The fierce collision between tradition and the Internet
When the “Internet +” trend was in full swing, a large number of Internet home improvement companies emerged. However, the good times did not last long. Since most of these companies were just under the guise of the Internet, doing what the original staff of the traditional decoration industry were doing, more than 100 Internet home improvement companies have closed down after the second half of 2018.
Affected by the epidemic at the beginning of this year, the offline shutdown forced home furnishing companies to promote the long-stayed Internetization process, opening the way for online self-help, and the industry’s potential was once again released. The hand of “Home Furnishing” has gradually become the sweet pastry in the eyes of major Internet giants. Internet giants such as Alibaba, JD.com, Pinduoduo, Xiaomi and other Internet giants have begun to line up in the home improvement industry.
The home improvement market in China, known as the “four trillion market scale”, has never lacked disruptors and careerists. What impact will the entry of Internet giants have on the “indigenous people” and the industry? Can the industry pain points that lie between the home furnishing industry and the Internet be resolved?
Internet giants are betting heavily on the home market
Although Internet home improvement companies have suffered setbacks in 2018, as time goes by, the industry has begun to usher in a new wave of benefits. The home improvement market has always been inseparable from my country’s urbanization process. my country’s national urbanization rate has increased from 52.57% in 2012 to 59.58% in 2018, providing a broad market space for the development of the home improvement industry.
Furthermore, the home improvement industry is a post-cyclical real estate industry, which is closely related to the prosperity of the real estate industry. The main demand comes from housing transactions. According to data from the National Bureau of Statistics, from January to October, the sales area of commercial housing nationwide was 1,332.94 million square meters, and the year-on-year increase stopped falling flat. Commercial housing sales amounted to 13,166.5 billion yuan, an increase of 5.8% year-on-year, and the growth rate was 2.1 percentage points higher than that from January to September. Among them, residential sales increased by 8.2%, and the growth rate increased by 2 percentage points.
At the same time, residents’ incomes have continued to grow. The National Bureau of Statistics released household income and consumption expenditure data for the first half of 2020, showing that in the first half of the year, the national per capita disposable income was 15,666 yuan, a nominal increase of 2.4% over the same period last year. Under such a general background, residents’ consumption potential has a lot of room to release, or can effectively promote the sustained and stable growth of home furnishing consumption.
In 2019, the scale of online shopping transactions in China reached 10.6 trillion, with a growth rate of 17.8%, which was far lower than the growth rate of 59.4% in 2013. This means that the traffic dividend will peak and the cost of customer acquisition will increase. Take Ali as an example In 2017, the marketing cost required for each new active user was 279 yuan, and then increased year by year. By 2019, it has reached 536 yuan, an increase of 92%. The battle for traffic has intensified. When the potential of the home improvement industry is released, Internet giants also Started to focus on this piece of cake.
In March 2015, Alibaba’s Taobao online home improvement O2O platform is very home. On June 21, 2020, a new member of the Ali family, Juzhi Life, opened in Ningbo, Zhejiang. There are currently four experience halls across the country.
The compound growth rate of decoration services on JD.com platform has exceeded 200% since its launch. Internationally renowned brands such as Sealy, Simmons, and TOTO have also entered JD.com. In 2017, JD.com has made full efforts in the home furnishing market, and the abundance of household products In continuous expansion, the categories have been expanded from level two to level four, and the sub-categories have expanded from 17 to 224.
In the first three quarters of this year, the overall sales of household products on the Pinduoduo platform increased by more than 400% compared with the same period last year, covering more than 90% of well-known brands. At the same time, in July, Xiaomi successively started cooperation with domestic LED lighting leader Mulinsen and home improvement company Dongyi Risheng.
It is undeniable that after the high-profile entry of the giants, the home improvement industry has truly entered the stage of competing for strength. In the new round of life and death battles, what changes will the industry have, and what impact will the increase of Internet giants have on home improvement “indigenous people”?
Capital is competing to reshape the industry?
In addition to the good environment, as an important part of the national economy, the total market of the entire large home furnishing industry has exceeded 4 trillion. If you want to compete for such an attractive cake, the Internet giants are naturally “the eight immortals crossing the sea.” All show their magical powers”.
JD’s advantage lies in its own brand advantage and supply chain integration capabilities. The core crux of the high rate of complaints and disputes in the home furnishing industry has always been logistics and installation. The new model of “JD Home Service Platform” and “Integration of Dry Support and Installation” launched by JD.com can effectively break through the two major bottlenecks of home improvement and home furnishing. Constraints.
However, unlike JD.com, Ali adopts the new home retail + strategic investment approach. The home retail giant is actually the home of “Shengong 007”, the main lighting installation, cleaning and maintenance “Craftsman Duoduo”, Red Star Beauty There is Ali’s shadow behind Chiron, who has appeared five times in two years.With a cumulative investment of more than 10 billion yuan, Ali has taken another path to enhance its core competitiveness in the battle for home improvement e-commerce.
Compared with the other two platforms, Pinduoduo’s exploration in the home furnishing sector is more “low-key and pragmatic.” The product display under Duoduo’s decoration section is not traditional home improvement services, but hardware tools, bathroom hardware, and lighting. The main household building materials tools and products. Pinduoduo is more inclined to use the social e-commerce model to quickly sink “group buying” to the market, and extend its traffic tentacles to the sinking market through the “people leading people” approach, and low-priced hot items push single products out of sales. .
No matter in terms of technological innovation, technology research and development, capital reserve or resource integration, Internet companies have more obvious advantages than traditional home improvement companies, and their overall strength is more prominent, which will inevitably affect the original players in the industry.
There has been a long history of fighting between the two traditional home furnishing stores of Jia Ranzhi and Red Star Macalline. However, from the perspective of performance, in 2017, 2018, and the first three quarters of 2019, the operating income of the house was 7.404 billion yuan, 8.417 billion yuan and 6.416 billion yuan, and the net profit attributable to the parent was 1.223 billion yuan and 1.952 billion yuan. Yuan and 2.253 billion yuan; during the same period, Red Star Macalline’s revenues were 10.96 billion yuan, 14.24 billion yuan, 11.82 billion yuan; net profit attributable to the mother was 4.078 billion yuan, 4.48 billion yuan, and 3.783 billion yuan. Macalline.
For the joining of Internet giants, Red Star Macalline and Jiaranzhijia chose to join hands with them, injecting technological elements and “online genes”. On Double Eleven in 2019, Macalline’s total online and offline sales exceeded 219.86. 100 million yuan, a year-on-year increase of 37.4%, and 449,000 new members, a year-on-year increase of 240%.
This also reflects from the side that although the entry of Internet giants has catalyzed the intensification of industry competition, it has also nurtured new industry imagination. In the future, for the home improvement and home furnishing industry, it is foreseeable that under the stimulation of competitors, the battlefield of new home retail is surging. The addition of Internet giants makes the new prototype of the industry more and more clear, but the industry’s major pain points Whether it can be relieved is still unknown.
Who can occupy the “C position” in the value chain of the home furnishing industry?
Judging from the performance of Jiaranzhijia and Red Star Macalline in the first three quarters of 2017, 2018, and 2019, the growth in revenue and profit of both parties is not optimistic. At the same time, Red Star Macalline’s asset-liability ratio has increased from 48.58% at the end of 2015 to 60% at the end of June 2019. Actually Holdings also issued 5 bonds from 2016 to 2018, with a total issuance of 2.8 billion yuan. Reflecting the current home improvement industry, it seems that there are still some pain points that have not been resolved.
For a long time, the upstream raw material categories in the home furnishing industry are relativelyLess, more than 90% of the upstream categories are composed of plates, wood, hardware, and profiles. However, due to the relatively large number of production and circulation links for custom-made furniture, it has also resulted in layered price increases and opaque information.
It is reported that in European and American countries where the custom home furnishing industry is far more developed than China, even the century-old cabinet factories in Germany with extremely modern production equipment and management systems have only 92% utilization of raw materials. Therefore, the lack of efficiency on the production side and the inconsistency of process standards have become key factors that plague midstream home furnishings and hinder industry collaboration.
The downstream is affected by the regulations on the delivery of new homes. In recent years, the high cost and low conversion of channel acquisition will continue to plague small and medium-sized sellers.
It is undeniable that after the high-profile entry of the giants, the home improvement industry has truly entered the stage of competing for strength. But to solve the pain points of the industry, companies need to tell new stories.
With the rise of the new generation of consumer groups born in the 90s and 00s and the popularization of the era of personalized consumption, custom home furnishings have begun to take the form of a golden track. In 2018 and 2019, the average revenue growth rates of the nine listed companies of custom home furnishings were 18.08% and 16.73%, respectively. In 2017, they generally exceeded 30%. The potential of the industry is recognized by the market.
In addition, property companies such as Country Garden Service, Poly Property, and Xinchengyue Service are naturally closer to users and have more opportunities to penetrate the home improvement market. But at present, it will take time for the property company to run out of a large-scale enterprise with a relatively light operation method.
In short, as the granularity of Internet home improvement competition becomes more refined and intensified, traditional brands will inevitably collide with emerging formats. In the future, will the home improvement industry’s “whole body pain points” be broken by Internet giants one by one, or traditional industries will open up The lane of digital transformation, let us wait and see.