An electronic product for sale in a store.
After the busy leisure Spring Festival, all walks of life resumed production at full speed, household appliances industry is no exception. But with home appliance enterprises started the same in full swing, is the home appliance raw materials market. It is understood that since this year, including copper, oil, a variety of raw materials prices have risen sharply, the current majority of home appliance manufacturers are facing greater pressure of rising costs.
As end consumers are more sensitive to price changes of home appliances, manufacturers actively seek a “balance” between price and sales in the face of sales pressure. To this, the personage inside course of study points out, want to crack this one difficult problem, home appliance enterprise still needs to be in further technical breakthrough and product upgrade up and down effort.
Raw materials rally has clearly been transmitted to the end
Since 2021, the price of raw materials for home appliances has been rising. After the Spring Festival, the price of raw materials for many home appliances has reached a new high. The data showed prices of a number of important industrial raw materials, including copper and crude oil, rising sharply, a price fluctuation that will affect industries as diverse as plastics, tyres and home appliances.
The data showed that the prices of copper, electrical steel, aluminum and rare earths, the main upstream raw materials involved in home appliances, rose sharply. After Spring Festival, copper is up 38%, plastic 35%, aluminum 37%, iron 30%, glass 30%, zinc alloy 48%, stainless steel 45%… Relevant data show that the cumulative increase since April 2020 has reached 30%~60%. With air conditioning as an example, the cost of copper, aluminum, steel, plastic and other materials is about 30%, the cost pressure is obvious.
In this regard, the industry pointed out that the rapid rise in the price of important raw materials in the home appliance industry will lead to a significant rise in the cost of home appliances, and accordingly, home appliance enterprises must increase the price of terminal products if they want to maintain profits.
On adjusting price problem, each big enterprise has corresponding action early. Since January this year, many brands, including Boto Lighting, Aux Air Conditioning, Chigo Air Conditioning, Hisense, TCL and so on, have adjusted their prices one after another. TCL announced that it will adjust the prices of refrigerators, washing machines and freezers from January 15th, which is expected to increase by 5%-15%. Hisense said it will raise the sales prices of some products from January 10, mainly for low-priced products, with a range of 10%. February 28, the United States refrigerator division issued “the United States refrigerator price notice letter”, announced since March 1, to the United States refrigerator product price system 10%~15%.
From the domestic market of home appliances, in January, online and offline prices have increased. AVC monitoring data show that offline, in January this year, the average price of color TV was 4573 yuan, a year-on-year increase of 22.3%; The average price of air conditioning was 3,937 yuan, up 3.4% year on year; The average price of washing machine was driven by the structural growth of drum, with a year-on-year increase of 10.9 percentage points. Lampblack machine average price market whole average price was raised 11% year-on-year.
Online, the average price of color TV was 2,553 yuan, up 30.4% year on year; The average price of air conditioning industry is 3,010 yuan, up 14.1% year on year; The average price of refrigerators maintained double-digit growth; The average price of washing machine increased by 12.1 percentage points year on year, among which the average price of washing and drying all-in-one machine increased by 21.2% year on year, becoming the main driving force of the average price increase.
While the average price of domestic sales is rising, the average price of foreign sales is also rising. Pei Dongmin, research director of white home appliances division of Aowei Yunnet, told reporters that most foreign trade enterprises are early orders, so from the current data, the price of export home appliances is not much. “However, according to our recent survey findings, foreign trade companies generally plan to raise prices for the next order, so we are bullish on export orders.” Pei Dongmin said that in the long term, the whole export price trend is the overall upward, and is about to enter the stage of a comprehensive price rise.
Rising prices intensify sales pressure and export market may show “increasing volume and not increasing profits”
To reduce cost pressure, manufacturer of partial home appliance must choose to rise in price, but concerned personage expresses, home appliance company can make a few price adjustment according to the circumstance such as cost, market sale every year, such adjustment looks to have rise to have fall throughout the year, adjust price is very normal. But end consumers are very sensitive to price changes, and if they follow suit, there is likely to be consumer resistance.
In addition, many more companies expressed concern about the market reaction to the price increase. Data show that China’s home appliance retail market has been down in 2019 and 2020 for two consecutive years.
Especially for some small and medium-sized manufacturers, the impact of price increases may be more obvious to sales, and the pressure of price adjustment is more prominent. Kitchen electricity companies said, “for raising prices, mainly depends on the reaction of the market, if the big manufacturers go first, we small manufacturers to keep up with the market acceptance will be higher, but this we bear more pressure.”
Not only is the domestic market under pressure, but home appliance exports also face challenges. On February 26, the reporter learned from the Shanghai Shipping Exchange, the latest release of China’s export container freight index shows that the composite index of China’s export container freight rate is 2059.52, compared with the previous period (February 19) of 2071.71 decreased by 0.6%. Among them, airlines in South Korea, Japan and the United States and Spain increased the most, up 48.6 percent, 9.4 percent and 2.8 percent respectively.
Industry insiders told reporters that the current freight rate is still in the state of soaring, the main reason is still the spread of the epidemic abroad, more routes, container tension, etc.
Analyses think, raw materials rise in price substantially, the factory enterprise that depends on processing profit or sales profit to a few pure is very unfavorable. Nominally, the sales figures are high, but in fact most of the costs are offset by rising raw material prices, soaring sea freight, falling exchange rates, inflation, etc. To some extent, this also reflects the low added value of China’s export products, the overall profitability and the low ability to resist risks.
Min Fuxing analysis of air conditioning industry believes that in this situation, the profits of foreign trade enterprises are indeed greatly affected. “At present, many orders in the export market are pre-orders, especially for many domestic brands with large export volume, low unit price and relatively low export added value, which are greatly affected by the price rise of raw materials in the later stage. It is expected that this year’s export market may show the phenomenon of ‘increasing volume and not increasing profits’.” Min Fuxing said.
Analysis: Manufacturers seek “balance” between price and sales
For home appliance enterprises will continue to pass on the cost to consumers in the future, home appliance industry veteran observer Liu Buchan believes, “the price of raw materials, does not mean that the whole machine will rise.” He said that the machine price is not only affected by upstream raw materials, more need to refer to the reality of market sales pressure. “Influenced by the epidemic, the real estate market and other factors, the sales of many home appliances have not recovered this year.”
And the cost pressure brought about by the price rise of raw materials, in addition to the home appliance enterprises themselves to digest, the channel also dare not in the price adjustment issue “rashly act”. Reporters have learned that in order to deal with the impact of rising prices of home appliances raw materials to consumers and the impact of the current, each major home appliance retailers have hit “discount card”, with “old for new” “full reduction” and “special buying” “hot style straight down thousand yuan” and other measures to attract customers.
When visiting the market, there are businesses told reporters that the current purchase price has a significant upward trend. “After the inventory is empty, we may adjust it again based on the purchase price.” There are sales personnel said to the reporter. Market view thinks, in this year’s market competition pattern, for many home appliance enterprises and businesses, the challenge of management and variability will further aggravate. The three prices of cost price, factory price and retail price will remain the same for most of the time. However, for some top enterprises, in order to grab more market shares, they will launch some new and cost-effective brands and take the means of retail price close to cost price to promote sales and grab the market.