The Golden Week festivities in China, this year held for eight days from Sept. 30 to Oct. 7, seems like a perfect time for retail spending to increase in that country. However, for the past three years, spending during the holiday has only increased 18 percent on average.
Much of the blame for this weak growth comes from the government’s policy to abolish tolls during the week, causing consumers to travel instead of staying at home and shopping. As a result, electronics companies weren’t planning for this year to be any different, according to IHS iSuppli China research from information and analytics provider IHS.
Based on information from China’s National Bureau of Statistics and National Tourism Administration, the total number of tourists during Golden Week this year reached 425 million, a 40.9 percent increase over that of 2011. Total tourism income during the week rose to 210.5 billion yuan—or $33.7 million—equivalent to a year-over-year growth rate of 44.4 percent.
Yet during Golden Week 2012, retail spending grew only by 15 percent year-over-year, less than the average for the past three years. As a record 80.9 million people traveled by road each day during the holiday, most decided to either travel to scenic locations or rush home, instead of going shopping.
Japanese products down, Korean goods up
In China’s domestic retail market, anti-Japanese protests are continuing because of territorial disputes with Japan on Diaoyu island, located in the South China Sea between the two countries. As a result, the sales of Japanese products, such as home appliances and automobiles, have fallen precipitously in China. In the TV market, Chinese domestic brands occupy more than half of the market, while South Korean brands are thriving. Among all the brands, TCL Multimedia, Skyworth and Konka—Chinese manufacturers all—are the biggest winners.
One reason why TV sales in China are surging is because the government unveiled an energy efficiency subsidy program earlier this year. With the subsidy, pricing competition was less severe during the Golden Week promotions. And although a sales blowout didn’t happen in the consumer market, the upgrading of home appliances and high-end products kept sales momentum going during the week. Chinese brands Midea, Haier and Gree are still the first choice among customers, with some high-end products from these brands proving to be as expensive as European or Japanese names.
Handset sales thrive
During promotions on Golden Week, Chinese electronics retailers generally cut prices on handsets by 100 to 200 yuan. Smartphones are still the most welcome purchase among buyers. For instance, the Samsung Galaxy S III sold more than 10,000 units, and maintains its position as the best-selling phone in the China retail market. The Xiaomi 1S and Tianyu W619, both local brands, ranked second and third, respectively. Although Apple’s iPhone 5 has yet to be sold through official channels, the iPhone 4S ranked No. 4 in the Golden Week holiday sales.
In the PC market, energy-saving subsidies (260 yuan per PC) went into effect Oct. 1, but sales were still flat during the week. Two main factors were responsible: the effect of new policies needed time to influence the market; and many buyers are awaiting the Windows 8 launch at the end of October.
Domestic demand down
Within the domestic economy, inventory for raw materials picked up and industrial stockpiles returned to normal levels, showing steady growth to be gradually taking place. The Chinese government will further relax investment limits and restrictions on imports and exports—actions expected to encourage more foreign long-term capital.
Overall, however, China’s growth in domestic demand for electronics has come down from last year’s levels. Gross domestic product remains sluggish because of weak exports and lower investments.
However, the easing of restrictive monetary policies and the implementation of government stimulus measures could again reverse the downward trend in demand for the months to come. And as the world’s second-largest economy, China is expected to flex its buying power to the maximum, especially within the confines of its domestic electronics market.
Read More >> China Electronics Supply Chain