Author丨Xi Xiangyu
Editor丨Su Jianxun Qiu Xiaofen
At the beginning of 2024, Gree Electric has encountered a new round of controversy.
Gree's "rose air conditioner" was born - above it is a retractable solid rose, and the fuselage is bright pink throughout. The official price of this product is as high as 30,000 yuan, which is the most expensive air conditioner launched by Gree in recent years.
Dong Mingzhu is full of confidence in this, saying that this is a product that "wants to use roses to express love to users", and it is also a "work of art worth collecting".
It's just that Dong Mingzhu is full of sincerity, but he didn't let netizens pay:
"If it had been launched in the 80s, it would have been beautiful."
"Give it to my grandmother as a golden wedding gift......
The price of the rose air conditioner Source: Gree Mall official website
The ridicule of the rose air conditioner is just an incision, and what is reflected behind it is Gree's difficult exploration in the process of high-end. This is reflected in the fact that although Gree has raised the average price of air conditioners, the sales of high-end products are not as good as those of competitors.
According to the data of Aowei cloud network, in the national offline market in 2023, the average price of air conditioners of the Gree brand will be the highest, reaching 4,641 yuan, higher than that of Midea (4,355 yuan) and Haier (4,257 yuan).
However, when it comes to the sales of high-end products, Gree has begun to lag behind Midea. In the list of best-selling air conditioners in the national offline market in 2023, Midea and Gree both account for 3 high-end models of more than 7,000 yuan, but Midea's total sales market share is 3.42%, and Gree's is 2.41%, which is slightly behind.
The growth bottleneck of air conditioning has been slowed down by channel reform
Gree's predicament is as clear as its advantages - it is also air-conditioned, and sleepy is also air-conditioned.
Air conditioners support the vast majority of Gree's revenue, but this category is a stock market, and its growth has almost stagnated. The sales of air conditioners are positively correlated with the real estate market, which is facing growth bottlenecks today. In 2022, there will be 2,015 new projects in China's real estate fine decoration market, a year-on-year decrease of 42%.
In addition, there has been no major technological innovation in household air conditioning for many years, and there is a lack of new selling points. Two reasons have led to the decline of the air conditioning market. According to Aowei cloud network data, from 2021 to 2022, domestic air conditioning sales have declined for two consecutive years.
The market is not good, and Gree is particularly affected by the decline in air conditioning sales. According to the financial report, since 2020, 7% of Gree's annual revenue comes from the air conditioning business. In contrast, Midea and Haier have diversified by adjusting their product structure, with air conditioning revenue accounting for only 47% and 18% respectively.
Composition of Gree electrical products Source: Guojin Securities Research Report
The industry environment is very cruel, and Gree Air Conditioner is also facing the squeeze of competitors. In the first half of 2023, the growth rate of Gree's air conditioning business will be only 1.8%. Midea and Haier relied on launching price wars and expanding sinking channels, making the growth rate of air conditioning business reach 10.5% and 18.3% respectively.
Gree air conditioner's market position is in jeopardy, and its air conditioning business revenue has also been surpassed by Midea - according to the company's financial report, in the first half of 2023, Midea's air conditioning business revenue will be 92 billion yuan, 22 billion yuan higher than Gree's air conditioning business revenue in the same period.
One of the reasons for Gree's high-end dilemma can be attributed to the slow and difficult transformation of offline channels.
Previously, air conditioners mainly relied on offline agent sales. In the era of the comprehensive rise of e-commerce platforms, reducing the level of offline agents has become an inevitable choice for home appliance companies. More importantly, the unit price of high-end air conditioners is higher, which is destined to be a category that emphasizes experience and service, and needs more powerful offline channels to support it.
From 2017 to 2018, Midea and Haier have started similar channel reforms, compared to Gree's channel reforms, which are heavier and slower.
Gree's channel reform has started in 2020 - on the one hand, Gree has reduced the level of agents, and the headquarters has supplied to terminal stores through the online batch platform, and on the other hand, it has transformed agents into service providers, and the original agents have made money through product price increases, and now the headquarters has paid service fees, so as to maintain a unified and stable online and offline price system.
At the beginning, sitting on the throne of the first place in the domestic air conditioning market, Gree's secret was to bind the interests of provincial agents, but now it is necessary to wave a knife to the former allies, which determines the difficulty of self-reform. According to the first financial report, it is not until 2024 that Gree plans to fully implement the supply of online batch platforms.
One step is slow, step by step, and Gree's high-end brand channel construction also lags behind Midea and Haier. After the completion of the channel reform, Midea is still continuing to build high-end brand stores, training exclusive engineers and customer service, and improving the service of high-end brands. Haier, on the other hand, has built 265 "three-winged bird stores", which integrate home appliances, furniture and home improvement services in the stores.
Under the superposition of various reasons, Gree was completely opened up by competitors. As of press time, the total market value of Midea Group is 387.9 billion yuan, equivalent to 2 Gree Electric Appliances, and the total market value of Haier Smart Home is 202.83 billion yuan, equivalent to 1.1 Gree Electric Appliances.
Gree Electric Appliances, Midea Group, Haier Smart Home stock price trend, the blue line is Gree Electric Appliances Source: Google Finance
The high-end lacks the support of independent brands
In addition to channel problems, there is no independent high-end brand, which has also led to the controversy of Gree's rose air conditioner to a certain extent. Within the same brand, there should be a unified design style and pricing strategy, and the biggest problem with Gree Rose air conditioner is that no matter the shape or price, compared with Gree's conventional air conditioning products, it is inevitably abrupt.
In contrast, Midea and Haier have both established brand sequences through a large number of acquisitions, and have also launched original high-end brands.
Midea mainly promotes two high-end brands in the domestic market: Toshiba and COLMO. Toshiba comes from Toshiba's home appliance business, which Midea acquired in 2016. COLMO is an independent high-end brand released by Midea in 2018. According to the company's financial report, in the first half of 2023, the retail sales of the Toshiba brand in the domestic market exceeded 1.8 billion yuan.
Haier focuses on the high-end through Casarte. The price range of Casarte brand cabinet air conditioners reached 1-37,000 yuan, while the price range of cabinet air conditioners in Haier Mall was 0.5-16,000 yuan. There is a significant price gap between the two. According to Haier's financial report, in the first half of 2023, Casarte ranked first in the share of retail sales in refrigerators, washing machines, air conditioners and other categories in the high-end market.
The products under the Gree brand can be described as large and detailed, but because there is no independent brand to undertake, the product series is inevitably mixed - 36 Krypton found that the cabinet air conditioner of Gree Mall contains 114 models, with a price range of 0.5-33,000 yuan, and the price range is large. With such a complex product category, it is naturally difficult for Gree to coordinate the pricing and styling of products.
Source: Gree Mall official website
In addition to the difficult exploration of high-end, Gree has not looked for the second growth curve, and mobile phones and new energy are the directions that Dong Mingzhu values. Dong Mingzhu has also said many times that Gree wants to build a high-end brand, and has also educated investors not to talk about Gree air conditioners, but to talk more about Gree electrical appliances.
In 2021, Gree launched its last mobile phone. In the past few years of making mobile phones, the market share of Gree mobile phones is basically negligible.
Another major layout of Gree has become a burden: Yinlong New Energy (now known as Gree Titanium), whose main business is lithium titanate batteries and the use of lithium titanate batteries to build commercial vehicles. Gree has spent a total of 2.85 billion yuan twice to win 55% of the equity of Gree Titanium.
It's just that Gree Titanium not only did not bring revenue growth to Gree, but spent a huge amount of money to fill the hole. According to Gree's announcement, by the end of 2022, Gree Titanium's total assets were 25.02 billion yuan and total liabilities were 24.79 billion yuan, almost insolvent. In 2022, Gree Titanium will have a net loss of 1.91 billion yuan.
In the first half of 2023, Gree's other main businesses such as household appliances and industrial products will account for only 11.8% of total revenue. This means that, at least in the short to medium term, Gree will still rely heavily on the air conditioning market.
Facing the bottleneck of the growth of the air conditioning market, high-end and diversification are the growth paths verified by Midea and Haier. For Gree, the rose air conditioner is just a short-term twist and turn. In the long run, channel reform, high-end brands and diversified layout are all difficult but correct paths that Gree must take.
(If you are also a home appliance practitioner, welcome to add the author to communicate)