The recent phenomenon of large-scale tenders for home appliances on JD.com indicates many issues that will be encountered in the operation and competition of the home appliance market in the coming quarters. For instance, home appliance manufacturers solely focusing on slashing prices will only end up hurting themselves; subdued consumer demand will be the most challenging issue for manufacturers to tackle in this year's market competition; manufacturers must be bold in setting prices but also avoid getting trapped in a cycle of endless price cuts.
Recently, JD.com's massive tenders for home appliances have resulted in prices for products across all categories being extremely "outrageous." Many of these prices are so low that it's evident they don't even cover the production costs for manufacturers. However, JD.com continues to ship large quantities to first-tier markets, facing channel distributors and scalpers. It remains uncertain how offline distribution channels for home appliances will fare in the upcoming quarters.
Industry insiders have recently disclosed that JD.com's large tenders for home appliances have pushed many low-end product prices below the production costs of home appliance companies. This signals that the price war in the home appliance market during the next quarters may be inevitable, though the timing remains uncertain.
Facing JD.com's extremely low prices in the large tenders, several channel distributors have expressed their inability to handle such goods anymore. They can only watch as scalpers take advantage. Ultimately, the impact will be felt by the authorized distributor systems of various home appliance brands. However, these large tenders mostly involve low-end products and won't significantly affect the normal operations of JD.com's self-owned exclusive stores' distributor system.
Despite this, many home appliance insiders express concerns about the continuous decline in prices in JD.com's large tenders. Firstly, in a market where supply exceeds demand, major channel distributors like JD.com, Alibaba's Tmall, and Suning have gained the power to counteract home appliance companies' market operations and product pricing. In essence, home appliance companies no longer set prices; instead, the prices are dictated by channel distributors, and companies can only sell their products if they can meet those prices. If platform sellers inject additional subsidy resources to meet their operational and competitive needs, it could lead to extreme situations where the prices of JD.com's large tenders fall below the factory cost.
Secondly, amid the persistently subdued consumer market for home appliances, companies will inevitably adopt a series of internally competitive strategies to grab market share. While low-priced appliances may not sell, many manufacturers will continue to slash prices to compete, as they have no better alternatives. Moreover, it's not just e-commerce platforms engaging in price competition; various channels, including live streaming, offline retail stores, and exclusive stores, will also participate. Furthermore, home appliance companies will directly engage in price competition within their own channels, while e-commerce platforms will continue to engage their franchisees in this competition.
This is why the prices in JD.com's large tenders have continued to decline recently. As a participant in the market, if you don't engage in price competition, you'll face the awkward reality of being outcompeted by others. Therefore, the market landscape in the future will see more and more powerful home appliance companies and channel distributors compelled by competition to engage in aggressive pricing strategies. Conversely, many home appliance companies and retailers will lack the strength and autonomy to engage in such aggressive pricing strategies, leading them to be passively drawn into a commercial quagmire of "passive competition."
Ultimately, this situation serves as a reminder to many home appliance companies and retailers in the market: whether in the second or third quarter of this year, as long as market competition and consumer demand remain subdued, internal competition will only intensify, exacerbate, and magnify. Therefore, they must prepare psychologically and strategically in advance. They must either actively participate and embrace internal competition or be forced out during the internal competition.
In response to the current market situation, distributors from sinking markets on e-commerce platforms express the sentiment within the home appliance industry: the current market reality is that whether it's companies or platforms, even if we're not rapeseed, we've become soybean cakes, they will still exert full force to extract a few drops of oil from us. In the end, we can only be passively drawn in until we can't be drawn anymore and then withdraw! It's not a big deal after all!
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Disclaimer: Personal original work, for reference only.
