Liping Zhang

Guangzhou Liby Enterprise Group Company Limited, China

General development situation of daily chemical industry in 2015

China’s annual GDP in 2014 grew at the rate of 7.4%,the GDP growth rate slowed to a 25-year low of 6.9%in 2015. The Business Climate Index of light industrial enterprises dropped from the 107 of 2011 to the 89 of the end of 2014. That means Chinese economy has entered a new phase, namely, “new normal”. The “new normal”means the Chinese economy is different from the high speed growth pattern exhibited in the past. It is a new trend that features more sustainable, mid - to high - speed growth, with higher efficiency and lower costs.

According to the statistics by China Cleaning Industry Association, in the period January ～ July of 2015, main business revenue of the enterprises, above designated size in the daily chemical industry was 216.17 billion Yuan, up 9.02% year-on-year; the cost of the main business increased by 8.91%, the total profit and tax increased by 2.74%, the increase rate of profit was 0.70% year-on-year (Table 1).

Table 1 shows that detergents suffered a great loss, the profits decreased 23.85% in first two quarters of 2015,while the year-on-year of gross profit for oral care industry increased 13.65%, and the year-on-year growth of gross profit for cosmetics increased 9.51%. Although the profit for the home care product industry dropped, its year-onyear growth rate of the main business was 3.25%. The data shows that the market demand still exists, and consumers are willing to spend more money for better health-related products, such as oral care products and cosmetics. Since the domestic consumers’ demand for daily chemicals is rising, why is the profit for the household cleaning product industry decreasing?

Table 1. Economic index of daily chemical industry from January to July in 2015

Challenges and opportunities

Challenges

Intensification of industrial competition.The enterprises invest heavily in store employees become one of the main means to contribute to the terminal sale amount, and the execution of the Labor Law has increased the cost of labor.

The impact of on line shopping on retail property.In recent years, consumers can buy detergents online at low prices. The impact from on-line retail has forced the largesized retailers to improve their service and carry out sales promotional activities to attract consumers back to their stores. Stores often offer discounts and free gift.

The above factors have resulted in the rise of the terminal cost, the detergent industry has entered a dilemma. If we give up the terminal bussiness, it will cause a direct loss of the sales amount and market share, and the brand's influence power will be greatly affected. If we rely on the terminal bussiness too much, the cost will become heavier and that will be nothing more than seeking temporary relief, regardless of the consequences.

Opportunities

Income increase.In the new normal state, the government should raise the wages of low-income people, and at the same time, the government should offer basic social public welfare to all the citizens. Those policies will provide more jobs, and the consumption funds will increase.

Enhance consumption.In 2014, consumption to GDP growth contributed more strongly than investment to GDP growth for the first time. The two-child policy, which came to effect in 2016, will greatly enhance consumption.

According to the above, the industry can find the new growth. Data from National Bureau of Statistics indicates that in 2015, the proportion of China's population aged 60 and over reached 15%. The industry should upgrade hardware, to improve the degree of automation, provide more convenience product. In 2015, about 749 million people had lived in urban and 619 million in rural regions in China. With the changes of the living environments, more and more people will need cleaning products.

According to the report of the National Economy and Social Development Statistical Bulletin of 2013, up until March 2014, the total population in China was 1.36 billion; among others, in the age distribution, the total population aged 15 to 34 exceeded 0.4 billion, becoming the mainstream consumers. Table 2 shows the demands in different age groups of consumers. Consumers have different demands, depanding on ages, family structure and economic conditions. Market segmentation and product differentiation will meet the demands of different consumers.

Breakthrough of cleaning industry

In order to achieve new growth, the cleaning industry may improve from the following 3 aspects.

Redefine the target for the industry：continue to improve the consumers’ living standard, reduce the environmental impact

Researchers of the cleaning industry often develop new products to expand market share, according to the demand of the corporation’s market department.

Why do companies launch new products into the market?What is the goal? Is the goal improve the consumers’ life or expand market share? The introduction of new products in general appears to be driven by consumer demand. The more the manufacturer believes consumers will be interested in purchasing the item, the more likely the products will bee introduced. The more likely the company feels the new product will help its market share, the more likely the product will be introduced. Changes in consumer demands for products provide opportunities for manufacturer to introduce new products. At the same time, in order to keep industry’s sustainable development, the environment impact of the newproducts, selection to renewable raw materials and energy must be considered in product design.

Table 2. Demands in different age groups in China

Refactoring product line

Now, consumers can learn more about product performance through the Internet and social media, the time of using false advertisement to fool consumers has over. The main purpose behind marketing a product is to satisfy demands and wants of the consumers. It is important for enterprises to study consumers’ behavior.If the consumers are satisfied with the product, they will buy the same product again. In product design, the companies should focus on the efficacy that can enhance the consumers experience.

Promoting innovation

A study found that the consumers concern not only traditional efficacy such as “stains removal”, “decontamination”, “whitening” etc., but also high additional efficacy such merits as “non residue leaving”, “fadeless”,“gentle enough for hands” and “easily rinsing”. Consumers’new demands must be met by research and application of new materials. Liby Group Company lauched a natural soap liquid in 2015, which provides excellent performance on fatty and oily stains with some natural ingredients.When consumers find the benefits of the product, they will share their experiences.

Figure 1. Statistics on Chinese patents of chemical and textile categories

In the recent 5 years, China’s innovation in the daily chemical industry showed a fast growing trend, and the number of new products launched into the market and the number of patents issued can be regarded as indicators of innovation. Figure 1 shows the general condition of patents in chemistry and textile products.

From Figure 1, it can be seen that, from 2009, the invention patents application and authorization, entered a stage of high-speed development. China has a rich pool of science and technology talent. Modern analysis technology have developed rapidly. All these have boosted the development of chemistry-related technologies, and the innovation in daily chemical industry. All the major companies in the industry have also increased investment in research and innovation to keep pace with leading companies.

Conclusion

In the first half of 2015, China’s profit in the detergent industry further declined. Channel diversification has a significant impact on the cleaning industry. There are some ways to make breakthroughs: innovation, continuing pour money into R&D, consumers study, and segment market. In recent years, China’s daily chemical industry showed a trend of high-speed development, the reserve quantity of highquality talents, the development of information technology and analysis techniques, which will greatly boost the innovation of the daily chemical industry. These are also the measures for the industry to make a breakthrough in the new normal state.