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Midea looks forward towards better development through crowdfunding, what could this mean for the goodwill of the company?

Midea is facing the same fate as many Chinese corporations, asking for funding, going the old-fashioned way, through Kickstar

Midea is a multinational technology company specializing in HVAC systems, consumer electronics, robotics, and industrial automation, and the digital market. (1) Midea provides a wide range of products and services, including HVAC, home air conditioning, industrial air conditioning, and heat recovery ventilation systems); electronic appliances, laundry devices, fridges, kitchen equipment, and other small home appliances robotics and industrial automation systems KUKA and Guangdong Midea Intelligent Robotics Co., Ltd; and various products and services. Midea combines the World’s resources and facilitates technology advancement to make a better world for over 400 million users, affiliated companies, and trade alliances in various areas, with Bring Great Innovations to Life as its corporate vision, Integrate with both the World, to Motivate Your Future as its mission, and Embrace what’s next, Aspiration, Dedication, Collaboration, Innovation as its values (2).

Midea, a multinational operating firm, currently has about 200 branches, 28 research and development centers, 34 main manufacturing bases, and nearly 150,000 employees. Its operations span over 200 countries and regions. Midea employs over 30,000 people worldwide, with 18 research and development centers and 17 manufacturing bases spread across more than ten countries. Midea accepts 22 different currencies as payment. Midea is also the largest shareholder in KUKA, a world-leading company in robotics and automation headquartered in Germany, with a 95 percent stake.

Midea is ranked No. 312 on the 2019 Fortune Global 500 (3) list, up 169 positions from its 2016 debut, and No. 36 on the 2019 Fortune China 500 list, the highest-ranking home appliance company in the country for the fifth year in a row. It also features prominently on the 2019 China Enterprise Credit Development Forum & the 10th Good Faith Public Welfare Ceremony’s Top 500 Most Credible Chinese Companies, Top 100 Most Reliable Chinese Companies, Top 100 Most Reputable Chinese Private Companies, and Top 500 Most Credible Chinese Listed Companies lists. (4) Midea also ranks No. 33 on the 2019 BrandZTM Top 100 Most Valuable Chinese Brands list, with a 20 percent increase in brand value. Midea also takes the lead among domestic home appliance manufacturers, ranking No. 27 on the Brand Finance Tech list released by Brand Finance, a British brand evaluation institution, up 16 spots from the previous year. The three international credit rating agencies, Standard & Poor’s, Fitch Ratings, (5), and Moody’s have all issued Midea excellent credit ratings. The scores are among the best in the World for home appliance manufacturers and Chinese non-state-owned businesses.

Midea’s big home appliances all took up a more significant share of the domestic market in 2019, according to AVC results. Residential air conditioners, in particular, had a much more substantial percentage of all platforms, with a 30 percent online market share and a roughly 29 percent offline market share. Midea continued to be the best-selling home appliance manufacturer on major e-commerce platforms such as JD, Tmall, and Suning in 2019, with online retail revenues close to 70 billion, up over 30 percent year on year. As one of the World’s leading household appliance manufacturers and a market leader in the main appliance sectors, Midea Group offers high-quality, one-stop home solutions across its extensive product line, including full specifications.

Being competitive

Midea Group has established a complete chain involving Research&D, manufacturing, and sales of critical units and finished units, supported by an industry-leading R&D center and manufacturing technologies of core devices such as compressors, magnetrons, electrical controllers, and standard controllers, and request, as white goods and HVAC enterprise with a full product line. In China, Midea is a well-known household appliance and HVAC brand. Its dominant position in the major appliance and HVAC markets can offer a diverse selection of attractive product sets (6).

Internal synergies in brand recognition, overall price bargaining, consumer needs analysis, and R&D investments are also included. Since the rise of the intelligent home, compatibility, synchronization, and interaction among household appliances have become increasingly important. Midea has a head start offering a combined and compatible innovative home platform with integrated home applications for consumers since it has a complete product portfolio.

Midea’s global activities and leading advantages in robotics and automation have been further solidified by the success of several international acquisitions and new market growth steps. The Group has been able to grow into new overseas markets quickly. It is becoming a stronger player in established overseas markets thanks to its world-leading production potential and experience and a wide range of products and production bases around the World. The Group is one of the World’s most prominent producers for several product segments, giving it a strategic advantage in production and cost reduction that its overseas rivals lack (7).

The Group’s international revenues account for more than 40 percent of overall sales revenue. It has 17 overseas manufacturing facilities and 24 overseas operating agencies, and its goods have been exported to over 200 countries and regions. The transformation of Midea’s global operations system from a platform unit to a corporate entity has further strengthened its global operations system. To encourage growth in its Branding & Manufacturing sector, it also raises investments in overseas business activities, focuses on local consumers’ needs, and improves product competitiveness.

Furthermore, Midea encourages global branding and expansion through global partnership and cooperation, based on deep product characteristics and product demands in the overseas market. Midea’s global competitiveness is slowly improving in this way. Currently, the Company has covered all tiers of the industry. Furthermore, the Company’s leadership in branding, brands, offline networks, and logistics delivery has provided a strong guarantee for the Company’s substantial expansion of its e-commerce sector and channels. Midea maintained the highest revenues on China’s popular e-commerce platforms such as JD, Tmall, and Suning in various home appliance groups, delivering the required online sales among China’s home appliance producers online retail close to RMB70 billion in 2019, up by over 30 percent YoY.

Performance in the Home Appliance sector

On the one side, variable-frequency air conditioners grew their market share to over 85 percent. The market share of variable frequency air conditioners with AFP Level Energy Efficiency increased by 8 percent to 57.3 percent. Higher energy quality requirements in 2020, on the other hand, would encourage energy efficiency upgrades and incorporation in the air conditioning industry. Laundry appliance retail sales in China totaled 70.5 billion in 2019, up 1.2 percent year on year. Major product upgrades were credited with a slight increase. In terms of product performance, the market share of high-end goods was steadily growing, with laundry appliances with a unit price of more than RMB 6,000 accounting for more than 23 percent of total sales; clothes dryers were attracting consumer interest, with heat-pump laundry dryers accounting for a much larger share of retail sales (8).

Small domestic appliance retail sales in China totaled 128.9 billion in 2019, up 3.6 percent year on year. As new product categories emerged, total sales of small household appliances continued to rise steadily. Vacuum cleaners, rice cookers, and blenders all saw increases in retail sales of 3.2 percent, 3.5 percent, and 1.4 percent, respectively, over the previous year. Meanwhile, the technological re-upgrading trend of intelligent recognition, intelligent display, and sweeping-mopping integration grew in both online and offline retail number of handheld vacuum cleaners. With people’s increasing understanding of the importance of living a healthy lifestyle, sales of hair-care and personal-care appliances have increased dramatically (9).

Creating better channels

Midea continued to encourage channel reform and transformation, flattening offline channel hierarchies, advancing the optimized integration and empowerment of distributors, firmly reducing inventories, optimizing the structure and streamlining SKUs, and significantly improving channel performance. It improved and upgraded domestic sales synergy across all product categories; Midea developed over 30 regional market operation centers. It reinforced the long-term sustainable growth capability of channels by carrying out more specific joint promotional activities for various categories. Midea worked hard to boost its B2B competitiveness by increasing revenues in the engineering channel. To better serve corporate users, it has established long-term strategic procurement partnerships with the top 50 real estate companies in the nation, long-term leasing apartment chain operators, and financial and insurance firms.

To improve the retail service experience, refresh and update its retail infrastructure, and expand its network scope, Midea creates a full-coverage and high-penetration retail network aimed at consumers in various cities and regions. On the one hand, it supports a project that brings supply chains and e-commerce platforms together to achieve accurate forecasting, intelligent inventory delivery, and automated restocking through data support and system connectivity. It develops intelligent supply chains to respond quickly to consumer demands. On the other hand, it allows consumers with one-stop shopping by collaborating closely with major retailers in offline outlets.

Dealing with shareholders

Midea Group safeguards the interests of its shareholders by adhering to a clear dividend strategy. After the Group’s initial public offering in 2013, it has placed forward cash dividend plans totaling RMB 46.8 billion to share its shareholders’ growth. Aside from consistent dividend payments, the Company has implemented several share repurchase programs. Following an RMB 4 billion share repurchase in 2018, the Company announced another share repurchase program in 2019 to further stabilize the market capitalization and protect shareholders’ interests. The shares that were repurchased will be used for equity compensation plans and employee stock ownership plans.

Going Global

In recent years, China’s engineering behemoths have struggled in Western markets. Trade sanctions have been placed on Huawei and DJI, and TikTok and WeChat face smartphone bans in the United States. In general, Chinese companies with a global presence are becoming increasingly concerned about growing geopolitical tensions. Businesses ranging in size from a startup making portable power stations to the 53-year-old home appliances behemoth Midea listened intently as Indiegogo’s China managers shed light on how to court Western customers event organized by California-based crowdfunding platform Indiegogo for Chinese consumer product makers in Shenzhen.

Midea raised 1.5 million dollars on Indiegogo last year for a new air conditioner device, (10) a pittance than the 280 billion yuan in annual revenue it reported in 2019. However, the 3,600 Indiegogo supporters were more of a proof of concept. Midea learned within a few weeks that a small air conditioner that fits snugly on the window sill filters out noise and saves energy could appeal to a large number of American consumers. Midea, like other well-known Chinese home appliance manufacturers, had been exporting for decades. “The first step is to enable the rest of the World to hear us.

Li Yongqin, general manager of Indiegogo China, prompted a room of entrepreneurs, “We have achieved that.” “After that, we’ll bravely ride the wave and take on the challenge of being the brands that consumers all over the world love.” Chen Zhenrui, who manages Midea’s overseas e-commerce initiative, said that “crowdfunding offers us a straightforward way to understand customers.” Indiegogo and Kickstarter are examples of platforms that enable individuals and organizations to raise funds from many people to finance a project. Backers usually receive benefits or discounts from the projects they support.