In year 2016, China's home appliance industry comes under high pressure as domestic economy continues go downward. While white goods struggle to grow in general, built-in appliances secure a two-digit growth, making an industry highlight. As a result, home appliance enterprises start to turn bullish on built-in products for their high profitability and resilience, and actively expand into new segments while upgrading traditionally strong ones.
While built-in white good market remains small and low-recognized, built-in kitchen appliance market has got a fair wind to take off. It covers range hoods, ranges and cook tops, electric ovens, electric steamers, microwave ovens and more. In 2016, built-in kitchen appliance industry is booming, which is expected to push for a transformation in its market size and product mix.
Distribution channels diversify with an increased percentage of specialized channels
Distribution channels of built-in kitchen appliances include both traditional channels such as home appliance outlets (mainly Gome and Suning), department stores, supermarkets, franchises, and online stores, and specialized channels such as home furnishing channels (including home furnishing outlets such as Macalline and Easyhome) and housing construction channels.
Among them, home furnishing channels further span kitchen appliance stores, and kitchen furnishing stores. The former, mainly run by representatives and distributors, sells only appliances. A number of high-end global brands enter Chinese market through this channel, such as Franke, ASKO, CHEF, AEG, SMEG and Liebherr. The latter, kitchen furnishing stores, sells both appliances and furnishes. They are established through cooperation, such as the strategic cooperation between BOSCH and Vifa, SCHMIDT, Boloni, or by cross-boundary brands, such as Fotile, who markets its specialized built-in kitchen brand of BORCCI in this segment.
While distribution channels of built-in kitchen appliances diversify, home appliance outlets and home furnishing outlets stay in domination. In 2015, total sales of these two channels represented more than 47% of the whole market. Mega home furnishing outlets are positioned as the highest-end channels, and with an increased percentage in sales year by year, they are the fastest growing ones too. Some manufacturers purposely set specialized channels apart from mass channels, for the latter showcases built-in products better. This move enhances the high-end position of specialized channels and help ensure the profitability of manufacturers and distributors.
Housing construction makes another crucial channel. High-end kitchen appliance brands mostly establish their presence in China through this channel, and considering product features, most of them expand their market through collaboration with European kitchen cabinet brands. For instance, 80% of Miele's sales in this segment comes from this channel, and Gaggenau, a high-end brand under BOSCH, focus its main attention on this channel. Given the differences in cooking cultures and habits, Chinese and Western brands differ in their expertises, with the former in range hoods and ranges, and latter in ovens.
It is noteworthy that online sales of built-in kitchen appliances represent close to 11% of total sales of this segment. As online market expands, online built-in kitchen appliances are going high-end. Product prices from online channel were clearly lower than the general market. For instance, the average online price of built-in dishwashers only registers 4,000 Yuan, about half of the price charged in housing construction channel. This disparity meets the needs of different consumers, pushing forward the penetration of built-in kitchen appliances and possibly built-in products in general.
Range hoods and ranges grow steadily, and dishwasher makes the fastest in growth
Built-in kitchen appliances are either at mature stage or at introduction stage. Range hoods and ranges, after years of promotion, are at their mature stage. By 2015, range hoods and ranges maintain a growth rate of 8% in sales. From January to April 2016, range hoods with an output of 18 m3 /min have increased 3% year-on-year to account for 15.5% in total sales of range hoods. European style range hoods (including side suction ones) represent 95.6% in retail sales. Gfk estimated that the average price of ranges hoods and ranges would increase by 6% in 2016.
Built-in products at introduction stage span electric ovens, electric steamers, microwave ovens and dish washers. According to statistics from Gfk, in year 2015, sales of built-in ovens registered a growth of 36%, and built-in dishwashers registered a growth of 96.5% to 220,000 units. What underlies the surge of built-in dishwashers are the previously low penetration rate and manufacturers' efforts in marketing and consumption guidance. Gfk predicted that, in 2016, ownership of dishwashers per million would still remain less than 1%. In 2015, 80% of the dishwasher market was dominated by foreign brands, but in January to April 2016, home grown brands expanded their presence in sales clearly, which is expected to boost the market expansion rapidly.
While electric steamers are at startup stage, products with steaming functions are expanding their presence. Microwave steamer and bakers are expected to be trendy. According to Gfk, the market size of microwave ovens are narrowing down year by year, but those with steaming and baking functions at the price of more than 2,500 Yuan are increasing their share in retail sales to represent 73.5%.
Built-in kitchen appliances are set to be a new growth point in home appliance industry. Its distribution channels are increasingly diversified, among which specialized channels are on an upward trend. The development and scale of built-in products differ, and Gfk predicts that built-in dishwashers are expected to be a first smash hit among its peers. But more efforts are in need, including industry standards, an expanded area of kitchen, improved venting channels, enhanced power load in communities, etc.