The Surface + Design Event China 2019

2019.12.11-13 | Shanghai New International Expo Centre(SNIEC)

 

How Will The Pattern Of Home Furnishing Industry Change?

Under the continuous change of channels, everyone has to find the way to survive and develop. At the same time, we also want to look at the whole home ownership industry in a larger context and try to find some of the big trends that might happen.

The pattern of “big at both ends and small in the middle” is no longer balanced

Since the development of the home business, the dealer group had a strong right of speech period, when most manufacturers’ brand building had just started, and the nationwide distribution of chain store channels had not been carried out on a large scale.

In the end market, many dealers will even bypass the manufacturer after receiving orders directly from small factories to pick up goods, also known as flying orders. In most cases, the vendor can’t do anything about it, and it’s usually the consumer or the vendor representative who gets hurt.

Subsequently, as is known to all, for the purpose of establishing and maintaining brands, manufacturers have increasingly standardized and strict management of terminals. Especially with the expansion of chain home furnishing stores, the national layout of head home furnishing enterprises has been completed, and the stores have formed a deep binding relationship, that is, strategic alliance brand.

However, at this time, the dealer group is still fragmented, without a national organization with sufficient influence, and the industry has formed the pattern as shown in figure 1.Today, such a pattern from the outside or internal are facing the situation of being broken. First of all, from the external perspective, the closure effect of upstream real estate’s hardcover, outfit and move-in is increasingly obvious, and manufacturers have to start to consider supporting the upstream, making it more difficult for small and medium-sized dealers.

Internally, in the pattern of manufacturers — dealers — distributors, dealers, as the “sandwich layer”, are often faced with the pressure of opening stores and taking goods, and have a strong desire for reform.

At the same time, some excellent big dealers began to appear, through multi-category management, multi-channel development and other ways, gradually mastered a certain initiative in the region. As a result, the industry landscape began to evolve into figure 2.In this process, we can see that the total cake amount of the whole market has not changed, but some of it has been eaten up by the upstream, and the market participation role is more diversified than before.

As a group with power of speech and influence, the rise of dealers requires two conditions — that is, the untying of manufacturers and channels, and the evolution of dealers’ own professional ability. The former is the favorable and necessary condition brought by the change of the external environment, while the latter is the internal and sufficient condition for the sustainable development of the dealer group.

So, under the new market pattern, what is the future development direction of manufacturers and distributors? Here, I hope to think and explore with you.

Professional differentiation of household manufacturers

The essence of business is the competition between efficiency and cost. Cost leadership is also the embodiment of efficiency.

The fundamental reason why home manufacturing enterprises need to change is also efficiency. The solution is to realize professional division of labor. There are two approaches:1. Specialized division of labor in brand operation and manufacturing

Float subsequently the primary stage of development, at home by the unified organization of the furniture manufacturing enterprise production and management of brand operation, can save social costs, build brand advantages, especially in the dealer’s brand awareness is not strong, the household enterprises must take responsibility to establish and maintain the brand, which has produced some well-known sofa, mattress, solid wood suites, etc. The rapid rise of the brand.

However, with the development of the industry, manufacturing enterprises are not sensitive enough to the changes of the terminal market. In particular, investment promotion through exhibitions can quickly occupy the local market and bring more shipments. Therefore, enterprises tend to focus on investment promotion and ignore product research and development.

The more important problem is that companies tend to build more sub-brands — most of the time different product lines — and attract business separately through sub-brands, thus gaining more terminal stores. Finally, the product line of household enterprise is more and more, more and more complex, distribution system also becomes very complex.

At this point, the issue of efficiency decline will become more and more prominent. Enterprises will find that although there are more product lines, larger scale and more revenue, careful calculation will find that each product series has not achieved the market leading position, which not only wastes resources, but also increases the risk of dealers.

In the end, it is very difficult for enterprises to succeed in both production efficiency and brand operation. Higher production efficiency requires less categories and large quantities, while multi-brand operation requires more categories and small quantities. This in itself is contradictory, and few businesses can achieve perfection.

Therefore, we believe that the first challenge for home manufacturing enterprises is the professional division of labor in manufacturing and brand operation.

Professional brand operators

Household industry needs brand of course, no matter industry brand or consumer brand. However, brand operation is a very complicated thing. It is a kind of value concept and a set of system that occupies the mind of consumers, including image, symbol, service, experience and so on. However, most household manufacturing enterprises lack professional ability in this aspect.

It is worth noting that this does not mean that household furnishing enterprises must give up manufacturing, but brand operation is the core and primary work, and production can choose more OEM or joint production to put overall efficiency first.

At the same time, building brand influence is not simply advertising or marketing activities, but to create a complete brand experience, which includes product design, terminal management, after-sales service and so on.

Just as European and American home furnishing brands have successfully expanded to the global market, especially the excellent results of foreign brands of mattresses in the Chinese market, it is a model worthy of learning for domestic home furnishing enterprises.

Professional manufacturing enterprises

Household enterprises or become successful brand operators, and the second way is to become a professional and efficient manufacturing enterprises. There should be no third way. In the may issue of “furniture today”, the cover topic of “journey of new manufacturing — furniture manufacturing facing the future” discussed the difficulties, pain points and future development direction of domestic furniture manufacturing.

In fact, it can also be seen from figure 2 that local production began to integrate home furnishing and became an increasingly important home furnishing product organization and sales unit. Home furnishing enterprises either took the initiative to draw closer to the B end to obtain orders with higher production efficiency and cost advantage. Or go retail brand route, with design and aesthetic let consumer initiative pay.

But no matter which kind, the efficient production is indispensable, the difference is then doing OEM or to participate in the terminal competition with their own brand.2. Relationship between manufacturers and dealers, from one-way control to win-win cooperation

It is very important to explore the two paths of transformation of household enterprises, and therefore it has spent the most space. After this problem is clarified, the relationship between home furnishing enterprises and dealers will be easier to understand.

When home furnishing enterprises cannot take the lead in the manufacturing sector and their products lack differentiation advantages, dealers will lose the most fundamental dependence. The original dealer system will be difficult to maintain, the impact of the enterprise on the terminal is gradually reduced.

When the enterprise still operates independently according to the original multi-brand, terminal stores must actively integrate multi-category products — for example, sofa brand dealers start to actively integrate mattresses, customized wardrobes and even wooden door products. As a result, it has become a one-stop multi-category home retail terminal and a retail brand in the local market.

More importantly, when the environment of terminal market becomes more and more complex, excellent dealers will become the most scarce resource in the whole industry, and will directly determine the success or failure of enterprises in the local market. At present, around the country, some excellent dealers in the continuous reverse integration of manufacturers resources.

Dealers, in turn, will start to optimize their product mix, rather than being “integrated and optimized” by manufacturers.

At this time, the relationship between the enterprise and the dealer will change from the previous control and management to a “strategic partner” relationship, and the two will conduct in-depth cooperation and win-win from product to marketing.

The extension of channels and self-help

Furniture today explored the topic of “channel change” twice in August 2018 and April 2019. And in today’s dealers, home stores under the background of transformation to discuss this problem, the channel of course, inevitably to change their own. Of course, this is a very painful process.

As you can see, chain stores are exploring new ways to distribute traffic. (the existence of a home store is to charge rent based on the acquisition and distribution of traffic).For example, on August 22 this year, red star macalline announced the establishment of its sub-brand “macalline love home” in Shanghai, officially entering the real estate brokerage industry, and said it had selected 100 stores and expected to launch 100 stores in the next three months.Fu sen beauty also rolled out “carry bag to move in”, solve one-stop household shopping problem for consumer. Time will tell.

Finally, there is a model or very worthy of attention, that is home retail “buyer store”. Although there are still few successful cases in China at present, with the improvement of consumer aesthetics, the gradual maturity of niche market, and the use of more efficient new media communication tools, this kind of home furnishing stores will become the chain home furnishing stores can not be ignored rivals.

In a word, channels are not only becoming fragmented, but also becoming more diversified and specialized. Each channel needs to meet the needs of specific consumer groups or meet the needs of mass consumers with extremely high cost performance.

Terminal retail brand, will be born in the dealer?

Dealers are essentially the “middlemen” of market transactions, and they are indispensable. Whether home furnishing dealers can create more value in the link they are responsible for and turn it into a business rather than just a business is the difference between different levels of dealers.

However, when dealers gradually adapt to the new industry pattern and develop their core competitiveness, which becomes a key link affecting consumer decision-making, will the terminal retail brand with dealers as the core gradually rise, or even become a key role in the future industry pattern? In the us market at least, retail brands have proven their power. We look forward to more new possibilities in the Chinese market.