» Biz Commentary
Wow! iPhones have it, fridges don't
CONSUMERS want better prices, but they also crave more cutting-edge features in the merchandise they buy.
Perhaps the home appliance industry, now in the throes of a massive price war, could learn a lesson from the information technology sector.
In the mobile phone industry, for example, iPhone and Samsung's flagship models are always the most anticipated devices to hit the market, even their prices are triple or fourfold that of a mainstream handset.
Apple Inc, which is widely expected to kick off next-generation iPhone next month, sells iPhone 4S starting at 4,600 yuan (US$730) over its entry-level 16GB model. Samsung's Galaxy 3 costs about 4,500 yuan. Comparatively, the average price of Chinese handset is about 1,200 yuan. When consumers look at operating systems such as Apple's iOS, Google's Android or Microsoft's Windows Phone, they assess design, touch-screen capability, battery life, the user experience and the number of applications in addition to price.
Though Apple and Samsung sell products at high prices, their technology sells well because of the innovation and design, such as Apple's iOS ecosystem and Samsung's large-size screen.
Applying that marketing concept to the home appliance industry, what do consumers look for when purchasing an air conditioner or a TV?
Most consumers would probably choose the air conditioner with the best price among trusted brand names.
For TV purchases, tech geeks would probably weigh up the merits of 3D technology versus an LCD screen from Sharp, Samsung or less well-known Taiwan firms. Most would still base their final choice on brand and price.
Thus, it's easy to whip up a price war in a sector where price, instead of innovative products, rules the roost.
The price battle started earlier this month when online retailer 360Buy.com said it would sell appliances, including TVs, air conditioners and washing machines, at a 10 percent discount to the prices at rival Suning. Suning, a top China appliance retailer, fought back later with its own price cuts, and rivals like Gome's online unit and Tencent arm 51Buy.com were forced to join in the fray.
Centering on patents
As the home appliance war heated up, the competition in the information technology sector centered on patents.
Lawsuits over patents covering top brands like Apple, Google, Samsung and HTC and sectors such as design, operating systems, touch-screens, voice assistant (Siri), cameras and batteries also heated up.
To challenge the leading market position of Apple, Samsung sued it for disputed patent on design, while Google acquired Motorola Mobility to own the necessary patent to protect its Android mobile system.
In the game console market, Sony used to dominate in the 1990s with its Playstation. That was challenged by Nintendo, which invented Wii, with unique motion capture technology. Then came Microsoft, whose XBox has gained market share in the recent years thanks to Xbox Kinect and its more advanced sensing technologies.
Each of these market giants won consumers through new technologies or design, not lower prices.
It's a widely repeated industry mantra: First-class companies own patents and standards, second-class companies have the best products and designs, and all other rivals compete on price but rarely show great profitability.
With high prices and best-selling innovation, Apple and Samsung have cornered 90 percent of global profits in mobile phones.
By contrast, 360Buy is still struggling to move into the black from the red despite investment from venture capitalists.
It's hard to find a "first class" company in the home appliance industry. There are a limited number of firms that might be called "second class."
The home appliance industry needs to see the writing on the way and realize that it is at crossroads in development. A price war is destructive to that process.
Apple is widely expected to launch its own-brand TV device soon. Based on the company's commercial history, I believe Apple has the ability to revolutionize the TV industry just as it did in digital music and mobile phones.
Google and Samsung also have great potential in the TV sector because of Google's great resources and Samsung's strong patents on flat panel displays and 3D. Actually, the firms do well in mobile phone history on Android.
Internet of Things, which connects various devices through a network, is a promising technology.
It can enable people to program wash machines, refrigerators and air conditioners through mobile devices or even by wearing devices like Google Glass or a watch connecting every thing.
A lot of new gadgets and functions are expected to debut in the home appliance industry within 12 to 18 months.
The smart consumer will just forget the current price war and wait for the "wow" devices of the future.
Or if a price war suits your pocketbook, why not wait another month for the run-up to China's National Day holiday on October 1?
That's traditionally a season of big discounts when retailers are willing to sacrifice profit for sales volume.