"The conclusion of the double-season Golden Week sales promotions signals the end of the peak selling period for the year. Given the challenging market environment this year, businesses have been preparing diligently. Despite maintaining promotions even during traditionally slower seasons, the sales performance in October remained weak, and the anticipated year-end push failed to materialize as expected," remarked a store owner operating a ceramic shop in the Venus Building Materials Market along Tianbei Road in Luohu. "This year is shaping up to be particularly tough."
With the conclusion of what’s commonly referred to as 'Silver October,' the final major sales season of the year has come to an end. Back in February, a reporter from the Southern Daily had written about "The Cooling Housing Market Triggering a 'Butterfly Effect' – The Home Improvement Industry Enters a 'Severe Winter.'" Fast forward to today, just a year later, the reporter revisited eight home furnishing stores on Tianbei and Baoan North Roads. The interviewees informed the reporter that even during last year's downturn in the property market, the market conditions at this time were not as sluggish as they are now.
It’s worth reflecting on the fact that despite merchants adopting extensive promotional strategies this year, the market response has not significantly improved. Why is the home furnishing market so weak? And how will the home improvement industry progress in the future?
One visible sign of the market's challenges is the growing number of store vacancies. Since the end of last year, numerous reports across the country have highlighted store closures, withdrawals, and changes in business models. Early this year, industry insiders had predicted that by the end of this year, Shenzhen might see a significant number of brands withdrawing.
It’s reported that during the October double festivals, major home stores like Shenyejiafu, Jinhaima, and Red Star Macalline claimed that their promotional efforts greatly boosted merchant performance. However, after the initial excitement, a reporter revisited the eight home furnishing stores previously visited on weekdays and weekends. Amidst the relative quiet, another trend emerged: the phenomenon of vacant stores has become more noticeable compared to earlier in the year.
The reporter observed that some stores had posted "internal renovation" notices. Although there are vacant spaces, overall, it doesn’t seem to exceed 10%. However, upon consulting multiple store merchants, some revealed that every July, September, or around these times, home stores face the issue of renegotiating leases with existing tenants. Based on their observations, during those periods, over a dozen stores in one location chose to withdraw.
Stores labeled with phrases like "clearance" and "nothing left" occasionally attract a few curious citizens, but inquiries rarely lead to final purchases. The ongoing downturn in the broader economy has led some business owners, like those in the window business, to discuss conditions with store management, deciding to close the store by the end of the year. "There aren’t many stores making real profits; it’s good if one or two out of ten stores turn a profit. Except for factory-operated stores, most are losing money."
Boss Gong noted that everyone is striving for an aggregated effect and increased visibility, but the situation isn't ideal right now. "By the end of the year, we’ll sell as much as we can and then close the store."
Is the Path to Expansion a Breakthrough?
While some stores are closing, others are opening new locations—a peculiar phenomenon among current brand home furnishing stores. But can this expansion truly help stores escape the "icy period" of the market? Many remain skeptical.
At the end of July, the new Phuket-style home store opened. Reports indicated that on its opening weekend, the store’s foot traffic and transaction volume surged, reaching over three times the usual weekend figures. In August, the newly reopened European City Xiangjiang Home, dubbed China's first 5G home complex, generated a total profit rebate of 8 million yuan within two days of reopening. On September 23, the Shajing store of Huameiju Home Life Plaza, a building materials home brand enterprise in Shenzhen, opened. This marked Huameiju’s second store in Shenzhen, accompanied by continuous promotional activities...
For traditional home furnishing stores, rent remains a key survival factor. Without opening new stores or increasing rents, there’s no way to boost turnover.
For home manufacturers and distributors, the downturn in the broader environment has left most companies hesitant to follow up, yet performance concerns keep them cautious. Consequently, tensions among market players are intensifying.
Domestic and international home improvement companies have gradually realized that this status quo is unsustainable. Wang Tingguo, general manager of Milan Spring Radiator, stated that current building materials companies should be selective in expanding new stores. "Last year, many newly opened stores incurred losses. Some brand stores blindly pursued market share, which became a burden for companies." He added that Milan Spring’s approach to opening new stores has been highly targeted.
"Like many industries today, the home furnishing sector is experiencing a surplus—of both products and sales outlets," noted industry expert Mr. Han. "The threshold is dropping, and homogenized competition is intensifying. Coupled with the impact of the larger economic climate, the furniture industry is inevitably feeling immense pressure."
Notably, amidst the lackluster larger environment, home museums have emerged as something new in the past two years. For instance, the Art Exhibition Center expanded from Phase I and II to Phase III, with storefronts still in high demand. Before the opening of Shenzhen's first home furnishing market, "Slow Life," 95% of the shops in the third phase of the Slow Life · Home Furnishing Center of Sungang Craft City had already been leased.
Jewelry boutiques or home experience museums provide new spaces for furniture sales. Treating home products as exquisite jewelry offers a fresh green for the industry, and new differentiated stores are maturing.
Limited Recovery in the Property Market
The sluggish home furnishing industry often points fingers at the unrelenting property market regulatory policies. They argue that the sluggish overall property market has dragged down the downstream home building materials industry.
You Guozhong, chairman of Shenzhen Renhao Furniture, urged companies and distributors to brace for a prolonged battle. "We hope distributors are mentally prepared, as it is estimated that within the next three years, macroeconomic controls will not ease significantly. Things won’t improve this year, and next year might not be better either."
"Real estate and the furniture market in Chengdu are inseparable, like teeth and lips," said Zhu Changling, chairman of the China Furniture Association, in an interview. Generally, after a year or half a year of a downturn in the real estate industry, it affects the furniture industry.
However, interviews with several industry insiders revealed that even if the current trend of the housing market recovery could positively impact the home furnishing industry, the extent of its benefits remains uncertain.
The question of whether the real estate market can truly recover is indeed "a bit worrying." The report on real estate mentioned in the 18th National Congress of the Communist Party of China has only one mention of "establishing a housing system combining market allocation and government security, strengthening the construction and management of affordable housing." In this regard, Dong Fan, director of the Beijing Normal University Real Estate Research Center, views this as the top-level design of the CCP's solution to the housing problem, though this statement is not new and has been reiterated in recent years.
"In the face of the awkward situation of rising and falling housing prices, the policy cannot be canceled in the short term until a suitable solution is found. Even after the 18th National Congress of the Communist Party of China, certain aspects will still be strictly controlled. As long as suppression is lifted, house prices will rise, and rising house prices will affect stability. This remains an unresolved issue," Dong Fan said.
"The home furnishing industry must find its own path to survival and can no longer rely on real estate" became the consensus among interviewees. Evidence-based He He, chairman of the Guangdong Furniture Chamber of Commerce and chairman of Fuzhidao Furniture Co., Ltd., emphasized internally that while focusing on sustainable development, the industry should tap into its strengths to enhance product competitiveness and vitality.
The vitality of a product stems from its quality, variety, and originality. Externally, the industry should shift its focus to emerging foreign trade markets like Southeast Asia, the Middle East, and Africa, exploring the "blue ocean." Domestically, initiatives like "furniture for the elderly" and "furniture for rural areas" might be worth trying.
Transformation of Model: Breaking the Dilemma?
Gradually, online shops are becoming a new avenue for home building materials.
Mr. Zhong and his wife, who live in the Longhua New District, are currently busy renovating their home. They entrusted the renovation project to a decoration company using a semi-package form. Most of the tiles, floors, kitchens, toilets, appliances, wallpapers, hardware, etc., used for the renovation were purchased online.
He explained to the reporter that the reason for buying online is convenience—it allows for easy selection without leaving the house. Secondly, purchasing building materials online is cheaper than buying in physical stores, and some products are primarily sold for promotion, with detailed introductions provided by sellers, ensuring quality.
Mr. Zhu also shared an example. Before the renovation began, he noticed a special offer on the official website of a well-known home improvement brand. A lower cabinet measuring 3 meters and an upper cabinet measuring 1.2 meters, including drawer rails, hinges, handles, and disinfection equipment, along with gas stoves, range hoods, sinks, faucets, etc., totaled only 10,000 yuan, with additional items discounted at 10% off.
"My kitchen isn’t large, and 3.8 meters of cabinets are sufficient; the difference isn’t much, and it’s quite affordable." After placing an online order and registering at the physical store, a designer came to measure the size. "For such a low cost, it’s a great deal to buy branded items without leaving the house and enjoy the service!"
Faced with the current high rental costs, many companies have embarked on a new development path. Traditional home stores have opened e-commerce channels, and home e-commerce has established offline physical stores. With the continuous growth of online shopping groups, the transformation of traditional furniture companies into e-commerce has become a trend.
According to data from the State Administration for Industry and Commerce's website on September 10 this year, the number of online shoppers nationwide reached 210 million, accounting for 39% of the 538 million internet users. Online shopping has become an important part of residents' lives. Last year, the transaction scale of the national e-commerce market reached 7 trillion yuan, of which the online shopping market accounted for 773.56 billion yuan.
With such prospects, the slogan "If you don’t do e-commerce, you’ll regret it in five years" is everywhere. As a result, many companies place high hopes on e-commerce. This trend has led many home furnishing and home improvement building materials companies to establish online malls. With the growing popularity of the internet, consumers prefer online shopping as a convenient method.
He Bin, director of the Shenzhen Real Estate Information Network's Furniture and Decoration Department, who is familiar with online group purchases of home improvement and building materials, told the reporter that to cater to different consumer levels, many first- and second-tier building materials merchants now choose to cooperate with building materials group-buying websites. The online sales price of a product is generally 20 to 30% cheaper than in physical stores. Building materials group-buying websites directly collaborate with manufacturers, cutting out many middlemen costs. Mature websites also monitor merchants' after-sales services, so many consumers are gradually buying home improvement building materials products online.
So-called online shopping is also online shopping. He Bin noted that although there are many low-quality home products online, which negatively impact the entire industry, the shrinking market and rising costs have indeed made the home furnishing market sluggish. Thus, online sales have significantly impacted the traditional market, making life difficult for physical stores.
In summary, the combination of e-commerce and physical stores may become the future trend of the furniture market.
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