Opportunities For Chinese Air-Conditioning Industry in Olympic Year

Based on data from experts in home appliances of the State Council of China, worldwide air-conditioner (AC) production reached 89.77 million units during 2007. China was now the AC manufacturing hub that accounts for 70% of the world’s production. While there are general issues with exporting and trade tensions confronted by Chinese exporters, however, they are able to export with confidence. Chinese AC sector, with the support of the government, has established an extremely responsive mechanism and technological foundations in areas like sustainability and energy efficiency.

All channels are open.

To get exposure to the growing demand for the domestic AC market, In order to be able to tap into the booming demand of the domestic market, it is important that the AC sector in China is currently moving towards diverse distribution channels. In the new policy called “Home Appliances for Villages”, which provides subsidies to rural residents for purchasing eligible electronic items, The government is hoping to draw regional distributors to submit competitions for the eligible items in order to create a more sophisticated business model of distribution can be developed in the rural area of China. Even though AC products aren’t yet included in the “eligible” products “eligible product” group, AC manufacturers and franchised distributors could still use similar distribution strategies to open and connect the third and fourth-tier market (rural and small cities).

In the year 2007, Gree, a leading electronic brand in China, has more than 4000 retail stores throughout the country. Their sales accounted for half of the total sales of Gree. A different company, AUX, has also announced that it will launch 3000 retail stores with its brand name in China in 2008. As a result of AC products being deemed eligible products soon and powerful AC brands entering new markets and markets, China’s AC marketplace in China is expected to grow even more.

In light of the argument, it is possible to see within the next couple of years, with the full introduction of high-end products into the first and second-tier markets, the opening to fourth and four markets growth of online sales channels and the resilience of export markets, the majority of AC distribution channels within China are likely to have positive outlooks.

Performance that is more advanced

The results of The State Council also indicates that in part due to the rise in living standards, Chinese customers aren’t any anymore content with their basic functions to adjust the temperature in the selection of AC products. However, the authorities’ environmentally friendly and energy-efficient demands are becoming higher and higher. In the end, aside from the basic functions of temperature adjustment, AC manufacturers are building products that meet the needs of consumers’ health-conscious, energy-efficient and fashion-forward demands.

Concerning the health demands, two main topics, automatic cleaning and sleep-friendly features, are likely to lead this Chinese AC market in 2008. The largest AC brands like Haier, Midea, and AUX have all introduced products that include automatic cleaning capabilities. Also, sleep-friendly features, like sleep modes and low noise, are among the latest innovations that are being promoted by the large AC companies in China.

In comparison to the more recent health requirements as well as energy efficiency and decorative features are more traditional and still popular. According to reports, the government is planning to increase the requirements for energy efficiency of AC products to a higher level in 2009. Therefore, you can expect an array of energy-efficient ACs being marketed during the years 2008 and 2009. Due to the increasing trend in home decors of recent years, a lot of female buyers are concerned about and much more AC panels, their fabrics patterns and colours.

High-end strategies

In light of the rising standard of living, Chinese AC consumers were less influenced by prices in 2007. One way to explain this is due to the advancements in AC technology and added-value features. However, AC manufacturers overall are improving their product ranges in moderate, middle and low-end categories to ensure that the premium market will be more efficiently provided.

For the performance of products and costs of top-of-the-line AC products, the gap between the local Chinese brand names and the foreign brand is small. Chinese AC producers have been following a method that involves “following and refining” their foreign counterparts. For instance, the mentioned automated cleaning and sleep-friendly features have been present on Japanese and Korean product lines for a long time. However, Chinese brands are adding more features to them. Regarding price and features, from the large electronic appliance retailers like Gome and Suning and Suning, the price differences for premium AC products among domestic and foreign brands aren’t significant. However, value-added strategies employed by foreign premium brands are not fully developed by local brand names in China.

Premium strategies could be a viable method to help AC manufacturers to increase their value propositions; however, the premium does not necessarily correspond to high cost. A lot of Chinese AC companies currently have premium items, but they do have premium brands. The coming Olympic Year could be an ideal chance to allow Chinese AC manufacturers to develop their brand names that range from Made in China to Created in China through the addition of accessories to their products that keep up with consumer demands. For instance, “experience marketing” in the top retailers and complete tracking services provided that are provided by foreign brands will enable consumers to experience “premium” experiences.

Better service

The so-called “30 30% manufacturing and 70 per cent installation” features of AC products, along with their seasonality, have given significant importance to the aftermarket service that is offered by AC products. Chinese AC manufacturers are currently being tested on every front from outlet locations for aftermarket and installation speed and the quality of their products, as well as warranty years as well as cleaning and maintenance problems. This is also a challenge for AC firms hoping to establish brand value.

Regarding aftermarket services, the major AC producers, such as Gree, Midea and Haier, are all leading the national AC market, and this is also one of the factors behind their regular wins in major construction tenders. The quality of the aftermarket service is determined by a firm’s overall capabilities. For instance, consider the company Haier which has for a long time considered services to be the basis of their brand’s building. In the aftermath of the massive snowstorm catastrophe in the southern part of China in January 2008, Haier set up its own “rapid response teams” to ensure that AC customer demands in affected areas could be promptly met.

Since the start of the year, 2008 Chinese AC businesses have started making preparations for their Olympic marketing strategies, which means that it is likely to witness an increase in competition on the Chinese market in the coming months.