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The decline in the custom home industry in the first three quarters of 2018 is related to the macroeconomic and capital market downturn cycles, but the underlying reason is that industrial structural factors such as industrial supply and demand, entry barriers, and consumer demand have changed from quantitative to qualitative. Subversive changes, the industry has fully entered the “silver age.”
In the first three quarters of 2018, the growth of the custom industry declined significantly. The top six listed custom furniture companies saw an average growth rate of 20.5%, down 40%; and since the fourth quarter of 2018, The downward trend is even more intense. In the first quarter of 2019, the average growth rate of nine listed custom companies was sharply reduced to 9.33%.
The P/E ratio of listed companies is accompanied by the overall decline of China’s capital market and the fall of the cliff. On February 1, 2019, the average P/E ratio of listed companies was 20 times, only 44.44% before 2018. What are the main reasons for the decline in the growth rate and P/E ratio of listed companies? Is it the cyclical fluctuations accompanying the macroeconomic and capital market declines?
The root cause is market changes
Our analysis is that the decline is related to the macroeconomic and capital market down cycle, but the deeper reason is that the industrial structural factors such as industrial supply and demand, entry threshold, and consumer demand have changed from quantitative to qualitative, and subversive changes have taken place. Enter the “Silver Age.” Specifically:
The fundamental change in the supply side is “Blue Ocean becomes Red Sea.”
In the context of the rapid spread of customized technology, the decline of the industry’s overall learning curve, and the lower barriers to entry, real estate, home improvement, finished furniture, sanitary ware, ceramics and other industries have expanded their product lines, business lines or established subsidiaries. The layout of the custom furniture business, while the custom home business in the recent years, the centralized listing, the production capacity is released, the competition is intensified.
The fundamental change in the demand side is “consumption upgrade, stratification”, “real estate slowdown + hardcover housing policy”.
After ten years of high-speed growth, the core appeal of consumers has been upgraded from functional satisfaction to multi-level, high-level, comprehensive value needs such as time-saving, worry-free, labor-saving, and taste. At the same time, with the climax of China’s real estate construction (the year-on-year growth rate of commercial housing sales from 24.3% in 2016 and 7.9% in 2017 to 1.4% in 2018), coupled with the accelerated implementation of the hardcover housing policy (2017) In May, the Ministry of Housing and Construction’s “13th Five-Year Plan for Construction Industry” pointed out that by 2020, the newly-built fully-renovated residential area will reach 30%. The traditional “incremental market is turning to “structured market”.
The arrival of the silver era not only means that the growth rate of the custom industry will be difficult to maintain more than 20% growth, but also the advantage of the traditional business model of the custom enterprise is disintegrating, and the traditional growth model is ineffective. The key reason why furniture companies can win the “Golden Decade” is to share the manufacturing dividend in the context of rapid real estate growth. Although the custom furniture enterprise provides the service to meet the customer’s personalized customization needs due to the information-driven pull supply chain, it is different from the traditional finished furniture enterprise and constructs certain models and technical barriers, but this does not cover the past ten. In the year, most custom furniture companies on the surface “pull the actual” “push value chain, on the surface”, “service-oriented” is “product-oriented,” and channel-driven horse-horse and enclosure growth.
When the rapidly growing industrial factors are weakened or even disappeared, the drawbacks of this homogenization and extensive growth model are exposed: product homogeneity, no viscosity to customers, low frequency consumption, drainage The cost is high and there is no strategic moat.
Three major transformations in the second half of the competition
Faced with the silver age, the custom furniture industry is entering the second half of the competition, which is a very different competition from the first half, the winner must Complete three transformations:
From “homogeneous to” “differentiated transformation.
The competition in the first half was a homogenous competition. With the help of the industry, custom-made enterprises fight for capacity layout, channel expansion, and advertising investment. However, the second half of the customized enterprise should innovate the business model based on its endowment, resources and capabilities, and replace the homogenization competition with differentiation.
From the “product logic” to the transformation of customer value logic.
In the first half, most custom companies followed the product logic. Under the product logic, “the whole house is “all the potatoes in the sacks to achieve tying; and the second half, the company It must be transformed into “customer value logic. Under the logic of customer value, it is also a “house-wide” solution that can be a lifestyle-based solution. Looks like the same style of play, but under different logic, the effect is very different.
Driven by “opportunity-driven transformation”.
The success of the first half of a custom business is not only related to its own efforts, but also to chance opportunities, but the success of the second half needs to turn accidental opportunities into inevitable abilities. The ability to create core capabilities that make competitors difficult to replicate in the short term and difficult to imitate, and to form their own strategic moat, the capital market must give it a valuation far higher than the competition. (*thisThe source and source of the article have been marked. The copyright belongs to the original author. If there is any infringement, please contact us)
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