Sales Channel Reform Tests Chinese Air-Con Giant Gree

With its sales company system shrinking, agent profits narrowing, and its online business launched later than its peers’, sales channel reform is proving to be a test for Gree Electric Appliances, China's leading maker of air conditioners.

Gree's retail sales have fallen since December compared with the same period a year ago because of the Covid-19 epidemic and increasing price sensitivity among consumers, one of its sales agents told Yicai Global. The company's mid to high-end air-con units cost at least CNY300 (USD44) more on average than those of other brands’ products, with the price gap of centralized air-con systems reaching between CNY1,000 and CNY2,000 (USD148 and USD295).

Gree's profit margins are also declining, narrowing to 1.2 percent in 2022 from about 4 percent in previous years, according to another agent in East China.

In 2011, Zhuhai-based Gree set up Shengshi Xinxing to manage about 30,000 air-con stores across China, but its nationwide sales company system is contracting.

Gree mainly relies on offline stores to maintain its market advantage, while its rivals, such as Foshan-based Media Group, have speeded up their shift to online sales. When Gree launched its e-commerce business, the firm’s competitors had already established a hold on the market.

Gree is launching a new sales model in Anhui province to enable it to connect with distributors directly and keep its sales companies focused on providing services, industry insiders told Yicai Global. The reform is led by Wang Ziru, who joined Gree last year. Wang oversees the firm's digital channel management department, dealing with products from pricing to logistics via an internet platform, a source close to the company said.

But the firm’s sales department lacks motivation following a sales policy disagreement with Gree Chairwoman Dong Mingzhu about how best to balance the interests of all parties after changing the sales system to a service function.

Chinese households bought 57.14 million air conditioner units last year, a 3.3 percent decline from 2021, according to figures from market research firm AVC. By value, sales rose just 0.3 percent to CNY196.9 billion (USD29 billion). Offline channels shipped 26.66 million units, down 7.7 percent from 2021, with the value sinking 2.8 percent to CNY104.3 billion.