The small home appliance market in 2021 has not continued its previous popularity.
Whether it is from retail sales or retail prices, there has been a "cooling" phenomenon to varying degrees, and the growth rate is slowing down.
Data show that in the first half of 2021, the retail sales of small household appliances totaled 25.08 billion yuan, down 8.6% year-on-year; the retail volume was 119.11 million units, down 8.2% year-on-year.
As a popular player in the small home appliance track, Bear Electric reflects the overall situation of the industry to some extent.
Since its listing in August 2019, the share price of Xiaoxiong Electric has soared to HK$159.4 per share, but since August last year, the share price has entered a mode of "falling and falling".
As of press time, Xiaoxiong Electric closed at HK$64.1 per share, which is almost halved compared to the same period last year, and the overall market value has shrunk significantly.
The performance of Xiaoxiong Electric in the third quarter of last year was also unsatisfactory. The actual revenue was 2.365 billion yuan, a year-on-year decrease of 5.32%, and the net profit attributable to the parent was 189 million yuan, a year-on-year decrease of 41.29%.
The market is cold and the performance is under pressure, which is a dilemma faced by many small household appliance companies.
1. What is the reason for the cooling of small appliances?
First, demand tends to be saturated, and consumption returns to rationality.
During the epidemic, the "home economy" superimposed the demand for consumption upgrades, which stimulated consumers' demand for small household appliances in different scenarios.
Most small household appliances rely on online channel dividends, and attract users to buy through high appearance and high cost performance. Consumers have started the "buy, buy, buy" model.
With the gradual control of the epidemic, on the one hand, the home is no longer the only life scenario for consumers, and the home economy has weakened; on the other hand, some users who are attracted by the high value of products have also returned to rationality, making the demand for small household appliances return to normal levels.
Second, high base pressure.
Data shows that in 2019, the size of my country's small household appliance market will reach 402 billion yuan. The China Business Industry Research Institute predicts that my country's small household appliance market will reach 486.8 billion yuan in 2021.
▲Image source China Business Intelligence Network
In the small household appliance market with a high base, the growth is now a little weak compared to the previous boom.
Due to the sharp rise in the prices of raw materials such as copper and aluminum, various small home appliance brands have to increase their selling prices due to cost pressures, suppressing downstream consumer demand.
2. Small home appliance brands seek new breakthroughs
Under the pressure of short-term performance, many small home appliance brands have sought new breakthroughs.
Air fryers, mini yogurt machines, floor mopping robots and a large number of small household appliances with big brains appear frequently, and some brands continue to develop new categories, hoping to create the next "explosive product".
Some brands have turned their attention to overseas markets to open up the second growth curve of the company.
The global small home appliance market is showing a booming trend. Some companies have launched overseas layouts around cross-border e-commerce, and developed overseas channels such as independent websites, Amazon, and eBay.
In 2020, the top players represented by A-share Xinbao Co., Ltd., Xiaoxiong Electric Appliances, and Ecovacs have shown excellent performance in business performance: Xinbao Co., Ltd. has achieved an operating income of 10.174 billion yuan through small home appliances; Xiaoxiong Co., Ltd. The overseas operating income of electrical appliances in 2020 reached 209 million yuan, a year-on-year increase of 143.21%; the operating income contributed by Ecovacs overseas in 2020 reached 3.379 billion yuan, accounting for 46.71%.
Under the circumstance that the domestic market is cold, many small household appliance companies have accelerated their pace of going overseas.
1. Home appliances become the "evergreen" category of going overseas
The stable production under strict domestic epidemic prevention and the manufacturing turmoil under repeated overseas epidemics have resulted in a time lag in product supply, which has brought huge dividends to Chinese manufacturing and brands going overseas, which will continue into the post-epidemic era.
Driven by this factor, a large number of Chinese brands are looking forward to overseas markets.
According to Tmall and Taobao overseas data, from 2020 to October 2021, the number of Chinese brands overseas on Tmall and Taobao maintained a year-on-year growth rate of 10%.
Judging from the list of top 10 brands with the highest sales in the past three years, home appliances have become one of the "evergreen" categories that go overseas, and are most favored by overseas consumers.
Specific brands include Xiaomi, Midea, Haier, Supor, Ecovacs, etc. They have created considerable revenue and growth in overseas markets.
Domestic export companies of small home appliances have even started the "exploding order" mode. Customs data shows that my country's small home appliance exports have grown by more than 600% in 2021, and microwave ovens have set records in export value; in the first half of the year, my country's electric frying pans, bread machines, juicers Exports of machines and other equipment increased by 62.9%, 34.7% and 12.1% respectively.
It is estimated that by 2025, the global sales of small household appliances will exceed 230 billion US dollars.
▲Image source General Administration of Customs
2. Power factors for small household appliances going to sea
Thanks to China's model of "high-quality supply chain + cross-border e-commerce infrastructure + efficient digital marketing overseas", more and more competitive local brands have emerged in China on the overseas track.
First, the supply chain advantage.
The current advantages of Chinese manufacturing are not only reflected in cheap labor and Big Mac production models, but most importantly, in the supply chain advantages.
As Adam Smith said in "The Wealth of Nations", the output of multiple people's division of labor is far higher than that of a single person responsible for all steps, and China's supply chain is reflecting a modern and more advanced division of labor.
This supply chain advantage comes from the agglomeration effect.
This clustering effect is mainly reflected in several typical industrial belts in China, such as Shunde Small Appliance Industry Belt, Foshan Furniture and Home Furnishing Industry Belt, Caoxian Hanfu Industry Belt, Fujian Sports Industry Belt, etc.
Among them, Shunde's home appliance industry currently has a scale of more than 300 billion yuan, with more than 3,000 production and accessories companies, and a large number of well-known home appliance companies such as Midea, Galanz, and Wanhe. At the same time, a number of "new forces" of small household appliances such as Xinbao, Xiaoxiong Electric, and Delmar have also emerged in Shunde.
These industrial belts basically meet the one-stop needs of enterprises, so that they can get it when they think of it, make it well when they get it, and ship it when it is done well.
Second, cross-border e-commerce empowerment.
Cross-border e-commerce is definitely one of the hottest tracks in the past year or two.
In 2020, cross-border e-commerce exports reached 1.12 trillion yuan, a year-on-year increase of 40.1%. According to data from Tianyancha, in the first half of 2020, there were 2,356 new cross-border e-commerce-related enterprises nationwide, of which June had the highest monthly registration, reaching 637.
Some small home appliance companies take advantage of cross-border e-commerce to empower themselves. Since July last year, companies such as Little Swan, Little Bear Electric, and Joyoung have successively entered the cross-border e-commerce business.
Third, efficient digital marketing overseas.
In the process of brand going overseas, efficient digital marketing capability plays a key role.
In the digital age, on the one hand, brands can use digital to accurately locate target groups, gain their likes, and recommend related products; on the other hand, domestic and foreign consumers can speak through social media to let overseas consumers know more about Chinese products .
In addition, policy support is also indispensable for small household appliances to go overseas.
3. Resistance factors for small household appliances going to sea
First of all, international logistics freight rates are soaring and the timeliness is too slow, which has become a major problem for cross-border sellers in the post-epidemic era.
Under the normalization of the epidemic, the demand of developed countries such as Europe and the United States continues to recover, and the demand for online purchases has surged, but the global container shipping capacity has not performed well, and there is a large gap.
According to the "Research Report on the First Journey of Cross-border Logistics FBA", whether it is viewed from the regional market freight rate or the freight rate of the logistics channel, the first journey freight rates of sea, air and railway FBA are all on the rise.
Some domestic brands said that logistics costs increased by more than 50% during the epidemic.
According to Hugo’s cross-border survey on the export logistics issues that cross-border sellers are most concerned about, “the price is too high to afford it”, “the timeliness is too slow, and the goods are often out of stock”, and “the warehouse is out of stock and the shelves are too slow” to become The three problems that bothered them the most.
Secondly, resistance from overseas platforms.
In April last year, Amazon's platform policies became stricter, and large-scale rectification was carried out against third-party sellers who violated laws and regulations or platform rules, and small and medium-sized enterprises fell one after another.
According to statistics, more than 50,000 sellers have been banned by Amazon in China, resulting in an estimated industry loss of 100 billion yuan. The categories involved include home appliances and 3C electronic products.
Under the stricter policy, the export of small household appliances will also usher in a comprehensive reshuffle, giving some mature and standardized operations more advantages.
Under the multiple resistances, what opportunities are there for small household appliance companies?
Benefiting from consumption upgrades, small home appliances, as a symbol of high-quality life, have quickly become a consumption hotspot.
According to data from the China Business Industry Research Institute, the size of my country's small household appliance market reached 402 billion yuan in 2019, and it is predicted that my country's small household appliance market will reach 486.8 billion yuan in 2021. From the perspective of the sales of subdivided products, the sales of small kitchen and bathroom appliances accounted for 76%, the small household appliances accounted for 13%, and the personal care category accounted for 11%.
In overseas markets, there are also huge opportunities for product innovation hidden in different sub-scenarios.
1. Category innovation opportunities
First, clean electrical appliances
According to data from meltwater, from December 2020 to 11 years in 2021, the total number of mentions of clean electrical appliances in overseas social media reached 3,680 times, and the discussion of clean electrical appliances in North America and Southeast Asia was the most enthusiastic.
Analyzing the word cloud of the search results, it can be found that keywords such as sweeping robots have appeared repeatedly, and the sweeping robots have entered the list of top single products in Tmall's overseas sales for three consecutive years.
In the capital market, sweeping robots are also very popular. According to incomplete statistics, there have been at least 10 investment and financing events in the sweeping robot industry. Almost every month, players have received tens of millions of financing, including Beetle Intelligence, Wow Power, etc.
Even if there are many players in the market, the space that can be excavated by sweeping robots is still considerable. In terms of penetration rate, it will be less than 5% in 2021.
In addition, in most key cleaning small household appliance categories, the penetration rate in China is lower than that in developed countries. Taking vacuum cleaners as an example, the number of vacuum cleaners per 100 households in China is only 12, and the number of vacuum cleaners per 100 households in the United States and the United Kingdom exceeds 100. There are more than 90 vacuum cleaners per 100 households in Japan and South Korea.
Second, kitchen appliances
According to data from meltwater, the total mentions of kitchen appliances in overseas social media reached 449 times in the past year, and North America, the United Kingdom, and Hong Kong are the most enthusiastic about kitchen appliances.
In the first half of 2020, the home appliance category was active. The overseas transaction volume on Tmall increased by about 70% year-on-year, and the number of transactions doubled.
Among kitchen appliances, the traditional small kitchen appliances have entered the early stage of saturation, and only the health-care category (electric steaming pot, health-care pot, air fryer, etc.) has withstood the pressure and maintained a rapid growth rate.
The air fryer is the fastest and most popular, and "healthy oil-free" has always been its selling point.
Third, entertainment appliances
Entertainment appliances have also become the new darling of going overseas, especially small appliances such as home KTV karaoke machines and projectors that can improve happiness.
For example, some users have built their living room into an entertainment space that can integrate audio-visual and KTV.
With the help of strong domestic supply chain capabilities, domestic small household appliance brands can develop different products for different sub-scenarios to capture the changing needs of overseas consumers.
2. Free your hands and integrate with intelligent small household appliances
Under the "lazy economy", fewer and fewer consumers do housework or are willing to do housework, so small household appliances that are easy to use and highly comfortable are more and more popular among consumers.
Smart small appliances such as "fat-reducing weapon" air fryers, hands-free sweeping robots, etc. are not uncommon and emerging one after another.
At present, the smart home appliance market is relatively large and basically mature. If it is deeply ploughed into subdivided fields, solves the pain points of users, and produces cost-effective products, the probability of becoming a popular product will be much higher.
With the popularity of smart devices (such as wearable smart devices, smart phones, etc.), consumers are increasingly demanding and reliant on smart life. Small household appliances with humanized design and intelligent operation will become the trend of future consumption.
3. Build DTC brand
SHEIN has swept the global fast fashion market with the DTC model.
DTC (Direct-to-Consumer) refers to selling products directly to consumers, bypassing any third-party retailers, wholesalers or other middlemen. DTC brands are usually sold online, focusing on specific categories to meet the subdivision needs of users, and retaining consumers in the form of brand independent stations, forming an e-commerce model.
Small home appliances can also build DTC brands when they go overseas.
On the one hand, products cooperate with DTC brand power to continuously expose and obtain traffic, and accumulate comprehensive consumer behavior data, preferences, crowd portraits and other information to help merchants understand target consumers and make marketing more accurate.
On the other hand, long-term DTC brand operation, accumulation of consumer reputation, and building a brand recognized by consumers are an important way to continue to retain repeat customers and continue to attract new traffic. DTC brand power can not only increase consumer stickiness, but also reduce customer acquisition costs, extend consumer life cycle (LTV), and increase repurchase rates for the brand’s official website and independent website.
All in all, China is the world's factory, which lays a solid foundation for brands to go overseas.
At present, there are about 1.06 million small household appliance companies registered in China, but most of them are mainly ODM (design and manufacture) and OEM (production and foundry).
This will cause a problem. The homogenization competition of export products is serious, and there is a lack of brand effect.
If overseas brands do not seek new outlets in terms of products themselves and brand marketing, after consumers’ freshness dissipates, overseas brands will fall into the dilemma of “having a brand without a brand”.
It is a general trend for small household appliances to go overseas. How to achieve the ultimate reverse output of OBM (brand manufacturing) is a problem that all brands should think about and explore.