"If you don't go to sea, you're out". Under the involution of the domestic market, going to sea has become a new choice for many enterprises, in addition to finished products such as Gujia Home, Minhua, and Left and Right Home Furnishing have been laid out to the sea very early, custom home furnishing companies are also eager to try, and today's home furnishing found from the 2023 financial report:
Oppai Home Furnishing's overseas channel revenue was 320 million yuan, a year-on-year increase of 46.5%;
Zhibang Home Furnishing's overseas channel business revenue was 150 million yuan, accounting for 2.45% of operating income, a year-on-year increase of 31.86%;
The overseas channels of gold medal kitchen cabinets achieved sales revenue of 274 million yuan, a year-on-year increase of 16.92%.
Including Henglin Co., Ltd., Zhiou Technology, Lege Co., Ltd., Aili Home, Zhejiang Yongqiang, etc., most of the overseas business revenue in 2023 will account for about 90% of the total revenue.
In today's view, the process of Chinese furniture going overseas can be divided into three stages: product going overseas, production capacity going overseas and brand/channel going overseas. Of course, these three stages will also appear at the same time (for example, the current is the coexistence of three forms), but the goal of Chinese furniture going overseas in the future should be the brand/channel going overseas.
So, what are the opportunities and challenges for Chinese home furnishings to go overseas? Today's Home Furnishing interviewed representatives of companies including Meishe International and Dajian Yuncang, which provided a very valuable reference.
It is worth noting that enterprises going overseas are not all opportunities, but also face challenges, and cost fluctuations such as shipping, tariffs, and exchange rates have an important impact on the overseas operation of home furnishing enterprises.
Dajian Yuncang, which has just released a brilliant financial report, has rich experience in the cross-border field of home furnishing. Zhang Renyuan, director of the marketing department, believes that China's furniture going overseas mainly faces five important challenges:
1. Uncertainty of the international situation, such as anti-dumping investigations, additional tariffs, policy fluctuations, geopolitical factors, etc
2. Logistics problems: including shipping price fluctuations, transportation cycle extensions, goods shortage and other problems
3. Operational pressure: warehousing costs, stocking pressure, cash flow pressure, and lack of understanding of localized operations
4. Brand building: Establishing and maintaining a brand image in the international market requires long-term investment and strategic planning.
5. Dependence on cross-border e-commerce platforms: Over-reliance on a single platform may increase business risks.
Opportunities and challenges coexist, and the road to sea has a long way to go.
So, what are the issues to pay attention to in the "trilogy" of going overseas: products going overseas, production capacity going overseas, and brands/channels going overseas?
Second, the first stage: products go overseas, from OEM/ODM to cross-border e-commerce
Product going overseas refers to the sale of products by enterprises to foreign markets, which is the most basic form of going overseas. Today's home furnishing believes that the main forms of products going overseas can be roughly divided into OEM or ODM foundry, as well as cross-border e-commerce methods.
Cross-border e-commerce is mainly sold through e-commerce platforms such as Amazon and Wayfair, which can be directly to C for consumers, or can be sold through the form of semi-managed platform (operated by the merchant independently, and the e-commerce platform is only responsible for warehousing and logistics), or fully managed (the e-commerce platform is fully responsible for store operation, warehousing, distribution, after-sales, etc., and the merchant focuses on providing goods).
(1) The trade war has brought tariff barriers, and domestic foundry is becoming more and more difficult
The trade war, which has lasted for many years and will not stop or even increase in the short term, has gradually narrowed the advantages of Chinese enterprises in the global furniture OEM industry chain.
Especially in a series of categories such as solid wood suites, cabinets, mattresses, etc., the trade war initiated by United States will continue to increase tariffs. Many companies that move their production capacity to Southeast Asia will find that if tariffs are not counted, the comprehensive cost is similar to that of China, and the efficiency may be lower than that of China.
Shrinking orders and shrinking profit margins have made many OEM home furnishing companies in China face "pains" of transformation.
(2) Cross-border e-commerce has accelerated, and the overseas warehouse business has grown rapidly
With the gradual improvement of the logistics chain, furniture going overseas has been upgraded from made in China to sold in China based on cross-border e-commerce, especially on third-party e-commerce platforms such as Amazon. According to data from China Securities Construction Investment, in 2023, the total merchandise transaction volume (GMV) of Chinese sellers in the overseas furniture and home furnishing B2C e-commerce market will reach 773.8 billion yuan, a year-on-year increase of 23.2%, exceeding the 12.8% growth rate of the furniture and home furnishing e-commerce industry.
Source: China Securities Securities
Zhang Renyuan, director of the marketing department of Dajian Yuncang, said in an interview with Today's Home Furnishing that the competitiveness of Chinese furniture going overseas lies in the cost advantage and the integrity of the supply chain: relying on the domestic raw materials and production supply chain system, Chinese furniture companies can provide competitive prices; Thanks to the integrity of the supply chain and long-term OEM experience, Chinese furniture companies have rich experience in quality, design, service, etc., providing a rich and diverse selection of products to meet the needs of different markets.
Today's Home also interviewed the global integrated logistics service provider - Meishe International. In the view of Zheng Danyang, vice president of sales in South China, the current stage of China's furniture going overseas is in the stage of "shock upward", and products with intelligent elements will be more competitive. For example, the current popular intelligent lifting desk, ergonomic chair with massage function, etc.
Behind the boom of cross-border e-commerce, there is also the smoke of low-price competition. Li Zhiming, general manager of Wayfair's Greater China business, said that China has always been a major exporter of overseas furniture markets, but the core is price, not brand.
Today's Home Furnishing also learned from the exchange of the industry that Wayfair, as a professional furniture e-commerce platform, does not encourage blind price wars and product hom*ogenization, but encourages sellers to serve consumers with differentiated products, and at the same time, it is also more in place in terms of seller protection.
(3) Overseas warehouse, a new must-have option for furniture to go to sea across borders
By setting up warehouses in the countries and regions where overseas buyers are located, companies can transport goods to the warehouses at their destinations in advance. When the consumer places an order, the goods can be shipped directly from the overseas warehouse and directly to the user. This is the business model of overseas warehouse business, which has the characteristics of fast customs clearance, fast distribution, fast turnover, fast service and low cost.
Source: Dajian Yuncang
At present, the construction of overseas warehouses is ushering in new opportunities, and many enterprises have seized the opportunity, and the scale of overseas warehouse groups has begun to appear.
Dajian Yuncang: As of May 24, the company has 42 delivery centers with a total area of 10.5 million square feet (about 975,400 square meters).
Lege shares: As of the end of 23, the company has 12 overseas warehouses, totaling 289,600 square meters, 23 years of overseas warehouse revenue +94.03% year-on-year to 951 million yuan, accounting for a total revenue increase of 9.10pct to 24.38%, with the opening of self-built overseas warehouses in 26 years, it is expected to increase the company's gross profit margin.
Zhiou Technology: As of 23 years, the company has 10 overseas warehouses with a total area of 273,200 square meters.
Aoji Technology: As of 23 years, the company operates 27 overseas warehouses with a total area of more than 5 million square feet (about 464,500 square meters).
Second, the second stage: production capacity to go to sea, to avoid trade barriers
Sorting out the routes of China's home production capacity to go to sea, from the initial brave entry into Southeast Asia, successively set off a gold rush in Viet Nam and Malaysia, to enter Mexico in a group, and then to the layout of the "Belt and Road", open up new opportunities for development, and promote the redivision of labor in the global industrial chain.
According to the report of Huatai Securities, before 2018, only Lege shares in Viet Nam, and Dream Lily had production bases in Serbia and Spain; Since 2018, a total of 17 overseas projects have been implemented or in preparation according to incomplete statistics, and the pace of factory construction of various enterprises has accelerated significantly.
In 2018, the Viet Nam production base of Minhua Holdings started construction and was officially put into operation in August 2019. In 2019, the production base of Dream Lily in Thailand was put into production and full production in April of the following year; In 2019, the Viet Nam production base of Ingenuity Home Furnishing started construction and was put into production in the fourth quarter of this year; Qisheng Technology's Viet Nam production base also started construction in 2019 and was put into operation at the end of the same year.
In January 2024, the groundbreaking ceremony of Qisheng Technology's Viet Nam factory
Source: Qisheng Technology
In March 2020, the United States also began anti-dumping investigations on mattresses in seven countries, including Cambodia, Indonesia, Malaysia, Serbia, Thailand, Turkey and Viet Nam. (Related review: Mattress anti-dumping in Southeast Asia?) 1000% in Viet Nam and 773% in Thailand, behind these companies! Around the same time, Canada also announced anti-dumping and countervailing duties on upholstered furniture imported from China and Viet Nam.
Mexico "siphons" made in China and has become a new hot spot for going to sea.
In 2020, Gujia Home Furnishing Mexico factory was officially opened in Huafu Park, and in 2021, the company invested 1 billion yuan to build a production base in Mexico; Man Wah Holdings announced in early 2022 that it would purchase 338,000 square meters of land in Mexico to build a factory. At the same time, home furnishing companies such as Aili Home, Zhongyuan Home Furnishing, and Shengao Technology have also announced investment and construction of factories in Mexico.
Santo's base in Mexico
Source: Sunon Technology
However, in the latest United States mattress anti-dumping storm in July 2023, 13 countries and regions, including Mexico, were among them.
Extended reading: The third wave! United States launched an anti-dumping review against 13 countries including Mexico, or caused industry turmoil?
Today's Home Exclusive Interview with Zheng Danyang, Vice President of Sales of South China of American International International, believes that Southeast Asia has more advantages in the tax rate of wooden furniture, and there is still a market for North America, especially Mexico. However, in order to be settled after the autumn, it is recommended that more enterprises need industrial transfer and localization of production areas.
New opportunities for the Belt and Road Initiative are coming.
For example, Jiumu has successively carried out cooperation in more than 30 countries along the route, such as Viet Nam, Qatar, Mongolia and the Middle East; In response to investors' questions in March 2023, Jianlin Home Furnishing said that its international layout actively responds to the "Belt and Road" strategy, and in addition to the American market, its business development covers many countries in Asia, Africa and Europe.
In 2023, Shangpin Home Delivery Group successfully signed an in-depth cooperation agreement with Sweety Home, the largest furniture company in Myanmar, and will work together to develop a new market for customized home furnishings in Myanmar.
The Sweety Home team visited the pilot demonstration base of Shangpin Home Delivery Intelligent Manufacturing
Source: Shangpin Home Delivery
3. The third stage: the brand/channel goes overseas and takes back the initiative
For furniture companies, the ultimate goal of going overseas must be to become a global brand, not just sell goods globally.
This starts with the globalization of brands and channels.
On the one hand, from the perspective of channel going overseas, there has not yet been a Chinese home furnishing channel giant like IKEA or SHEIN. This means that China's furniture industry still lacks leading enterprises with sufficient influence and voice in the international market.
On the other hand, from the perspective of brand going overseas, brand going overseas is still on the way.
Today's home furnishing interview with Dajian Yuncang, marketing director Zhang Renyuan believes that China's traditional furniture foreign trade enterprises began to shift from "manufacturing to sea" to "brand to sea", began to pay attention to localized research and development and iteration, and began to consciously enhance brand value through registered trademarks, brand acquisitions, brand authorization, etc., and gradually changed from selling production capacity to selling products and brands.
(1) Brand sales represented by Zhiou
Branded sales refer to brand operation. For example, Zhiou Technology, a world-renowned Internet home furnishing brand, has three sub-brands: SONGMICS, VASAGLE and Feandrea, each with its own focus, focusing on home furnishing, furniture, pet home and other product categories, thus establishing a multi-brand matrix, deeply bound to the Amazon platform, and mainly sold in the European and American markets.
(2) Overseas brand mergers and acquisitions
Since 2017, a number of domestic first-line home furnishing companies have embarked on a wave of overseas mergers and acquisitions, such as Dream Lily, which has successively acquired MATRESSES, a Spain mattress retail company, and MOR, a comprehensive furniture retail company on the west coast of United States;
Qumei Home Furnishing acquired Norway's high-end home furnishing brand Ekonres for 4.063 billion yuan;
Markor Home Furnishing purchased a 60% stake in M.U.S.T. Holdings Limited, a high-end furniture and decoration manufacturing company, for $4.92 million;
OPPAI HOME FURNISHINGS ACQUIRES Italy FURNITURE MANUFACTURER FOR 4.6 MILLION EUROS......
As an important indicator to measure the effectiveness of overseas mergers and acquisitions of home furnishing enterprises, the targets of some foreign trade home furnishing enterprises in the past have become the pillars of the company's revenue.
According to the annual performance announcements of Dream Lily, in 2020, 2021, 2022 and mid-2023, the operating income of MOR companies in United States will be 1.499 billion yuan, 2.114 billion yuan, 2.23 billion yuan and 924 million yuan respectively, accounting for 22.96%, 25.97%, 27.82% and 25.66% of total revenue, and contributing more than 20% of revenue to listed companies in recent years.
In recent years, the Stressless brand has contributed more than half of the revenue to Qumei Home. According to the private placement prospectus updated by Qumei Home Furnishing in December 2023, in 2021, 2022, and from January to June 2023, the Stressless series achieved revenue of 2.376 billion yuan, 2.553 billion yuan, and 1.084 billion yuan, accounting for 47.75%, 53.39%, and 56.55% of the revenue respectively.
(3) Open stores overseas and directly enter the local market
Opening a store directly in overseas markets is the most direct and efficient way for brands to go overseas.
In December 2023, Gujia Home opened its first benchmark store in Mumbai, India, with its "big store" model providing an integrated whole-home solution to meet one-stop shopping needs.
Extended reading: Gujia Home Furnishing India store opens! How can home furnishing brands go overseas steadily and far?
In January 2024, Sophia opened a high-end custom experience hall in Ho Chi Minh City, Viet Nam. According to the company's annual report, in 2023, the company's export business operating income will grow by 42.92%.
In February 2024, the first store in Asia of The WE Story, an overseas brand of Left and Right Home Furnishings, opened in Mumbai, India.
In March 2024, the store of the house in Phnom Penh, the capital of Cambodia, will officially open. According to public information, the store has a construction area of nearly 40,000 square meters and an occupancy rate of nearly 100%, attracting a number of well-known Chinese home furnishing brands to settle in.
The opening ceremony of the Cambodian Phnom Penh store
Source: Actually Home
Epilogue:
From a macro perspective, it is the general trend for Chinese enterprises to go overseas. However, before making the decision to go to sea, enterprises must consider the whole situation according to their own business model, development stage, product characteristics, etc., and make prudent decisions.
Today's home furnishing special project "Go to Sea", and at the same time launch the "Go to Sea Resource Sharing Platform", welcome enterprises with overseas needs to scan the code to fill in the questionnaire and join the group to communicate!
