13 Sept 2017
Huge Market Potential for Air Purifiers in China
An Interview with Xiang Yong, Sales Engineer, AAVI Technologies (China)
In view of serious smog problems in recent years, China is paying increasing attention to air quality. The general public also have higher awareness of air quality and their demand for air purifying products is on the rise.
Founded in Finland in 1983, AAVI Technologies (AAVI) entered the Chinese market in 2013 and was later acquired by Synergy New Energy Technology, a Beijing new energy services firm. AAVI has since set up its headquarters and established an agent network on the mainland.
The company now employs more than 200 people and engages mainly in the manufacturing of air purifying devices. With a clientele comprising households, large shopping malls, schools, nursing homes, cinemas and manufacturers, AAVI has a full range of solutions for domestic, commercial and industrial use. Domestic devices now account for roughly 60% of its business.
Huge Market Potential for Air Purifiers
Xiang Yong, a Sales Engineer with AAVI China, said that air purifiers have huge market potential in China because, along with industrial development, environmental pollution and air quality deterioration problems are increasingly acute. In recent years the country’s smog problem has become serious, particularly for inland areas like Beijing. In the last three to four years, as the government pays increasing attention to air quality problems, the general public also have higher awareness of air quality. Xiang said: “As the government is not particularly successful with managing outdoor air quality at the moment, citizens have to resort to finding ways to improve indoor air quality by themselves.”
Xiang believes that, as the economy develops, people have higher awareness of environmental protection and will have an increasing demand for air purifying products. Therefore, air purifiers will become the fifth most sought-after home appliance in China after air-conditioners, refrigerators, washing machines and TVs.
Currently though, ownership of air purifiers in China is still low, with only 10% of the population estimated to have bought an air purifier. Xiang said: “Ownership of air purifiers is higher in first-tier cities because there are more high-income and high-end consumers. People buying air purifiers are usually those who want a better quality of life and hence pay greater attention to air quality.” He expects more and more mainland consumers to buy air purifiers every year, especially in big cities.
Over the years, there has not been much change in the number of air purifier brands, with about 20 active in the China market, including Boneco from Switzerland, Philips from Holland, along with Panasonic and Sharp from Japan. The majority of the active brands are foreign, coming mainly from European countries that have been industrialised for many years.
Consumers have more trust in foreign brands, partly because of effectiveness and partly because foreign technology is more mature and quality is better. The market share of indigenous Chinese brands is not very high because consumers do not have sufficient understanding of air purifiers – they think that, unlike refrigerators and washing machines where performance is quite easy to understand, the more expensive an air purifier, the better it would be.
Multi-functional, Energy Saving and Environmentally Friendly Products Gaining Favour
Mainland consumers are trending towards professional and multi-functional products. Xiang pointed out that multi-functional air purifiers are selling better currently – air purifiers which combine the functions of an air-conditioner, controlled mechanical ventilation system, air circulation system and purification system are highly popular. Also popular are products with low upkeep costs, no filter replacement requirement, better energy-efficiency and more environmentally friendliness. Xiang said: “Consumers are beginning to ask for personalised after-sales services, so warranty periods have extended from the previous one to two years up to five to seven or even 15, 20 or 30 years in some cases. After-sales services, such as extended quality guarantee, free replacement of parts and free cleaning, have gradually become effective ploys to lure consumers.
“When consumers are buying an air purifier, the first things they look into are voltage ratio and power consumption, and the last item they are concerned about is ozone content. As to safety certification, certification from authoritative institutions and testing reports from relevant departments, such as air testing reports, are very important to consumers who do not have a good understanding of this industry.”
Xiang believes that, in choosing air purifiers, consumers often start by taking note of the brand, and then go over information such as professional certifications before making their decision. But at the end of the day, they will base their decision on the brand, manufacturer promotions, advertising and word of mouth.
Online Selling Has Limited Impact on Physical Stores
One of AAVI’s distribution channels is corporate direct sales. The targets of this channel are commercial entities, and the sales pitch is more professional and comprehensive air purification solutions, backed by superior after-sales services. A second channel consists of agents that sell mostly household products to individuals and family users. A third channel is product demonstration centres for marketing both household and commercial products. While on-site orders of household products are accepted, commercial products are mainly for demonstration purposes. The last channel is online, which was launched in August 2016 and currently accounts for about 10% of total sales. AAVI has already set up its flagship online store in Tmall and plans to set up shop in JD.com too.
Xiang said: “For brand owners, online channels are less costly because a centralised platform offers savings in manpower and other resources. For customers, product prices are lower and shopping is more convenient. For agents, it is easier to promote their business through online channels because the same website can sell products from different brands simultaneously.”
Xiang believes that online selling has limited impact on bricks-and-mortar stores because the air purifier industry has highly specialised requirements. So even though online sales exist, physical stores are necessary to offer product demonstrations to customers.
Co-operation between Brand Owners and Agents
AAVI’s marketing staff typically make telephone calls to selected agents that are strong and specialised. According to Xiang, brand owners usually sell to agents at wholesale prices and require that agents’ selling prices should not be lower than the company’s own direct sales prices. Brand owners specify minimum shipments for agents and also have monthly minimum sales requirements.
If an agent’s sales performance is lacklustre, wholesale prices will be raised. Agents with satisfactory sales performance will be rewarded, often according to their sales turnover. If an agent exceeds the minimum sales, the brand owner will offer price discounts according to the agent’s shipment quantity.
Xiang attributes the success of co-operation between a brand owner and an agent to the agent’s capability and its understanding of the brand. He said: “The co-operation will stand a better chance of success if the agent is capable of selling huge quantities, has an extensive customer base and a thorough understanding of the brand. If competing brands set their prices very low, or the brand itself is not sufficiently known, the co-operation will likely end in failure.”
Xiang pointed out that agents are willing to work with AAVI because, other than its competitive prices, the company has some 100 patents under its belt and has the latest technology, which is recognised in more than 80 countries around the world – credentials that are not easily matched by other manufacturers in China.