Source: China Appliance (run by CHEAA)
Looking back at the smart appliance craze in the past three years, China’s home appliance players shake off their anxiety and disorientation, and become more assured. At the beginning of 2017, they are poised to usher in the new era of smart appliances.
Eye-catching market performance
Smart appliance sector saw a boom in 2016, after a few pioneers tried it out on market in 2015. Statistics from All View Cloud (AVC) suggest that, brown goods expand fast in this sector. In the first three quarters of 2016, sales volume of smart TV posted 28.7 million units, a year-on-year increase of 21.5%, accounting for 81% of color TV market.
Not to be outdone, smart white goods market posted strong figures too. Statistics from China Market Monitor Co., Ltd (CMM) suggest that, sales of smart white goods sector are expected to reach 13.6 million units in 2016, a year-on-year increase of 128.9%, accounting for 11.6% of white goods market. And its sales are expected to reach 44.3 billion Yuan, a year-on-year increase of 108.1%, accounting for 14.9% of white goods market. CMM predicts that, China’s smart white goods sector would continue to rise in 2017, with estimated sales volume of about 23.63 million units and estimated sales of about 70.9 billion Yuan, accounting for about 20% of white goods market.
What lies behind these figures are an expanded product portfolio. Smart appliances develop at a different pace. White goods saw air conditioners grow fastest,while washers and refrigerators come second and third. CMM predicts that, as of 2020, smart appliances are expected to create an accumulated demand of 1.5 trillion Yuan. And by then, smart products are expected to account for 45% of white goods, 28% of life appliances, and 25% of kitchen appliances.
New strategies launched to minimize discrepancies between enterprises’ campaign and consumers’ feedback
What comes along with fast market expansion is criticism. It seems that infancy-stage smartness fails consumers’ high expectations.
With smart product campaigns in full swing and technical terms such as “cloud technology”, “big data” and “artificial intelligence” constantly popping up, consumers’ complaints surface, concerning connection stability, difficult-to-use operation and unpractical functionalities. These discrepancies are what to be improved at the primary stage of home appliances. Xu Chengmao, Chief Digitalization Officer of BSH Home Appliances Holding (China) Co., Ltd, remarked in all honesty, “when it comes to smart appliances, we must shift our focus from bells and whistles, and really come down to products.” Jiang Feng, president of China Household Electrical Appliances Association (CHEAA), points out that, “primary stage smartness fails to satisfy consumers with the value and experience they offered.” Zhao Feng, Vice President and Chief Technology Officer at Haier Electronics, summarizes the pain points down to four aspects: difficult-to-use functionalities, difficult linkages, passive responses and fragmented services. He believes that, smart appliances 1.0 are at where smart phones used to be 10 years ago, and at this point, they are not able to provide users a unified experience.
Amid above issues, smart appliance makers are actively developing their new strategies.
“We are working on three things: expanding the connection scope of devices; achieving home wide integrated smartness built upon individual products; digging the value of data generated by devices.” Xue Guodong, Director of Product Strategy & Operation of Midea Smart Technologies, says that, “stable and secure connection comes as our top priority.” He believes that, connectivity is a prerequisite to elevate consumer experience to a higher level. And just like Midea, many industry leaders are deploying connection-related strategies.
“Internet-enabled products are smart products.” Though this definition has long been ridiculed by industry insiders, connectivity is no doubt the base ground of smartness. A source from a domestic IoT enterprise tells CHEAA-run China Appliance Magazine that, “The Internet connects not only devices, but more importantly, people, or digitalized users. We talk about big data, but where do big data come from? Eventually, it comes from terminal devices which collect, upload raw data and then put it into analysis.” Previously, a finished purchase order almost ends the relationship between an enterprise and its users, but now Internet connectivity brings them closer than ever, and this is set to bring a change in business model.
“I believe smartization is an irresistible trend. It might come at a slow pace, but is due to grow to scale.” Xu Chengmao says. Some industry players’ expectation of explosive market demand might not be practical, because this sector takes time to grow. Smartization cannot be achieved overnight.
What do future smart appliances look like? Answers from Hu Ziqiang, Vice President and Dean of Central Research Institute at Midea Group, might shed some light. He believes that future smart appliances involve four aspects: (1) Product smartness, which is built upon smart technologies especially sensor and communication related ones. (2) Knowledge smartness, which helps enrich product definition and enhance its agglutinant. (3) Interaction smartness, which is expected to offer better experience. (4) Scenario smartness, which requires developers to shift from engineer-centered thinking to user-centered thinking and elevate user experience in all scenarios.
A new era for smart appliances
More and more enterprises come back to products and manufacturing after suffer a period of disorientation. “No one knows better how to make a refrigerator or a washer than home appliance makers do. We must never forget who we are, and get back on the right track.” Xu Chengmao’s words at CHEAA-organized 2016 Technical Conference tell exactly what many home appliance makers are thinking.
Products and manufacturing are what home appliance makers excel at. Wang Qiang, CTO of Hangzhou Robam Appliances Co., Ltd., points out that, “in smart appliance era 1.0, we have been focused on connection in a bid to establishing an eco-system throughout the industry chain. In era 2.0, we focus on products, and let users define and select smart functionality based on their needs and occasions.” Xue Guodong from Midea also attaches great importance on manufacturing in his interview, and emphasizes Midea’s position as a manufacturer.
This comeback features an increased attention on software. “Smartness comes from software.” Xu Chengmao from BSH believes future smart appliances need a revolutionary structural change. He says, “Product functions are fixed and limited now partly because of the domination position of hardware. In the future, it will be hardware facilitating software, and a product could be updated throughout its life cycle.” If future smart appliances resemble smart phones to some degree, home appliance makers must prepare themselves with new talent pool and start to look at software.
“The biggest challenge confronting smart home appliance players is neither technology nor resource availability, but business model and profit model.” Tracy Tsai, Research Vice-president at Gartner, a leading information technology research and advisory company, points out. Business model of smart appliances has been a hot topic in 2016. Zhao Feng from Haier believes that, “by connecting terminal devices through IoT and people through interaction, smart appliances develop an eco-system surrounding smart scenarios. This system is designed to achieve cross-boundary synergies and therefore establish a value-sharing open eco-system. This could be a business model of smart appliances.”
Home appliance smartization is overturning the current industry pattern including people structure, R&D process, business model and more. “Instead of being overturned, we prefer doing it ourselves.” CHEAA’s president Jiang Feng says. Jiang Feng reveals that, CHEAA has been devoted to advancing connectivity among brands and is scheduled to present what it has achieved at the forthcoming AWE2017. “It is a great thing for the industry and we’re glad being part of it.” Xue Guodong from Midea remarks as a participant of this initiative. Connectivity of this level has never been achieved before.
Xu Chengmao from BSH says, “From the standing point of an enterprise, product smartization is only part of its digitalization process. The real challenge is business model transformation.”
Graph from Gartner suggests that smart home is set to peak by desired value, and it is expected to take 5 to 10 years to go main stream. Year 2017, as a critical time in this process, see industry players positioned to start over with refined strategies.