Text/ Li Huilin Editor / Chen Xiaoping
There is a saying in the industry: the property market has a cold in the winter, and the home improvement industry follows the sneezing.
Cooled by the epidemic and the real estate market boom, in the third quarter of 2021 alone, more than half of the net profits of the 9 A-share home improvement companies declined, which should have been the peak season for home improvement.
A home furnishing merchant in Wuhan complained to the "21CBR" reporter that this year's home improvement business is difficult to do: affected by the epidemic, the family income that originally wanted to be renovated has decreased, and the choice will be on; the delivery of new houses is mostly fine decoration houses, no need to be renovated, and the order amount is low; the price of materials has increased, squeezing profits.
The industry is in a difficult situation, but the boss Oupai home is thriving.
In the first three quarters of 2021, revenue was 14.402 billion yuan and net profit was 2.113 billion yuan, and net profit in the third quarter increased sequentially. The industry predicts that its annual revenue will exceed 20 billion yuan for the first time.
Oupai Home Furnishing's performance in the first three quarters of 2021
According to the "2021 Rich List" released by Hurun, Yao Liangsong, chairman of Oupai Home, ranked 91st with a wealth value of 59.5 billion yuan, and is the only entrepreneur in the home furnishing field to be listed.
Opal also has its own troubles.
The slowdown of the industry, the rise of raw materials, and the "price war" are all current problems, and they have also encountered dramatic emergencies, such as stepping on Lei Evergrande, and the former war will turn to opponents, and it is also brewing transformation.
Stepping on the thunder evergrande, a large number of hidden dangers are hidden
"The situation of the home market is in the early stage of the formation of heavy rains, and dark clouds have formed in other areas, but there is still a certain transmission process to come to the downstream home market."
Yao Liangsong believes that the impact of macro-control on the downstream home furnishing industry, there will be pain in the short term, the impact will not be very large, what Oupai has to do is to make various preparations before the dark clouds drift over, "We have no way to change the size of the cake, but we have the ability to occupy a larger share of the cake." ”
Yao Liangsong, chairman of Oupai Home Furnishing Source: Video screenshot
The real estate downturn directly affects the "bulk business" of Oupai, which is mainly a decoration service provided for real estate developers, usually the hard decoration part of the "hardcover house".
Fine decoration penetration rate increased, bulk business due to the large volume, the total amount of customer orders is high, home furnishing companies attach great importance to it, Oupai's cooperative housing enterprises include Vanke, Longhu, Evergrande and so on.
Under the impact of the epidemic in 2020, the overall growth of Oupai Home Furnishing was only 8.91%, but the bulk business maintained a growth rate of 24.05%, the fastest growth among the businesses, hedging the impact of the decline in the performance of retail channels.
In the second half of 2021, the situation took a sharp turn, the property market transactions and prices fell, and the demand for home improvement industry was generally suppressed.
The "cake" of Oupai's bulk business has become larger, with revenue of 1.046 billion yuan in the third quarter, an increase of 33.05% year-on-year, and in the first three quarters, the total revenue reached 2.63 billion, accounting for 18% of the total revenue. Only the quotation is lower than the retail price, and the gross profit margin of the three main channels is the lowest, at 30.42%, a decrease of 5.47% over the previous year.
Oupai Home Furnishing's performance in various channels in the first three quarters of 2021
"In the past, when the building was selling well, the developer could sell the building at will to find anyone to decorate, and now the developer found that to attract consumers, the decoration standard of the building should use more brand-name products." Yao Liangsong explained the reason for the increase in this way.
IPG China chief economist Bai Wenxi told the "21CBR" reporter that hardcover house delivery has become a future trend, for home improvement companies, bulk business is a foreseeable incremental market; the real estate downturn cycle, increased pressure, but also an opportunity to accelerate integration.
But bulk business is also a source of risk, and Oupai has unfortunately stepped on Evergrande's thunder. As of the end of September 2021, Evergrande Group's accounts receivable and commercial paper, the total amount of which does not exceed 50 million.
For potential risks, Oupai Home furnishing publicly said that it will choose high-quality housing enterprises with healthy capital conditions to cooperate in strategic negotiations at the source, and the current plan is "steady and slow growth".
"Due to the debt risk of some real estate developers now, the competition for high-quality customers will further intensify, which will bring challenges in price and service." Oupai officially said.
Promoted to "wardrobe brother", every time the executives ran away
On the retail side, Opal is satisfied.
Oupai first started with cabinets, and later expanded its business sector to wardrobes, bathrooms, wooden doors, wall decorations, furniture supporting, decoration and other categories.
The two major single-product cabinets and wardrobes are performance responsibilities, contributing nearly 80% of the revenue, and with more than 7400 distribution stores, mainly for C-end retail consumers, the business is relatively stable.
In the cabinet category, Oupai has long occupied the first place in the market, and it has been difficult to beat Sophia in the wardrobe category.
Source: Oupai official Weibo
In 2020, in the face of the impact of the epidemic, Oupai Wardrobe surpassed Sophia for the first time and became the new "wardrobe brother". In the first half of 2021, it is a gap of 500 million yuan with Sophia's wardrobe.
Oupai's stock price was also encouraged by the positive, once soaring to a high point of 169 yuan, and the market value exceeded 100 billion yuan.
The rapid progress of Oupai wardrobe sales is due to one person - Yang Xin, former vice president of Oupai Home Furnishing Group.
He joined Opal in 2003 and took over Opal Wardrobe in 2015, when the wardrobe business revenue was only 1.337 billion, less than half of Sophia's wardrobe.
Yang Xin put forward the strategy of "high-end whole house customized ecological platform", pushed the marketing case of "19800 yuan 22 square meters of whole house customization", and benchmarked Sophia's "799 yuan / square meter" custom wardrobe promotion package, which grabbed a lot of price-sensitive customers.
In the first three quarters of 2021, the revenue of Opal Wardrobe reached 5.736 billion yuan, surpassing the 5.395 billion yuan of the overall cabinet for the first time, becoming the largest source of income. In recent years, The cabinets of Oupai have almost stagnated, and the growth momentum mainly relies on the wardrobe.
Dramatically, in March last year, Yang Xin left Oupai, who had been in office for 18 years, and two months later, he jumped to Sophia as vice president of marketing, aiming at the "Jiangshan" he had single-handedly laid.
In the critical period of industry adjustment, the market is concentrated in the head enterprises, and the opponents are seizing the market through "price wars". Whether the soul figures turning against their opponents will shake the results of the European wardrobe is still unknown in the short term.
"The Matthew effect of the custom home industry is becoming more and more significant, the comprehensive 'champion' will continue to strengthen, and there may also be vertical champions, such as cabinets, wardrobes, solid wood cabinets of the deep cultivators to break out at the right time." Wang Jianguo, an Internet strategy expert in China's home furnishing and design industry, told reporters.
Bet on the "whole family" and seek new growth
In terms of vertical comparison, 2021 is still a high-growth year for Europe. Driven by wardrobes, wooden doors and other products, coupled with the low base of the previous year, the first three quarters, revenue growth rate reached 48%.
The other side of the scale growth is the decline in gross profit margins.
From 2018 to the first three quarters of 2021, the gross profit margin decreased from 38.38% to 32.35%, reaching the lowest point in recent years.
This mainly comes from two reasons: the continuous increase in the preferential treatment of live events, the proportion of sales of promotional products has increased; and the introduction of more preferential pricing policies to compete for users.
Raw material prices are also rising.
Taking planks as an example, data from the Chicago Mercantile Exchange in the United States show that timber prices have soared more than three times before and after the epidemic, from $410.8/board foot in mid-December 2019 to the current $1307.1/board foot.
A custom home furnishing merchant in Zhengzhou, Henan Province, told the "21CBR" reporter that each plank rose by 15 yuan this year, up 8% over the previous year. A wardrobe, about to use 3-4 pieces of wood, the cost of wooden boards alone, a wardrobe is more than 60 yuan.
Opal is seeking to expand categories and services to expand the unit price of customers to absorb costs.
In 2018, it has entered the business model of renovating large homes, matching the needs of rough houses and second-hand house users.
In July 2021, Oupai, together with Brands such as Shell, AIA and Marco Polo, established the China Kitchen Renovation Alliance, and plans to launch kitchen renovation services in 800 cities and 2,000 stores.
In September, it proposed the "whole house customization model", which is aimed at hardcover house users, which is a product between whole house customization and whole decoration.
Whole house customization is mainly centralized cabinet class, and the whole house customization is in addition to the cabinet class, but also includes wooden doors, background walls and home accessories, etc., belongs to the bag check-in service after the completion of hard installation, it integrates more categories of home, to form a scale effect with centralized procurement of the supply chain, reducing costs.
Sophia and Gujia Home have also followed up.
"In the past, the price of buying a cabinet was 30,000 to 40,000, if the furniture, home appliances and other soft decoration integration, it may be the concept of 8-10 million, the fixed cost is unchanged, and the profit level will be greatly improved." Liu Shunping, general manager of marketing of Oupai Integrated Home Division, said.
In order to drain and land, Oupai imitated the successful playing style of the wardrobe and launched the whole customized package of "20 square meters and 29800" to attract end users; it also cooperated with real estate properties such as Poly Property and China Overseas Property to place the entrance in front of the upstream.
As of November 2021, the performance of the whole equipment sector reached 2 billion.
Bai Wenxi told reporters that the difficulty of the whole customization is mainly that it is difficult to balance scale and personalization, and there is a conflict between cost and benefit.
"The whole customization is more than the concept, and it is actually difficult to land." Hu Zhongxin, secretary general of the China Home Furnishing Association, also pointed out that custom home furnishing companies occupy the advantages of core categories such as cabinets and wardrobes, but the production and installation costs of cross-categories are high, and "the integration of all categories is not easy".
However, Opal has regained its capital confidence, and as of January 19, the total market value has recovered to 87.5 billion.