From The Integration Of Industrial Platforms To The Big Ecology, The Future Generation Of 100 Billion-level Home Enterprises Is Not A Dream.

- Jan 16, 2019-

In 2017, the size of China's home appliance market was about 1.7 trillion, but there have been several giant companies with annual sales exceeding 100 billion. Among them, we are familiar with: Haier, sales of 241.9 billion in 2017; Midea, sales of 204.7 billion in 2017; Gree, sales of 148.2 billion in 2017. The remaining annual revenues of a series of home appliance companies such as TCL, Changhong, Hisense, Oaks, Skyworth are in the range of 10 billion to 100 billion.


In 2014, when the home furnishing industry was in the cold winter, a home furnishing company CEO Dong Mingzhu asked: “How do furniture companies achieve tens of billions?” Dong Mingzhu asked: “Have you ever thought about doing 100 billion?” On another occasion, the Iron Maiden More sharp: "Your market is much bigger than me. You can't do it for hundreds of billions. It's your own disappointment."

Objectively speaking, Chinese furniture companies have their own helplessness. For example, more personalized needs allow many furniture companies to customize only according to orders. For example, most furniture companies are still in the stage of hand workshops, which cannot be automated or even semi-automated. For example, underdeveloped large-scale logistics allows finished furniture or Assembling furniture requires expensive long-distance transportation costs, which makes the national brands encounter competition and encirclement of some regional brands everywhere, and also gives local furniture stores and dealers a stronger voice...

Looking at the world, only the “flat pack” and “self-assembled” global home furnishing brands with IKEA furniture as the core have achieved sales of 298.5 billion yuan in 2017, which stands out from the crowd.

Estimated at an average annual growth rate of 11%, we speculate that the size of China's home furnishing market will reach 4.4 trillion in 2021. What is certain is that there will be a batch of billion-scale enterprises by then, but can China's home furnishing industry be able to create a billion-dollar industrial giant? Our answer is: yes, and sure, sure and sure!

Most of the traditional home people have not paid attention to the fire of the stars that the industry is bursting out: Lin's wood industry, which was founded in 2007, has reached 5 billion in 2017. In 2008, Shangpin's home sales in 2017 were 5.3 billion in sales in 2011. After a major transformation, Wayfair sold more than 20 billion in 2016. In 2015, Ai Jia Life's revenue in 2017 exceeded 10 billion. It is expected to reach 30 billion in 2018 and over 100 billion in 2020!

So, what made the difference between Hongjun and Yanque in the old and new home business? Where will the billion-dollar Chinese home unicorn be born in the future? How to build a volley ladder from a billion, tens of billions to a hundred billion jump development?

The wind rises at the end of Qingping

China's home furnishing industry chain is at least 20 years behind the times. Ten years ago, Gree and other Chinese home appliance brands began to explore chain monopoly and downstream home appliance chain stores. Five years ago, most Chinese clothing retailers began to shout retail transformation. Most of the mass consumer goods companies began to follow Ma Yun’s guidance two years ago. A wave of new retailers. But all of this seems to have nothing to do with traditional Chinese home furnishing companies. Most of them are still sticking to the category manufacturer model, and downstream rely on dealers and home stores to penetrate their products into every corner of the market.

Like a nebula between two stars, the Chinese traditional home industry is destined to be completely shredded in the huge gap between the new era and the old model:

A designer who wants to realize his personality and become a vassal of the manufacturer. There is no shortage of outstanding designers in China, especially after the renaissance of the oriental aesthetics and the rise of the younger generation. A group of young and stylized designers with rich personality and creativity emerged in the industry, but now they are mostly adorned by manufacturers.

Whether as an in-house creative or as a third-party provider of outsourced design services, they can only be covered by vendors that need to maximize risk aversion, delivering the most popular design solutions that are most likely to be recognized by the market, and allowing those creative designs The manuscript is as dead as his own talent.

It is difficult for products to iterate over the increasingly difficult manufacturers. With the increasing reliance on terminal promotion and the increasing cost of production, it is well known that manufacturers are getting worse and worse, but the bigger problem facing manufacturers is that they cannot achieve product iteration through innovation.

They are eager for product innovation to achieve differentiated competition and increase gross profit, but they have to choose to produce the most mediocre mass goods to eliminate the high inventory risk caused by insufficient ordering in downstream channels. This can be called the manufacturer's product innovation paradox.

Facing the industry chain to the intermediate crisis. Since the e-commerce industry has been rampant, it has become the mainstream trend of various industries to realize the flattening of the industrial chain by going to the intermediate link, thereby improving the efficiency of industrial operation and lowering the price of end products.

Relative to daily necessities, clothing and other consumer goods industries, the dealers in the home furnishing industry have to pay for more functions such as delivery, installation, and after-sales in the public relations and terminal operations of the mall, but with the rise of home e-commerce and shopping centers. With the rise of home retail formats, home dealers will face serious role-changing challenges and even survival threats.

A household store that is increasingly depleted in traffic under the traditional commercial real estate model. The traditional business model of the home store makes it actually play another middleman role in the traditional industrial chain. The high cost of rent, entrance fees, promotion fees and other expenses are finally converted into product premiums by manufacturers and distributors. By.

To make matters worse, as the younger generation becomes a mainstream consumer, e-commerce, shopping centers or other emerging formats are becoming a more preferred option when buying home products. The traditional store relies on location advantages and frequent promotions to attract traffic patterns is ineffective, but it has become the new normal for home stores.

Compromise the customer's overall intensification. The compromises in various industry chain links eventually become a comprehensive customer compromise, including what you see in the home store may be the same popular goods (personalized compromise), you must go to the distant home store over and over again if you want to buy a home (convenience) Compromise), you need to buy a sofa in this store to buy a dining table and chair in that store (one-stop stylized matching compromise), you must accept the terminal price increase after the general maintenance of the ex-factory price 3-5 times the terminal price (price compromise)...

Designers who are eager to realize their creativity but lack industry resources, those who are good at producing professional products but are eager to integrate into the overall solution, and those who are eager to get rid of the middlemen’s status and seek role transformation, are entangled in traditional home stores and consumption that do not promote unsuccessful Customers who have intensified their compromises together constitute the current home industry that appears to be stable but undercurrent.

The root cause of this dark tide lies in the deviation of the industrial resources organized by the manufacturers and the era of customer sovereignty centered on the ultimate demand. Once the opportunity is found to allow them to jump out of the industry's current situation and recombine at the core of customer needs, these eagerly-moving industry players will unleash a huge industrial force.

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