The channel reform of Haier Zhijia, Midea and Gree is "to go to the middleman"

Image source @ Visual China

Wen | Intelligent Relativity, author | She Kevin

There is a famous saying: "It is not the competitors that defeat a company, but the cross-border." Such cases are not uncommon, such as "instant noodles and takeaways", "pickpockets and electronic payments", "mobile phones and cameras".

In the current business era, cross-border also seems to have become a must-answer question for all kinds of brands, when Xiaomi began to build cars, Geely began to do mobile phones, the market should know that cross-border is a trend.

Which industry is being crossed the most by other players? The home improvement industry is definitely one of them, from different fields or e-commerce platforms, or home appliance brands, or home furnishing brands are pouring into it, of course, the reasons behind the cross-border brand may be diverse.

Home appliances, home improvement, two do not delay

In recent years, the overall decline in the home appliance industry, and there is no stopping trend, has become the heart disease of many brands in these years, although from the perspective of big data, the scale of the home appliance retail market in 2021 returned to about 880 billion, equivalent to the level of 2019, but another data shows that in 2021, the proportion of home appliance consumption (including audio-visual equipment) in mainland national consumption continued to decline, from 2.19% in the previous year to 2.12%.

In contrast, however, the home improvement industry is a different landscape. First of all, its market size is even larger, public data show that by the end of 2021, even if the two years are affected by the epidemic, the total size of the domestic home improvement industry will remain at a high level of 2.5 trillion, and the market expects that by 2023, the market size of the home improvement industry will exceed the 3 trillion mark. In terms of volume, the home improvement market will become 3-4 times that of the home appliance industry. Secondly, from the perspective of market concentration, in the field of home improvement, as of now, the number of enterprises involved in decoration and home improvement exceeds 200,000, but the revenue of leading enterprises' home improvement business accounts for less than 2% of the industry's output value. In the home appliance industry, the trend of oligopolization is becoming more and more obvious, and the industry concentration is calculated by revenue as an indicator, the industry CR3 is 44.9%, and the CR6 is 57.9%.

In addition, the home improvement market is one of the core channels for home appliance shipments, and the current rise of the overall home improvement consumption model, because of the one-stop consumer experience, is favored by young people, which also allows home appliance companies to see new growth points.

As a result, home appliance brands are not surprising that they covet the home improvement market.

There is also the beauty of continuous power. I don't know from what year, the advertisements played by home appliance brands in the "March Golden Season" are no longer "March Home Appliance Festival", but have been renamed "March Home Improvement Festival". This year, the slogan of the United States is "The Fire of Beauty in March to renew the wisdom home". In fact, as early as 2019, Midea entered the field of decoration in the name of Midea Real Estate, but it was previously more concentrated on the bathroom business. At present, Midea takes the intelligent scene experience as the core and comprehensively implements the intelligent terminal upgrade. The data shows that there are more than 35,000 retail outlets for smart model samples and smart scene demonstrations, and more than 550 EDIS whole house intelligent service outlets have been laid out, providing users with products and services for whole house decoration, space transformation and intelligent set to output and strengthen Midea's whole house smart home appliance solutions.

Of course, there are still waiting for example, Gree, in 2020 Gree created the first autumn home improvement festival, this year and launched the 2022 spring home improvement festival, but unlike Haier Zhijia, Midea, Gree's so-called "home improvement" still failed to go out of the home appliance category, does not involve the whole package, at best, from the previous product single purchase model to today's complete set of sales system.

Obviously, the home improvement industry has become the best choice for "expansion tracks" in the eyes of many industries. So many companies have crossed over and won the home improvement track, so what advantages do home appliance brands have?

Chain ecology, back to the line, home appliance brands have many tricks

It should be noted that not everyone can succeed in cross-border, why did Gree choose to stabilize the track of home improvement? Perhaps the previous cross-border failure is also a reason.

Before this, the home improvement market is somewhat crowded, mainly because the number of related companies is too much, so these companies must have new competitive advantages when they come across borders, specifically, there are two aspects in common:

First, with the arrival of these enterprises, the competition in the traditional home improvement market has been upgraded from the technical level to the ecological level. The model of industrial ecology is the best play of these Internet companies and home appliance brands.

Second, the home improvement market is a typical "marine structure", a huge market space, relatively speaking, the player is much smaller, even if it is a giant whale, it is not worth mentioning in the face of the ocean.

Even if Gree is a brand that has not yet fully entered the home improvement market, we can still see that since last year, more and more Gree off-line service centers have begun to appear in various communities, and home appliance brands can bring users a more perfect experience and service with the advantages of outlets.

Of course, another major reason why they will choose cross-border is that many Internet industries have long entered the stock era, such as automobiles, home appliances, 3C and other industries urgently need new "catfish" to activate, and create new business models through cross-border competition.

Therefore, cross-border for them, is also a kind of disguised reform, for example, embodied in the home appliance industry is another "channel reform", or "de-middlemanization".

Behind the transformation into a decoration company, the channel change of the industry has come again

Some people may say that they still do not have a complete product production chain, or need to integrate, which is not just the former "middleman" decoration company, into their own? Why are home appliance brands different? That's because the "de-middleman" at this time is both for the user and for the brand itself.

For users, when choosing the service provided by a home appliance brand, it is equivalent to removing the "decoration company" this intermediary link, reviewing the traditional assembly process, looking for a decoration company - looking for a home appliance brand to take goods - looking for building materials company to take goods - start decoration, at this time it becomes, choose a home appliance brand - find a building materials company to take goods - start decoration, when the home appliance brand becomes a "middleman", it seems that there is only one link missing, but it is the most "pit" part for the user.

Of course, the more important "de-middleman" is still for the brand itself. In the face of a complex and changeable market environment, enterprises need to speed up for themselves, and the traditional model of layered goods and layered distribution is obviously too slow. There is also such a channel change, a change that allows the brand to face the consumer.

Of course, the "transformation into a decoration company" is only part of the channel change of the home appliance brand, and there are also ways to play like the front warehouse are also part of the channel change, which means that the player is beautiful. Last year, Midea played the "front warehouse" game, that is, like fresh e-commerce, it will move the warehousing center from the suburbs and countryside to the urban center closer to the user, that is, the "1-hour service circle" mentioned earlier, the specific impact can be seen in the Data of the United States, the number of warehouses has dropped from 2200 to 136, the warehouse area has dropped from 5.5 million + square to 1.6 million + square, the order delivery cycle has been shortened from 45 days to 20 days, and the inventory turnover has also been shortened from 51 days to 35 days.

It can be seen that whether it is transforming into a decoration company or creating a front-end warehouse, it is actually to solve the contradiction between the low turnover rate and the low gross profit margin of the home appliance brand, and it is a different path attempt of the home appliance brand to "go to the middleman". Judging from the results, both models have achieved good results, but compared with the front-end warehouse model, "transforming into a decoration company" may bring more imagination to the brand and the industry, and it is more conducive to the birth of a new business model for the brand.