The weather this year was not as hot as last year. The sales of air conditioners in the domestic market failed to continue the growth of more than 30% last year. However, due to the hot sales last year, air-conditioning companies started production at full capacity, resulting in a record for this year’s air-conditioning inventory, and the inventory will reach 48 million units.
Faced with such a market environment, Gree hopes to increase sales this year to nearly 200 billion yuan. It seems that it has set the goal of stimulating revenue growth in third-, fourth- and fifth-tier cities, and hopes to complete the impact in the rest of this year. The sales target.
Potential of third, fourth and fifth tier citiesAt present, the air-conditioning market in first- and second-tier cities has become saturated. Almost every household has purchased air-conditioners. Air-conditioners mainly come from new upgrades and the demand for more air-conditioners. The increase in air-conditioning is relatively limited.
For the third, fourth and fifth tier cities, the popularity of air conditioners before is far less popular than the first and second tier cities. With the process of urbanization, more rural residents enter urban life and the improvement of living standards. People's demand for air conditioners has been increasing, which has become a stimulus. The driving force for the growth of the air-conditioning industry.
Previously, big-name air-conditioning companies ignored the third, fourth, and fifth-tier cities. At the same time, because these markets are relatively fragmented, transportation and service costs are high, and low profits are also the reason why big-name air-conditioning companies are reluctant to go deep. This has led to these markets being occupied by small and medium-sized air-conditioning companies. After all, the products of small and medium air-conditioning companies have more advantages in terms of price, and small and medium-sized air-conditioning companies can also accept lower profit margins.
However, all of this is changing now. According to 2017 data, in the third, fourth and fifth tier cities, not only air conditioners, including other large household appliances, are showing a rapid growth momentum in these markets, and the growth rate is higher than that in first and second tier cities. Average retail prices are also rising rapidly, showing that consumers in these cities are pursuing a higher quality of life and are willing to buy more and more expensive home appliances.
Gree plans to tap third, fourth, and fifth-tier citiesGree Electric’s current chairman Dong Mingzhu put forward the goal of increasing revenue by 20 billion and 200 billion a year when he took office in 2012. By 2014, he basically maintained the goal of increasing revenue by 20 billion a year.
In 2014, China's air-conditioning inventory reached a record level of 40 million units. In order to digest the inventory and promote Gree's revenue growth, Gree launched its first air-conditioning price war since its establishment in the fourth quarter of the same year. The opposite is that the overall air-conditioning market stagnated in 2015. Gree’s air-conditioning price war caused its overall revenue to drop by 29.04% year-on-year to 97.745 billion yuan. The revenue rebound in 2016 was only 110 billion yuan lower than 2014. In 2017, with the sales of China’s air-conditioning market increasing by more than 30% year-on-year, Gree’s revenue once again broke through the 140 billion level to reach 148.286 billion.
In the first half of this year, Gree’s revenue continued the rapid growth momentum of last year, increasing by 31.50% year-on-year to 90.976 billion yuan. This performance is better than the performance of China's overall air-conditioning market. In the same period, the sales of air-conditioning in the Chinese market increased year-on-year. By 21.6%, Gree’s plan to hit 200 billion revenue may be realized.
Subsequently, the peak sales season for air conditioners generally expected by all parties did not arrive. Since July, the domestic weather has not been as hot as last year, which has caused the domestic air conditioner inventory to set a new record. Perhaps due to the lessons of the previous price wars, now faced with the air-conditioning industry's inventory setting a new record, Gree no longer speaks about price wars, and chooses to expand the third-, fourth- and fifth-tier cities with huge development potential.
Of course, Gree has the advantage to expand into third-, fourth- and fifth-tier cities. It has been the largest air-conditioning brand in China for more than 20 years. It is much higher than small and medium-sized air-conditioning companies in terms of air-conditioning quality, technology, and services. Gree enters these markets Conforms to the trend of consumption upgrades.
However, there is a downside for Gree. Entering these markets will lead to increased costs and lower profit margins for Gree, and it has entered the off-season of air-conditioning sales. In the end, whether it can achieve its goal of achieving 200 billion revenue by expanding these markets as it wishes remains. have a question.
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