On November 27, the first offline physical store of Country Garden’s self-operated home decoration brand Phoenix Home Decoration opened in Changsha.
The news that the real estate giant is increasing its home decoration business has sent a dangerous signal of "invasion" to the downstream home decoration industry and even the home building materials industry. Some industry insiders believe that real estate giants are in the upstream of the large construction and decoration industry and have strong resource integration capabilities, making it easier to achieve dimensionality reduction against downstream companies. It's like fishing in a river. The net upstream becomes denser, and there are fewer fish downstream.
When the era of cross-border robbery comes, who will dominate the home decoration industry in the second half? Where will home building materials companies, including ceramic companies, go? Will Tile end up being integrated by others, or integrating others?
01 Although the cake is huge, it is not easy to digest
With the acceleration of my country's urbanization process, the current volume of the domestic home decoration market has exceeded 4 trillion. Some institutions even predict that the stock of urban buildings nationwide will exceed 80 billion square meters in 2030, and the size of the home decoration market is likely to double on the current basis, reaching a market size of 7 to 8 trillion.
From the consumer side, home decoration consumption is truly high-value consumption and front-end consumption. It can be said that for an ordinary person, decoration is the single highest value consumption besides houses and cars. The 2021 annual report released by Dongyi Risheng shows that the average customer order value of its home decoration business is approximately 183,100 yuan.
China’s home decoration market is large in scale and has strong consumption power, making this track full of temptation. However, the home decoration industry still has the characteristics of "large industries, small companies, difficulty in replicating across the country, and low industry concentration." So far, there is no domestic home decoration company that has truly exceeded 10 billion yuan. The annual revenue of Dongyi Risheng just mentioned is less than 4.3 billion yuan.
During the decoration process, consumers experience problems such as complex processes, multiple links, long construction periods, substandard quality, asymmetric information, and unsatisfactory results, which are common pain points in the home decoration industry. At the same time, competition in the home decoration market has gradually become fiercer, and involution among peers has become more and more serious, resulting in a significant decline in the profitability of decoration companies.
According to incomplete statistics, 40 decoration companies declared bankruptcy in the first half of 2022, and the owners of the decoration companies lost contact.Even the news of running away has been reported in the newspapers. It can be seen that although the "cake" of the home decoration market is big, it is not so easy to digest. From another perspective, the current problems in the home decoration industry may be a good opportunity for "Country Garden" to cross-border robberies.
02 Players from all walks of life enter the game, who is more competitive
The first real estate giant to enter the home decoration market was actually Vanke. As early as 2015, Vanke invested in Wanlian Decoration, an Internet home decoration brand. In 2021, Beike announced that it would acquire 100% of the shares of Shengdu Home Decoration for 8 billion. Before Country Garden established Phoenix Home Decoration, it had successively launched the home furnishing service provider "Modern Zhumei Home Furnishing", the home furnishing platform "Chuangxi Bangsheng Home Furnishing", and the home furnishing brand "Chengjia" to share the home decoration market.
In addition to real estate companies eyeing the home decoration market, home furnishing companies are also accelerating their "land grab." Among them, Red Star Macalline not only established a home decoration subsidiary, Shanghai Jiabeide, but in 2020 it even proposed to make home decoration its first business. Not long ago, Oppein's directly-operated decoration companies in Chengdu and Shanghai officially opened for business, and Sophia's directly-operated decoration flagship store was also successfully launched in Shenzhen Yiju Nest, marking the two major home customization leaders moving towards the home decoration market. A big step.
Internet home decoration relies on customer channels to rob traditional home decoration, real estate giants rely on financial strength and brand advantages to rob traditional home decoration, home building materials stores rely on supply chain control capabilities to rob traditional home decoration, customized home furnishing companies rely on landing service capabilities to rob traditional home decoration... ...As various players enter the home decoration market, most traditional decoration companies have become a disadvantaged group to some extent.
Among the companies in the cross-border home decoration market, who has the more competitive advantage? Industry insiders expressed different views on this issue. Some people are more optimistic about customized home furnishing companies such as Oppein and Sophia, believing that they have moved from cabinet/wardrobe customization to whole-house customization, and the transition to whole-home customization is obviously a matter of course. Some people are more optimistic about the strong alliance model between Beike and Shengdu, believing that they have user resource pools, market shares and service foundations, and will produce huge synergy effects after integration.
In fact, the future home improvement industryNo matter which of the above "legions" will dominate the industry, ceramic companies as "material merchants" will be in a passive position. Especially under the great wave of the promotion of finely decorated houses, the damage caused by thunderstorms to real estate companies is still vivid in our minds.
03 Can integrated tiles integrate others
For the home building materials industry, including ceramic companies, the story of "the wolf is coming" is played out almost every day. Take Country Garden as an example. While it is expanding into the home decoration market, it has frequently invested in the field of building materials and home furnishings, accelerating the integration of the entire industry chain. At present, Country Garden has been involved in the production of coatings, bathroom ware, kitchen cabinets, ceramic tiles, furniture, flooring, wardrobes, shower rooms and other categories, and the self-sufficiency model is just around the corner.
When the "wolf" really comes, there are only two endings for the ceramic tile category, either being integrated by others, or integrating others. Is it possible for ceramic tiles to integrate with other categories to open a new era of decoration? In this process, what advantages do ceramic companies have? What challenges need to be faced?
Let’s first talk about whether it’s possible. Research data on the home decoration industry released by iResearch shows that nearly 40% of consumers across the country value the quality and brand of building materials most when choosing a decoration company. At this point, leading ceramic tile brands are well-positioned to enter the field of decoration. Let’s talk about the advantages. Ceramic tiles are not only a large-scale and irreplaceable main decoration material, but also have a highly standardized production model and personalized product specifications/colors, which can not only ensure quality but also meet diversified consumer needs.
From material manufacturing to cross-border assembly and on-the-ground delivery, it is undoubtedly the biggest challenge that ceramic companies need to face. In fact, in this step towards decoration, bathroom ware does a better job than ceramic tiles. In 2017, Jomoo has already released a global pan-home furnishing strategy; in 2018, Huida Sanitary Ware released a complete strategy. In the same year, the Dongpeng Sanitary Ware brand was renamed "Dongpeng Complete Bathroom"; and Wrigley, which successfully entered the capital market this year, , is also constantly increasing its focus on the home decoration field.
Both belong to the ceramic industry, sanitary ware has already made product launch services very popular many years ago, while ceramic tiles have only started to implement finished product delivery in the past two years. The key to the problem lies in the terminal dealer group.
Zhongtaojun once asked a dealer who integrated multiple building materials categories whether he would upgrade from one-stop purchasing toRegarding the decoration problem, the answer given by the other party is: it is difficult to achieve perfection in decoration, and it is very easy to produce customer complaints. Doing business is about making good friends, not enemies. Moreover, most ceramic tile dealers believe that providing paving and pasting services is competing for the jobs of decoration companies, and is not an unwise choice.
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As more and more consumers desire the "turn-up-and-move-in" decoration method, decoration will definitely become the mainstream of the home decoration market in the future. As more and more giants join the battlefield, highly discrete material categories will eventually be integrated one by one. It is foreseeable that once that day comes, those being integrated will completely lose their right to speak in the market.
In short, there is not much time left for ceramic tile brands to "live alone".
