Heating Up the Electric Stove Market in China
In 2005, electric stoves were widely predicted to be the dominant product in the Chinese home cooking market over the years to come because of their “efficiency in safety, security, energy-efficiency and eco-friendly”. In 2007, however, the market for electric stoves within China was so slow that sales weren’t changing. Not only was the expected sales increase was not occurring; however, there was a lot of inventory that was not sold in warehouses. Many companies were blamed for “market disturbances” for the slowing market.
A lot of producers
In a discussion of “market disorder,” numerous electric stove CEOs said that the huge range of stoves with different quality is the major factor.
“The growth and high profits of the market for electric stoves in 2005 attracted a wide range of new players, including certain companies with weaker capital and technological capabilities due to the lower entry requirements. There were at one time 1,000 manufacturers in the market, and the supply glut was a major factor in the market’s buying capacity. You can see this by the sudden fall in the market of 2006,” said Mr Qiu Mingyong, the Project Manager for the company based in Dongguan, GoldYip Electronic Technologies.
The investor stampede caused two issues for the industry. One of them is that the products of certain companies that were reckless had lowered the confidence of consumers in electric stoves, resulting in inferior quality, limited useful lives and safety issues. Another issue is that it has resulted in the supply and demand in a way that was unbalanced.
“The market saw an average decline of 7-8% (over the previous comparable period) during the first quarter of 2007”, stated Mr Yang Fuming, General Manager of another Dongguan-based electronic manufacturer, Supor. “The market improved in the second half thanks to an effort across the industry. I am expecting sales to remain steady in 2008 with a total of 30-32 million units for all of the country.”
Due to the surplus in the capacity as well as the in light of the demand and the supply gap and un-sold inventory, the electric stove industry began to reduce prices in order to gain market share. In particular, since 2007, certain electric stove makers, backed by the industry’s bellwether Galanz have commenced an intense price war. Certain producers who were nearing the end of their days were forced to withdraw completely from the market, and it led to an increased concentration of top brands in the market. According to market research that was conducted in the month of October 2007, the top 10 brands of electric stoves within China had a combined market share of around 87 per cent. There are about 700-800 brands in China. Chinese market.
The market is still being nurtured.
“No doubt electric stoves are the future cookware items for kitchens in the home, and it also matches the Chinese government’s energy policy. However, as a long-term cooking appliance in China, gas stoves are likely to not be replaced completely by householders in the near future,” said Mr Li Peng, Marketing Manager for Sunpentown, the Taiwanese electric stove manufacturer Sunpentown.
Another expert in the industry also advised that current marketing strategies for electric stove companies should be focusing on factors such as energy efficiency and green credentials to distinguish them from gas stoves and get the attention of the consumer instead of blindly increasing market share.
“Sales increase in the first and second-tier market (large and medium cities of China) are expected to slow over the coming years. However, when purchasing power rises in rural regions and the third and fourth-tier markets of China will become the primary areas of growth to purchase electric cookstoves within the short future,” said Qiu.
Inadequate industry standards
Li said that among the electric stove brands currently in use in China, there are just a handful of strong players. Other shops are mostly small that have limited capacity, ancient production techniques and even production permits that are not even in place.
It is believed that, in terms of quality, the electric stoves from China are controlled by QB/T1236-9, which is a standard that covers the efficiency of thermal energy as well as the noise and the efficiency of energy. However, this is an approved standard that has no influence on the producers. Concerning safety, electric stoves are covered by the national household safety standards for appliances.
Industry insiders have pointed out that the absence of any compulsory industry standards has led to numerous loopholes for reckless businessmen. Many technologically-backwards companies are still surviving, and their low quality and cheap products are still circulating the market. This does alter not only the market’s pricing system but also affects the confidence of consumers and interest.
In November 2007, the much-anticipated official standard for electric household stoves was officially made public in the Chinese government’s Standardisation Administration (SAC). The standard governs certain elements of stoves that are electric, such as energy performance limits for energy, efficiency assessment (EPC), energy-performance grade, testing techniques and inspection regulations. A lot of industry players hope that this standard will help bring about it easier for the Chinese electrical stoves market to be better controlled.
Industries looking to find a breakthrough
Despite the fact that the Chinese electric stove market was slow in 2007, there were new players. Qiu, the founder of GoldYip, has been one of the courageous souls, stated:” We were mainly creating radios and MP3s in the past, and 2007 was the year that marked the beginning of electric stoves production, which had around 200 000 units. We plan to expand to 500,000 units by the end of 2008.”
It’s not exactly logical to increase capacity in the current economic climate. However, Qiu did not think so. “The electronic stove industry has entered into an “ice age” from the close of 2006, which has seen declining sales. This is mainly due to the excess capacity as well as the chaotic competition and the absence of industry standards, and the huge growth in the past two years has also reduced the market’s consumption capacity. However, this doesn’t necessarily mean that the ceiling for electric stoves within China is falling.”
Yang has also stated that despite the backdrop of an uninterested market in 2007, Supor nevertheless registered a sales increase of 40 per cent. “After the brand consolidation in 2007, the market in 2008 must be more tightly controlled, and the degree of brand concentration must also be improved.”
I believe that the current decline in the electric stoves market is an occurrence that is normal within the process of industrial development. “Reasons like higher costs for ceramic panel materials as well as low-quality products and decreased confidence of consumers are all temporary issues. As the market gets more controlled and more regulated, there is a chance that the Chinese electrical stoves market is likely to be in a more stable growth phase in the near future.”