Chinese enterprises have started to expand their understanding of
the weather, and the magnitude of influence it has on business.
"In summer, a one-degree increase in temperature means the sale of
about 2.3 million bottles of beer..."
"An increase of one day over the period of temperatures 30 degrees
Centigrade or higher can increase the sales volume of
air-conditioners by 40,000..."
These observations and statistics are not from a Chinese brewery or
air-conditioner manufacturer. The first is from Germany, and the
second from Japan. The power of the weather over commodity sales
is, however, beginning to be acknowledged by Chinese
enterprises.
Indexes are also available on the relationship between the weather
and passenger volume, foodstuff/beverage consumption, and sales of
ice cream and swimwear. Data like this have introduced to China the
"meteorological economy" concept. Certain enterprises now consult a
meteorological service before setting their levels of
production.
Yet compared with overseas companies, where a meteorological
service is an indispensable facet in the course of their product
research, development, manufacture and marketing, China's
meteorological economy is very much in its infancy. Not all
business decisions take climatic vagaries into account, so when a
change in the weather does occur, numerous Chinese enterprises
suffer losses.
Meteorological Mischief
The influence of the monsoon climate means that the weather in
China is not necessarily predictable. Summer one year may be
swelteringly hot; the following year it may be temperate. This is a
major headache for air-conditioner manufacturers and the garment
industry. For instance, an unfounded expectation of high
temperatures last summer had disastrous repercussions for
air-conditioner producers, as output greatly outnumbered sales, and
substantial losses were incurred.
In
the hot summer of 2001, sales of air-conditioners on the domestic
market rose to 14 million -- an increase of nearly 40 percent over
the previous year. Another sizzling summer was, therefore, expected
for 2002, and a sales volume of 15-18 million air-conditioners was
anticipated. In April and May 2002, temperatures corresponded to
those forecast, and trading in air-conditioners was brisker than
had been expected. Manufacturers consequently increased their
production.
In
June -- when air-conditioners are normally at peak demand, it was
mostly rainy and cloudy, and far cooler than in past years, to the
extent that some places experienced record low temperatures. Sales
consequently took a dive. According to statistics, from January to
June 2002, a total of 6 million air-conditioners were sold on the
domestic market -- 1 million less than the same period the previous
year. Production of air-conditioners is normally reduced in August,
but in 2002, it was in June, almost two months earlier than usual.
Most of the 5 million air-conditioners produced in anticipation of
a sustained consumer demand gathered dust in various stock
rooms.
In
July, the sun shone once more, and in most places temperatures
reverted to their normal scorching level. Sales of air-conditioners
rallied reassuringly, but not for long, as August brought with it
the coolest weather for years. Manufacturers consequently lost out
again.
This was not the first time the weather had played havoc with
business. China's air-conditioner producers had failed to learn
from their previous mistakes. Fierce competition on the market
lured them into expanding production in order to gain a greater
market share. Their stock consequently reached unrealistically high
levels.
At
the end of 2001, a total of 5 million air-conditioners were being
held in stock, and by the end of 2002, this figure is expected to
rise to 10 million. Working on the premise that the production cost
of an air-conditioner is 500 yuan, this meant that 5 billion yuan
worth of goods was laying idle. The only way companies could hope
to stay afloat was by ruthlessly slashing their prices and
under-cutting their competitors.
Air-conditioner producers are not alone in suffering losses as a
result of inclement weather. The Chinese garment industry was also
its victim by courtesy of the warm winter of 2001, when 32 million
down jackets and coats remained unsold.
Progress Imminent
As
the market economy develops, consumers become increasingly
discriminating and expect more for their money, yet the majority of
Chinese enterprises still focus on production, rather than sales.
To them, market research is an unknown quantity. As they have no
idea of consumer demands or preferences, it is little wonder that
sales of their products are often disappointing.
The influence of the weather on the market is undeniable, and it
has now become obvious to Chinese enterprises that they must pay
more heed to it. After analyzing the situation, experts conclude
that 2002's unprecedented air-conditioner "mountain" might force
enterprises to take measures that will avoid cut-throat
competition, and reduce "blind" production.
The meteorological economy, whereby losses are avoided and profits
made through observing climatic changes, is largely unacknowledged
by Chinese enterprises, which need to familiarize themselves with
the concept and all its ramifications.
Meanwhile, the immaturity of the current meteorological service is
an obstacle to commercial success. Most weather information in
China comes from government meteorological stations. Some of these
do provide a service to enterprises, but their scope cannot compare
to that of developed countries, and earnings from such services are
negligible.
The Beijing Meteorological Station has established a special
organization to provide meteorological information for enterprises
on a trial basis, but its results are far short of satisfactory.
The station mainly supplies information for television weather
forecasts, and provision of a direct service to enterprises is on a
very small scale. The income from it is equivalent to just one
percent of that earned by a Japanese meteorological information
provider.
The Central Meteorological Station also provides services, and has
set up the Global Meteorological Navigation Co., Ltd., for ships at
sea, but the revenue it generates is, again, miniscule. Six months'
marine navigation guidance for one ship brings in just 7,000-8,000
yuan, as users of the service balk at paying any more. According to
the company general manager, it is only this year that the service
has begun to make a profit of 100,000 yuan or so.
Very few commercial meteorological services have been established
in China. Owing to a lack of the capital necessary to be able to
offer a variety of services, existing meteorological stations have
little experience in the commercial field.
Great Potential
One aspect of China that sets it apart from other countries is that
weather forecasting and dissemination of meteorological information
are regarded as part of the public domain. They are government
funded and free of charge. To most enterprises, paying for
meteorological services is unacceptable, an attitude that hinders
commercial utilization of meteorology.
There are, however, those who believe that economic development in
China will encourage enterprises to operate in a more scientific
manner. Meteorological expertise will, therefore, be consulted as a
matter of course in order to avoid financial disaster.
The need to be aware of weather conditions is gradually being
accepted by Chinese enterprises. Patrons of the Central
Meteorological Station include hundreds of enterprises, and this
area of the market is sure to expand.
The telephone weather forecast service is gaining popularity in
Chinese cities. In Guangzhou, for example, 20,000 weather forecast
inquiries are received every day -- a figure that sometimes
doubles. Urban mobile phone users that subscribe to a
meteorological service currently number 190,000. In Chaohu County,
Anhui Province, thousands of calls come in requesting weather
information every day from farmers, whose livelihood depends on
accurate forecasts of rain and shine.
Meteorological stations in various localities also give information
according to the needs of different enterprises. Short, middle, and
long-term forecasts, as well as those on an hourly basis, are
available. In some cities aspects of the weather relating to
everyday life, such as indexes on the intensity of ultraviolet
rays, degree of humidity, and the pollen count, are reported.
Certain enterprises, particularly pharmaceutical plants and
drugstores, promote medicine for asthma, colds and high blood
pressure according to information provided by these stations. They
need no convincing of the wisdom of arranging their production and
marketing on the basis of the prevailing weather.
Foreign meteorological services have set their sights on China. The
United States Meteorological Guidance Company, for one, has set up
a representative office in Shanghai. This is a positive sign for
China's meteorological economy, and bodes well for its
establishment of a commercial meteorological service mode.
(China
Today October 22, 2002)