For the changes in the global home decoration industry, 2011 was a watershed, and 2016 was another watershed. Taking these two points in time as the dividing line, the industry has started two rounds of changes and integration. In 2019, a new round of changes is already brewing.
Text/Wei Yubin Yiou columnist
In 2018, the scale of China's home decoration market reached 4.4 trillion yuan.
Most people in the home decoration industry must be familiar with the term "four trillion". However, what does the global market look like?
This article will provide readers with a general picture of the global home improvement market from three aspects: industry scale, development status of major countries, and future development trends.
Global Development Situation
(1) Industry Scale
Calculated by Yiou Home based on global per capita income and data from each segment, in 2018, the global home decoration market reached an equivalent of RMB 39 trillion.
From a national perspective, the United States is the largest market, with a scale equivalent to RMB 7.2 trillion, accounting for 18.5% of the global share; China and Japan follow closely. China’s home decoration market in 2018 was 4.4 trillion yuan. , accounting for 11.3% of the global share, while Japan is equivalent to 2.4 trillion yuan, accounting for 6.2% of the global share.
From a regional perspective, Europe, North America, and the Asia-Pacific region are all relatively large in size, and Europe accounts for 30% of the global share. This is due to the strong spending power of consumers from high-income countries and emerging markets. The unremitting pursuit of quality life.
(2) Development status of major countries
United States:
The U.S. home improvement market has three major characteristics:
First, the market size is large. After years of steady development, the U.S. home improvement market reached US$1,113.5 billion in 2018, equivalent to approximately RMB 7.2 trillion.
Second, it has certain growth potential. From 2018 to 2020, the home decoration market is expected to achieve a compound annual growth rate of 4.5%.
Third, the industry is highly concentrated. Among them, the top 10 U.S. furniture retailers account for 22% of the market nationwide, and the top 4 mattress brands account for more than 70%.
The United States is not only the largest home furnishing market, but also a trendsetter who is at the forefront of the industry and leads industry trends. As early as about 20 years ago, home furnishing e-commerce has sprouted in the United States. CSN Stores (the predecessor of Wayfair) and Overstock were established successively. The two jointly opened up the battlefield of home furnishing e-commerce; 2009 was the "first year of Internet home improvement" in the United States. This year, the Internet home decoration website Houzz was established and commercialized the following year. After a few years, it became a star enterprise in the industry. In 2015, the D2C wave swept across the European and American home furnishing industry. Within a few years, a large number of "self-produced and self-sold" products appeared. Home vertical e-commerce and mattress e-commerce have captured 15% of the U.S. mattress retail industry in just three years.
These new business models that have impacted the industry all originated in the United States and have gradually spread to other countries. This shows the innovation capabilities of American home furnishing companies.
Japan:
In 2018, the size of the Japanese home decoration market reached 35.3 trillion yen, equivalent to approximately 2.4 trillion RMB. Currently, the Japanese home decoration market is in the midst of a long recovery period, but it has not yet returned to the size of about 6 trillion yuan before the bubble economy burst in 1991.
At the same time, Japanese furniture and home decoration design styles have huge appeal around the world.
Although Japan and the United States are both developed countries, the home decoration industry has completely different characteristics.
First of all, after the bubble economy burst, Japan gradually entered the fourth era of consumption, and consumer behavior became more rational. From large-scale purchases driven by life stages such as marriage, relocation, and divorce, to small-volume and frequent purchases based on actual needs, the impact of fashion trends on consumer behavior is increasingly evident.
In the past, Japanese consumers would buy furniture and household items in large quantities at one time, with relatively low frequency of consumption. Generally speaking, these large-scale purchases will occur at major turning points in life such as marriage, relocation, and divorce. Japanese consumers will think that furniture and decoration are "a lifelong matter" and will tend to spend more money on high-quality and durable goods.
However, the trend in the market in recent years is that consumers often purchase furniture and household items based on fashion trends, with higher consumption frequency, but lower unit prices. It can be said that fast fashion has entered and changed the Japanese home decoration industry.
Secondly, Japan’s home furnishing and decoration industry continues to consolidate. In the 20 years from 1996 to 2016, nearly two-thirds of furniture manufacturers and wholesalers were eliminated. In the future, consolidation will continue.
Finally, the Japanese home furnishing and home improvement industry faces some negative factors, which is the main reason for the low expected growth rate of the entire industry. The main negative factors affecting Japan's home improvement market are, in addition to the macro-economy that has been "slumping" since the 1990s, as well as the decline in new housing starts and the marriage rate. From 1998 to 2016, housing starts fell 12%. After the bubble economy burst, the average income of Japanese people turned downward, and the lifetime never-marriage rate of both genders began to rise sharply. From 2010 to 2015 alone, the lifetime never-marriage rate increased by 3 percentage points.
According to the research results of the Japanese survey agency "Hakuhodo", by 2035, the lifelong unmarried rate of Japanese men will be close to 30% and that of women will be close to 20%. There will be 48.05 million singles in the population over 15 years old, that is, there will be approximately Half of Japanese live single.
The number of new houses started has a direct impact on the number of houses entering the home improvement market. The increase in unmarried people will also bring variables to the housing condition, decoration demand, furniture demand and other aspects. The new situation poses challenges for some companies and will be opportunities for others.
India:
India is a rapidly growing market. Although the overall size of the home decoration industry is small, with a scale of approximately US$56.5 billion in 2018, equivalent to approximately RMB 365.8 billion, the industry is expected to have a compound annual growth rate of 12% in the next three years, which is quite rare globally. The expectations of some people in the home decoration industry are more optimistic than 12%, and even reach 15% to 30%.
However, the extreme fragmentation of the Indian home improvement market from manufacturing to retail is a fact that cannot be ignored. In terms of
manufacturing, according to a report by the Indian research organization RedSeer, in the Indian home furnishing industry, organized enterprise production only accounts for 14% of the market share, and the remaining 86% of the market is divided up by tens of thousands of unorganized small workshops.
The same goes for retail. Department stores and shopping malls are difficult to penetrate into third- and fourth-tier cities. More than 90% of the Indian retail industry’s market share is occupied by small “mom-and-pop” stores and stalls without formal distribution channels.
Whether it is India's manufacturing or retail industries, they will gradually concentrate and integrate in the future. By 2022, the proportion of organized enterprise production in the Indian home furnishing industry is expected to reach 19%. However, it is obviously impossible for the entire industry to move from decentralization to concentration and from budding to maturity overnight.
When MINISO went overseas to India, it also faced the problem of extreme fragmentation in the retail market: due to customer flow considerations, MINISO stores were initially opened in shopping malls in first-tier cities, but the channels were sinking. , when expanding into a larger territory, the reality of “the lack of high-quality shopping malls in most parts of India” has brought huge obstacles.
Miniso said that they will open franchises in India to reduce the cash flow pressure caused by opening a large number of stores on the company. However, this is more like a "surrounding Wei and saving Zhao" approach and does not directly face the problem of the lack of high-quality business districts in third- and fourth-tier cities. . Some home furnishing companies in India are taking a "curve to save the country" and trying to quickly reach consumers in first- and second-tier cities through e-commerce.
But which method can provide the optimal solution and which companies can integrate the Indian market, which is like a "disorganized mess", still needs to be tested by time.
future development trend
2019 is, in a sense, an inflection point of and for the global home furnishing industry.
As Yiou Home Furnishing has expressed before: "For the changes in the pattern of the global home decoration industry, 2011 was a watershed, and 2016 was another watershed. Taking these two time points as the dividing line, the industry has started two rounds of Change and integration. In 2019, a new round of changes is already brewing."
In 2011 and 2016, Internet variables affected the home furnishing industry twice. After the two changes, some traditional companies that had lost their competitiveness were swept out. The original business methods of surviving traditional companies often faced huge challenges or even failed. It forces them to make up for their shortcomings.
What is different from the previous two changes is that in Europe and the United States, most of the brands that were shuffled in 2011 and 2016 were traditional home furnishing companies. After 2019, those who were once at the forefront Internet home furnishing companies (especially home e-commerce) will face greater pressure than before.
When the turning point comes, it becomes particularly important to see the situation clearly.
(1) The crowded home e-commerce battlefield will usher in consolidation
html billion Oujia has analyzed the D2C home e-commerce model in detail in previous articles (related articles: "Pinduoduo's "early adopter", capital is enthusiastic, D2C is the next trend in the home industry?"). Around 2016, a sudden emergence of A large number of D2C home furnishing e-commerce companies are like dark horses on the track, disrupting the already stable pattern of the European and American home furnishing retail industry. They are competing with traditional giants to compete with each other. In just about three years,Some D2C home e-commerce companies have become unicorns and even listed companies, finding a place among the traditional giants and Amazon .
But as more and more entrepreneurs and capital see the D2C model value, this battlefield has become quite crowded. According to Curbes, there are more than 150 D2C mattress e-commerce companies in the United States alone that have reached consumers.
But at the same time, the sales of most D2C home furnishing e-commerce companies are There is a big gap with traditional giants. Star companies such as Casper and Purple only have annual revenue of several hundred million US dollars. The characteristics of the home e-commerce track of "small area, many players, and very crowded" gradually emerged.
At present, the trend of "the strong gets stronger" has emerged on the track. The top fifteen bedding e-commerce companies in the United States had related category revenue of US$2.27 billion in 2017, a year-on-year increase of 66%; the top five bedding e-commerce companies Supplies e-commerce companies include Amazon, Casper, Saatva, Purple and TuftNeedle. In 2017, the revenue of related categories totaled approximately US$1.4 billion, a year-on-year increase of 85%.
On the one hand, consumers are accelerating their gathering of big brands; The crazy era of triple-digit growth has passed, investors and consumers have become calmer, and the vast number of home furnishing e-commerce companies on the track are bound to fight a more difficult war.
Household products have a long consumer decision-making cycle and are important for consumers. For products with high experience requirements, high unit price but low consumption frequency, the proportion of e-commerce sales is bound to have a ceiling. Some industry insiders in the United States have set this ceiling at around 20%-30%.
It is foreseeable that as the proportion of e-commerce sales in the home furnishing field gradually approaches the "peak" and the average growth rate of the industry continues to slow down, in the near future, a round of reshuffle will begin in the crowded track. Some companies that do not have core competitiveness, cannot focus on user value, or make mistakes in strategic deployment will be eliminated, while the few that remain will be able to gain a firm foothold in the industry and even become truly great companies.
(2) Innovative stores will become the direction of the entire industry
From the end of 2018 to the beginning of 2019, Sears closed down, JC Penney cut its business, Mattress Firm and Heritage went bankrupt one after another. Not optimistic news came one after another, reminding us that physical retail is declining. reality.
As mentioned above, due to the objective existence of various pain points, there is bound to be a ceiling in the proportion of e-commerce sales of household products, and users still urgently need physical stores to provide them with a place to experience. Physical retail is not going to the grave, it just lacks excitement for the time being. Traditional strategies and traditional business methods are failing. New retail is trying to capture the new needs of users and shine in the market.
Whether it is a traditional enterprise that started offline or an emerging enterprise with Internet genes, the visionaries among them have all made moves to innovate their stores.
Home furnishing e-commerce companies such as Casper and Wayfair in the United States, and Simba Sleep and Eve Sleep in the United Kingdom, have actively expanded their hands offline in recent years by opening their own stores or reaching cooperation with large shopping malls.The most remarkable one is undoubtedly the mattress e-commerce brand Casper, which has developed a variety of store types, whether it is a capsule hotel with a price of "25 US dollars for 45 minutes", an eye-catching pop-up store modeled after a phone booth, or a Log cabins and shopping mall stores that provide consumers with an uninterrupted experience are all trying to provide consumers with a full range of in-depth experiences and solve the biggest pain points of purchasing home furnishings online.
Japan's Yideli and the United States' Restoration Hardware are good examples among traditional enterprises.
Yideli's traditional stores are large-scale stores located in the suburbs. In recent years, it has actively opened small furniture stores and home decoration stores in the city center, targeting female consumers, focusing on package purchases and high-frequency consumption, creating a new environment for the company. new growth points. After several years,
Restoration Hardware got rid of its old image of "an old-school furniture store in a shopping mall" and turned into a "living art gallery selling coffee". By leveraging the Internet celebrity effect, it has harvested a group of people who come here because of its reputation on social media. And loyal fans who will spread the word spontaneously. In 2018, its revenue reached $2.5 billion.
turns its attention to China. We can also see that some original home furnishing brands have also embarked on the road of selling coffee and lifestyle, such as Fanji, Shangzai, etc.
innovative stores have become a trend worthy of attention around the world.
(3) The main consumer force, mainly people aged 25-39, will continue to shift to those born after 1995.
In recent years, new trends, new models, and new stores have emerged in the global home decoration industry. A word that has been mentioned a lot in China is " "New Retail for Home Furnishings". So, why do we pursue "newness"?
The bottom line is that we are facing a new consumer group.
In 2019, the "post-95s generation" accounted for 25% of the global population.
As they gradually enter society and start families, the new consumer power they represent is pouring into the home decoration market.
Take the United States as an example.
According to data from USA Today Furniture, in 2014, the sales brought to the home furnishing market by Millennials (those born between 1981 and 1995) accounted for 37% of the total sales; Generation X (those born between 1966 and 1980) people) are relatively affluent, driving 30% of sales; baby boomers (people born between 1946 and 1965) and the elderly (people born before 1946) generally have their own stable residences, contributing 29% and 29% respectively. 4% of sales.
So far, the mainstay of home improvement consumption in the United States is still the millennial generation.
The situation in China is also relatively similar. According to data released by Baidu, Tencent, 360, etc., people aged 25-34 account for half of home decoration consumption.
However, a new round of changes in the main consumer forces is approaching.
In 2019, the number of people born after 1995 will account for 25% of the global population and one-third of the US population. As they gradually begin to live independently, they are bound to have new demands for household items, furniture, and home decoration.
html The post-95 generation has grown up in the Internet environment, which determines that the Internet penetration rate in the home decoration market can only become higher and higher. Since they have been exposed to information explosion for a long time and are accustomed to digesting information quickly, the time they stay on the same product page will be shorter than that of their predecessors. Interestingly, according to surveys by research institutions, the consumer behavior of the post-95 generation is less affected by price, promotion and advertising. What they value is uniqueness and innovation, which puts forward higher design requirements for home decoration companies.Faced with a new round of changes in the main consumer groups, home decoration companies should make early preparations and understand the psychology and needs of the post-95s generation.
For the industry, returning to and focusing on user value will always be a core keyword when turning points or even changes are approaching.
