Analysis on the Impact of COVID-19 on China's Smart Speaker Market

In the short term, the supply of smart speakers in the market will be restrained, but as an emerging industry of AIoT application, in the long run, "otaku culture" promotes the increase of frequency and activity of smart speakers, which will benefit the future demand. Specifically, the impact of COVID-19 on China's smart speaker market mainly includes the following aspects:

To Supply chain: production is short of time and labor shortage is serious

The market for smart speakers in China is dominated by Internet companies, most of which have no factories of their own and use contract manufacturing. In order to strengthen the prevention and control of the epidemic, the country extended the Spring Festival holiday to February 2, and many provinces and cities postponed the resumption of work to February 10. In terms of OEM factories, most of the OEM factories have started operation on 10th, with the exception of fenda technology, which only resumed work on 20th February. However, there are uncertain factors in the rate of resumption. The reduction in production time has resulted in a decrease in supply.

In addition, the problem of labor shortage has a serious impact on the OEM of smart speakers. According to RUNTO, China's smart speaker manufacturers are concentrated in places such as guangdong, which is an important destination for the outflow of people from hubei. From the migration of people before the festival to the reverse, the largest province in the cross-provincial flow of population in hubei is guangdong, accounting for 28%. With the closure of cities all over hubei province, personnel cannot return to their posts, and personnel from other regions need to isolate themselves for 14 days to return, which brings impact to the resumption of the smart speaker industry.

To Enterprise: the market speed up reshuffle, small and medium-sized enterprises out

In the outbreak of smart speakers in China in 2017, in addition to xiaomi, alibaba, lenovo and other Internet manufacturers, there are dozens of start-ups, small enterprises enter. As ali and baidu increase subsidies, xiaomi adhere to close to the cost of pricing, the smart speaker market gradually formed the Tmall wizard, baidu and xiaomi three confrontation situation. According to data from RUNTO, the concentration of the TOP3 brands of Tmall, baidu and xiaomi reached 92% in 2019.

The monopoly of the giants makes start-ups that lack core technology capabilities or rely on hardware for profit begin to be eliminated. Some enterprises are restructuring their business, some enterprises turn to B terminal, some brands are directly disappeared in the competition. Under the severe epidemic, msmes are faced with difficulties in solving problems such as rent, loans and wages, or will withdraw from the market. Market reshuffles have accelerated further.

To Channel: online share recovery, new retail or trend

The sales of smart speakers in China are mainly online, accounting for 62% of the total sales in 2019, down from 2018, according to the total sales figures of RUNTO. During the outbreak, being forced to stay at home boosted "homeeconomy" and online shopping became popular. In terms of offline channels, smart speaker sales channels mainly include brand experience stores, home appliance /3C chain stores and operator business halls. The slow construction of brand experience stores and the requirement of sasac to reduce subsidies for smart terminals will have an impact on offline sales.

New retail could be the new way to sell smart speakers. Consumers place orders on the supermarket APP or through small brand programs, which are sent to stores near the same city. During the epidemic period, this kind of distribution is faster and can basically achieve same-day delivery.

To consumers: human-computer interaction has prominent advantages, and user stickiness is deepened

Figure fresh, low frequency of use is an important factor affecting the development of smart speakers in China. During this special Spring Festival, due to travel restrictions, interacting with smart speakers has become one of consumers' pleasures, and the frequency of use and active time of featured functions have increased. During the epidemic, many brands such as Tmall spirit, baidu and xiaomi launched epidemic query services and provided educational resources for children who started school later. Therefore, the activity of epidemic report and prevention and children's education content increased. The user stickiness of smart speaker is enhanced, and its value is further highlighted.

At the same time, the artificial intelligence technology used in the smart speaker has played an important role in epidemic prevention and control. AI algorithm helps diagnose patients with new coronary pneumonia, intelligent sterilization of robots, intelligent remote diagnosis and treatment, intelligent consultation, intelligent distribution, non-contact remote temperature measurement of AI, etc., which deepens consumers' cognition and understanding of artificial intelligence technology, and to some extent is also conducive to the development of intelligent speakers.

Forecast for 2020: down in the first quarter, still up for the whole year

RUNTO forecasts a 12 per cent year-on-year decline in China's smart speaker market in the first quarter. The outbreak of the new coronavirus occurred at the end of January, when an important promotional holiday -- the Spring Festival festival -- was over. The smart speaker market in January was not affected by the outbreak. According to RUNTO, the online market (excluding the official website) dipped 5 per cent year on year in January and the overall market is expected to edge up 3 per cent year on year. February is traditionally a slow month for smart speakers, but reduced production and limited logistics will further depress the market. If the epidemic can be basically controlled in March, it will still take about half a month for the market to recover. Smart speakers are not essential, and retaliatory consumption will not immediately come. The market will still decline in March.

For the whole year, China's smart speaker market will still grow in 2020. RUNTO estimated a 34% increase in sales to 49.1 million units, due to the following reasons: 1. The penetration rate of smart speakers in China is only 13%, which has a large market; 2. The important promotion nodes 618 and double 11 of smart speaker sales are not affected, and the importance degree will be increased; 3. Rural consumption rises and sinks, with huge market potential; 4. The epidemic has deepened consumers' understanding of smart speakers and their yearning for smart life. Only in voice technology, product functions, content resources and ecosystems, enterprises continue to dig deep, in order to recover from the outbreak as soon as possible.

The Chinese Smart Speakers Retail Market Monthly Tracker from RUNTO provides Monthly updates on the Retail data of the overall Market and the online Market in terms of Retail volume size, sub-channel, brand and product type, as well as the best-selling models and price trends.