Since the arrival of the historic moment of Midea's air conditioning revenue overtaking Gree air conditioning in 2020, the differentiation of the three giants of white electricity in terms of business layout has become more and more obvious. Compared with Midea and Haier, which have achieved results, Gree has been trapped in the dual dilemma of "diversification" and "channel reform" in the past few years.
The 2023 Annual General Meeting of Shareholders held by Gree last Friday conveyed a new message to the outside world, in which channel reform and diversification have become topics of great concern. Dong Mingzhu said, "(Gree) air conditioning is a housekeeper, and it is necessary to do its best. The growth points are in the refrigerator and washing machine".
This means that Gree's main task this year has returned to the level of diversification of household appliances. At the same time, Gree's channel reform is still deepening. Dong Mingzhu said, "In the end, it is necessary to bring convenience to consumers, create the greatest benefits for enterprises, and make dealers more at ease."
Industry insiders believe that judging from Dong Mingzhu's speech, Gree's channel reform has begun to show results. Since Wang Ziru presided over Gree's channel reform work, Gree's "cloud network batch" system was officially launched on a pilot basis, providing dealers with a standardized purchase channel, and Gree's channel reform has entered a new stage. It is expected that Gree's focus this year will be on the operation of the ice washing business.
Gree becomes a "left-behind child" in the home appliance industry
Industry insiders said that the information revealed by Gree's shareholders' meeting was mixed. Compared with Midea's cross-border diversification and Haier's smart home ecological internationalization, Gree is still trapped in the field of home appliances and still expects to seek new growth points outside the air conditioning business. Unlike Midea and Haier, Gree's current focus is on the ice washing plate.
It can be expected that Gree will have a large-scale layout action in the ice washing plate this year. In May this year, Gree announced its entry into the ice washing market in a high-profile manner. At the press conference in May, Dong Mingzhu announced that Gree Electric would set up refrigerator, washing machine and household appliances sales companies in every province in China.
Industry insiders believe that Gree's adjustment in the sales model shows that Gree has made great determination in the ice washing business. Gree has changed the unified sales model to avoid the impact of the air conditioning business segment in the process of expansion of the ice washing business, and to provide more professional promotion and services for each product line. By establishing an independent sales company, we can ensure independence in the ice washing sales process and ensure the continuous promotion of sales strategies.
However, although Gree Electric is gearing up for the ice washing market, it still exposes the fact that Gree Electric has lagged behind its competitors. Industry insiders believe that Gree is not only lagging behind Midea and Haier in terms of diversified layout, but even inferior to Dong Mingzhu's competitor Xiaomi, who gambled on 1 billion yuan that year.
Judging from the layout alone, Midea Group's de-home appliance process is obvious. While maintaining a stable position in the home appliance sector, Midea has extended its business from smart home to building technology, industrial control components, robotics, medical equipment and other fields, realizing a diversified layout other than home appliances. By integrating its own home appliance business segment and uniting the ecological supply chain, Haier Smart Home has upgraded home appliances to the smart home ecosystem. Xiaomi, Skyworth and other companies have expanded their product lines to the automotive field.
On the other hand, Gree has encountered a new crisis in the new wave of the times, which is reflected in the main business level, the status of the big brother in the air conditioning market is not guaranteed, and at the same time, the diversified layout is still in the bottleneck period. From the perspective of business composition, the proportion of revenue in the main business of air conditioning has not decreased but increased.
In 2023, Gree's air conditioning revenue will reach 151.2 billion yuan, a year-on-year increase of 12.12%, and the revenue will account for 74.13%. However, the income of household appliances including Gree refrigerators, washing machines, small household appliances, etc. was only 4.002 billion yuan, and it also decreased by 12.38% year-on-year.
This shows that in the past few years, Gree has been unable to reform the main business of air conditioning. When the channel reform has entered the deepening stage, Gree has the spare strength to continue the diversified transformation.
In fact, Gree is not without ambition. As early as the end of 2019, Gree showed the panoramic blueprint of the smart home of home appliances. In the planning, Gree will also build smart kitchens, smart bedrooms, smart bathrooms, smart study rooms and so on.
However, the plan could not catch up with the changes, and after Midea achieved the overtaking of the air conditioning sector through the channel reform completed earlier than Gree, Gree must put the stability of the air conditioning business in the first place. As Dong Mingzhu said, "Air conditioning is a housekeeper, and it must be done the best".
The icing on the cake or the new pillar?
Based on the consensus that China's white power market has been saturated, Gree faces many problems in entering the white power market.
From the perspective of the external environment, China's white electricity market has reached its peak, leaving very limited space for Gree to break through. At the same time, the ice washing market, as a mature market, has formed a Matthew effect. Brands such as Midea and Haier have very large brand and channel advantages in the refrigerator and washing machine sectors, and continue to occupy the share of small and medium-sized brands in the refrigerator and washing machine fields. Gree entered the ice washing market, not only facing the competition of second-tier brands, but also taking food from the mouths of Midea and Haier.
In the past, the development of Gree's home appliances other than air conditioners has been in a sluggish state of comprehensive product lines and continuous product iteration, but they are not selling. This shows that consumers recognize the manufacturing strength of Gree air conditioners, but do not recognize Gree in the field of refrigerators and washing machines. This involves the dilemma that the consumer's mind is already fixed. Gree's long-term image of the big brother of air conditioning is too prominent, which makes it difficult for consumers to establish the mind of "good electrical appliances made by Gree".
There is a view that in the process of establishing the mind of the ice washing brand, there are many variables, and the establishment cycle is too long. For Gree, the ice washing business can only be regarded as the icing on the cake in the short term.
Internally, Gree is still facing the problem of channels. Gree has improved efficiency through channel reform, but it is inevitable to damage the interests of the provincial sales department, and now Gree will apply the air conditioning model to the ice washing business, which will inevitably cause dealers to doubt. It is difficult to assess how well the dealer can cooperate.
The establishment of the dealer system also involves the issue of cost. Industry insiders believe that the key to the success of ice washing lies in the cost side, and only a low enough cost can allow the market to balance the distribution of interests between manufacturers + channels + customers.
However, Gree's determination cannot be ignored.
Since 2020, the revenue of air conditioning has been surpassed by Midea Group, and the gap is still expanding, Gree urgently needs to change its layout to cope with changes in the external environment. However, Gree's dependence on the air conditioning business has risen instead of decreasing, from less than 70% in 2019 to more than 70% today. Gree Electric has reached the point where it doesn't want to and can't just let the air conditioning business dominate.