competition has become the norm in 2024.

AVC monitoring data shows that the average price of the top online washing machine models will continue to decline in 2024, and it is predicted that the fierce price competition will continue in the second half of the year.

Product Features

Under the trend of integrated home appliances and appliances, washing machine products are gradually transitioning towards ultra-thin design, with large cylinder diameters entering the 500mm+era, redefining the concept of ultra-thin in the industry.

Market characteristics

Under the intensification of market competition, the pace of product iteration is accelerating, and the first battle of new products is the decisive battle. In this context, product planning focuses on stability, and enterprise flagship products are highly convergent (white+ultra-thin+set). On the other hand, the industry's washout ratio achieves "inflation", and companies hope to gain certain value through the internalization of washout ratio parameters under high competitive pressure.

AVC believes that due to a slight rebound in demand, the market competition environment in the hair care market has changed. Based on product innovation and price strategy to match the market, enterprises should maintain their composure and not tinker, and the industry will inevitably usher in a small window period.

Conclusion

The overall pressure on the home appliance market in the first half of 2024 is closely related to both the internal and external environment of the industry, as well as a necessary path for the industry's development cycle. Overall, the development of the home appliance market is facing many changes:

Consumption changes:The consumption path has undergone changes from upgrading, grading to downgrading. Our summary of the consumer market in 2023 is a "K" - shaped differentiation, with both high-end and low-end opportunities coexisting, but downgrade in 2024 is already the main theme.

Brand change:Brand loyalty is fading, and user perception of the brand is being reshaped. In this process, the strong brand's cognitive reconstruction and the accelerated rise of new brands have led to undercurrents of brand competition.

Marketing changes:Traditional marketing methods have failed, and existing marketing is highly focused on "planting grass". Social media platforms' integration of planting and cutting ', grass planting platforms and e-commerce platforms are each other's cultivation fields. Excessive marketing may even trigger resentment, and accurately targeting real needs and implementing efficient and precise seeding has become a new direction for enterprises to expand their customer base.

Product changes:White goods have entered a mature stage, and emerging categories are flourishing. The impact of technological equality brought by industries such as mobile phones and automobiles on household appliances will gradually emerge. High quality and price ratio products are increasingly being brought to consumers by the supply side, and companies are paying more attention to low-cost product strategies.