Source: GfK for CHEAA-run China Appliance magazine

Profit improvement has been a long challenge since the Chinese refrigerator brands entered the global markets. And there are reasons behind it. Given the unique demands of consumers from different regions of the world in terms of food storage temperature and refrigerator compartment layout, Chinese refrigerator brands must provide localized products to accommodate to the needs of the local consumers. It means more R&D investment for smaller consumer bases compared to the domestic market. Beyond that, Chinese brands have not been as recognized as local brands by channels and local consumers, making them at a disadvantage when competing with local brands and retailers in the low-end market.

Therefore, Chinese refrigerator brands need to improve the per customer transaction to get reasonable profits from the overseas market to compensate for the high costs. And the approach to it could be either rolling out high-end, affordable products or establishing high-end brand images.

From low-end to high-end, affordable products

For Chinese refrigerators brands, developing high-end, affordable product lines to get a bigger share of the high-end niche market and therefore to improve the price index and the consumer recognition is a critical step in their building of high-end brands.

In fact, the product positioning of Chinese brands in overseas refrigerator market has improved compared to ten years ago. The Chinese brands, with acquisition brands excluded, have seen its price index up to 76 in Q1 2024 from 66 in 2015.

The increase in the product price index is mainly due to the innovation in product categories and the upgrading of product functions by Chinese refrigerator brands. From competing on price in low-end product categories with local brands and retailers to focusing more on high-end product segments in overseas markets, Chinese brands have gradually transformed their brand images. It is observed that Chinese brands have a clear advantage in the market share of some high-end refrigerator segments in the first quarter of 2024. Currently, the competitive advantage of Chinese refrigerator brands in the high-end segments still mainly lies in price.

Low consumer confidence, an opportunity to enter and expand in the high-end market

Chinese refrigerator brands went to great lengths to upgrade their product lines to go high-end. In the process, the world also underwent changes that provided them an opportunity to enter and expand in the high-end market, for instance, the U.S. brands’ pulling out of Russian market in 2022, and a rise in the global refrigerator prices due to changes in exchange rates, transportation costs and inflation.

The consumer confidence is low across the globe in 2024. Consumers who used to choose high-end products start to turn to affordable, high-end products, and they are more open to new brands compared to pre-pandemic years, providing an opportunity for Chinese brands to squeeze in. Aside from positioning their products as innovative, affordable, and high-end, Chinese brands are also establishing their brand images to improve the profit margin as a coming step.

A focus on high-end functions such as energy efficiency and intelligence

While using customized door design and large capacity as selling points for high-end market, Chinese refrigerator makers also focus on energy efficiency and intelligence to enhance their high-end positioning of products and therefore to improve the profit margin.

According to consumer survey results in 2023, the most considered product indicator when buying a refrigerator is energy efficiency, followed by frost-free and noise level. In terms of product design, more consumers focus on size and capacity, with 7% showing interest in smart features.

The consumer base concerned with energy efficiency is substantial. They purchase high energy efficient products to save on their electricity bills while to express their concern for sustainability and environment. Plus, the energy efficiency standards are continually upgraded across the world. Focusing on energy efficiency not only attracts consumer attention and enhances corporate social value but also targets middle-to-high income groups to consolidate the high-end images of brands.

Though the proportion of consumers interested in smart functions is not high currently, the smart functions applied to refrigerators in recent years are gradually gaining traction compared to the smart features such as WIFI connection and product maintenance a few years earlier. The rise of AI, coupled with the long R&D of smart functions of Chinese brands, will provide a boost for Chinese refrigerator brands in their brand establishment.