From an annual output of 50 million sets last year, it's estimated that manufacturers only sold 20 million sets to the domestic market and exported another 10 million, with the remainder left unsold.
At one stage, desperate manufacturers were unable to find a floor for prices as they tried shifting excess stock. The low point occurred in early 2001 when 29-inch sets were selling at 1,500 yuan (US$184), a price that barely covered the manufacturing cost.
Part of the problem is the sheer number of manufacturers, according to industry analysts. Production is divided among more than 70 companies, simply too many even for a market the size of China.
And far too many are banking on price incentives to survive the fray.
As a result, a number of manufacturers have plunged into the red, and the nation's leading suppliers warn that industrial collapse will be unavoidable if the situation is left unchecked. "The market for TV sets is one of the most commoditised segments in China. There is a huge perceived difference between local and international brands,
notes J. Walter Thompson's Northeast Asia area director, Tom Doctoroff.
International household names such as Sony, Philips and Matsushita successfully avoided the price war by raising the technology and quality bar with the launch of high-end products. Even with TV penetration rates hitting more than 90 per cent in the richer coastal and poorer rural areas, the market for new sets is far from saturated. Manufacturers are banking on city households buying a second set and rural families trading up to colour sets. The potential has not been lost on one of China's more innovative manufacturers, the Hong Kong-listed TCL, which decided to go down the same path as its international rivals rather than the ruinous route taken by its local peers. Early last year, the Shenzhen-based state-owned enterprise dropped in-house advertising arrangements and signed on JWT to a one-year advertising contract as the price war had reinforced the need to "decommoditise the category", according to Doctoroff.
Three sets of campaigns were developed based on findings which showed that China's younger generation were "experientially-driven
and looked at TV and other media as entertainment and not merely as information sources.
Hence the brand promise, "infinite dimensions of excitement
to position TCL at a corporate level as well as serve as a hook for advertising TCL's new and innovative products such as its Stereo TV, HiD and RuHua models.
Says Doctoroff: "We're trying to move away from the typical corporate-speak and instead leverage technological innovations as modern lifestyle enhancers. But 'lifestyle' needs to be defined in a way that is specific to and relevant for the television category - hence, excitement."
For TCL's Stereo TV, the commercial highlights the fact that the TV also functions as a standalone stereo, with the copy revolving around things that look like something but are, in fact, something else. The HiD commercial introduces the concept of surfing the web from the TV set, with the creative playing up "infinite choice
to get across the idea of consumer empowerment, says Doctoroff.
For the RuHua TV, translated to mean "like a picture", the campaign zeroes in on the "ultra-realistic
visuals and sound quality of the model. Doctoroff says tracking studies show the campaigns have been extremely successful in updating TCL's image. With the HiD set selling for about 7,000 yuan, he says consumers now consider TCL in the same breath as Sony. "TCL is an example of how commoditisation is being defeated with classic rules of brand building. There's nothing revolutionary by international standards."
- Additional reporting by Christy Liu.
