Rice cookers have become symbolic of a deep rooted problem for China’s leaders. Although China makes more rice cookers than anyone – including some excellent models, Chinese consumers are tripping over themselves to buy imported ones. The average price of a Chinese rice cooker sold online is ¥574 ($88), while an imported cooker averages ¥2,523 ($389).
Just as Japanese toilet seats were the talk of the town early last year, Japanese rice cookers have been getting a lot of airtime in China this year. Since 2005, rice cooker imports from Japan have grown some 2,000% causing both Beijing and manufacturers to question why the factory of the world, with all of its expertise and capital, are building very few premium rice cookers that Chinese consumers want.
Enter Xiaomi’s Lei Jun on his white horse, using the obligatory warring words of China’s tech oligarchs. Lei claims his rice cookers will not only take a share of the $1.6 billion category, but are also about beating Japan and showing the world that China can make great and smart appliances.
Like many Chinese manufacturers, Xiaomi has a strong focus on integrating online features and functions into traditionally humble appliances. It is an increasing trend coming from innovative Chinese manufacturers which is being supported by tech-hungry Chinese consumers. More than 75% say that smart home technology will impact their lives in the next few years, compared to the global average of just over 50% according to GfK research.
Smart home appliances are representative of an overall O2O (Online-to-Offline) revolution that China is leading the world in – connecting offline objects and actions with Internet-connected devices. The trend is making Chinese consumers’ lives more convenient and creating a gold mine for those who can utilise the data.
In the retail segment – even back in 2014, the average Chinese consumer who was engaged with a brand online and offline, spent 60% more than in-store-only customers. In the first half of 2015, China’s O2O sector grew 80% year-on-year according to HSBC, who believe the sector is a ¥10 trillion ($1.54 trillion) market that is only 4% penetrated.
All the buzz has attracted plenty of cash for O2O startups. Many are comparing China’s O2O hysteria to the late-90s dot-com bubble in Silicon Valley, where significant wads of cash were invested in unprofitable business models. Chinese O2O startups are using their investment capital to subsidise and incentivise Chinese consumers to join the service, hoping they will be the last one standing in a war of attrition. An estimated ¥50 billion ($7.7 billion) a year is being poured into subsidies alone.
The highest profile subsidies are from the ride sharing apps, led by Didi Kuaidi, who’s valuation is now $20 billion – 33% up from last July. The company has set aside $4 billion this year to suffocate Uber and their estimated $1 billion of subsidies. Likewise, restaurant and cinema reservations service Meituan Dianping vaguely alluded to providing discounts and subsidies of ¥58 billion ($9 billion) last year, just as Alibaba and financial arm Ant invested $1.35 billion on online food delivery service Ele.me, not long after the company was rocked by a food scandal.
The huge figures and innovations should illustrate how hotly contested the Chinese consumer market is right now, and the lengths that businesses are going to tempt customers. The brands most likely to win are the most cashed-up and/or the smartest. On the bright side, O2O services provide new and exciting opportunities for almost every brand to reach Chinese consumers. China Skinny can assist with that. Go to Page 2 to see this week’s China news and highlights.