Once again a high-volume business

Grace Lo, marketing director at KEF. Whang Chao / China Daily

 

However, the Chinese market is just beginning to take off again, according to Lo, who says that apart from experienced audiophiles, most consumers are still learning to appreciate different levels of sound quality.

Established in 1961 by former BBC electrical engineer Raymond Cooke, KEF used to focus purely on making large hi-fi loudspeakers, but it has expanded its product line to headphones and digital TV sound systems.

"We'll be launching more portable products in China in autumn," Lo says. "We'll also launch active speakers for home cinemas, music players and tablets."

In China, KEF works with online retailers such as Tmall, Amazon and JD.com to sell home theaters, speakers and headphones.

To cut the cost of its products, the company now manufactures most products in China, keeping only three premium models - Muon, Blade and the Reference - in Britain.

Compared with 20 years ago, the target consumer for hi-fi products has changed, Dong says: "In the 1990s, the consumers were audiophiles, but now they are more ordinary, middle-class people, while the audio products are more of a daily necessity than expensive toys."

That does not mean premium brands can sit back and rake in the cash, however. Apart from traditional competitors, premium brands such as KEF must keep in step with the rapidly evolving China market.

"In the 1970s and 1980s, the music format was vinyls and cassettes," Lo says. "Then we started to see digitization and the boom in CDs. In the 2000s we saw the popularity of Blu-ray and home theaters, and now digital music is popular thanks to iTunes and iPods, and the emergence of downloading and streaming music."

In the past five years, the demand for headphones in China has surpassed that of the hi-fi and home theater markets combined, the CIConsulting report says.

"The market for headphones is easily double, if not triple, the market for high-end speakers," Lo adds.

Beats, a headphone brand bought by Apple last year, broke the rules of the traditional audio market, putting the emphasis on fashionable design rather than sound. The brand has won millions of young fans and has become an icon in modern music.

Premium audio manufacturers should thank Apple and Beats for opening the market to more consumers, according to Lo.

"They have helped more people to appreciate music, and have made it enjoyable and effortless," she says. "When a market is opened, there is always a proportion of consumers that want high-quality products, and when more people are looking for higher design and higher quality, KEF will be one of their considerations."

For a brand like KEF, whose products can easily reach 2 meters in height, design is also important. Lo says the company spends a lot of time studying trends in interior design.

"We are producing functional objects, so we need to look at how they integrate with people's homes," Lo adds. "It's not only for the ears, but also the eyes.

"Many of our products have a wood finish. Ten years ago, the trend was more rosewood and reds, but in the last five years we've see more walnut colors. For wireless products, Apple is an influential benchmark."

As the China market is fragmented, competitors in the hi-fi industry are also taking different approaches with their products, magazine editor Dong says.

"Some have upgraded from high-end to premium brands, while some have entered the smart home sector and have started to promote wireless and connected products for the living room," he says. "Others are focusing on smaller, portable gadgets such as headphones, mainly targeted at youngsters."

The market is far from mature, he says, but he predicts there will be major consolidation soon.

"Hi-fi products are half-functional, half-luxury, so eventually the market landscape will be like the auto market: While there are premium brands such as Porsche and Rolls-Royce, they belong to bigger groups such as Volkswagen and BMW," Dong says. "Premium brands operate independently and target high-end consumers."