Many consumers think that expensive furniture products must have huge profits, but furniture companies and distributors have been saying that they are almost unprofitable. This is a very strange thing. What is the reason?
Is the furniture industry a profiteering industry? What are their cost components? How much is the profit of furniture products? Someone broke it and calculated it.
The cost composition of a piece of furniture from the factory to the exhibition and consumers
1. Factory price
Based on direct production costs (including production materials, production labor, and workshop manufacturing costs), 28% of indirect costs (2% for utilities, 10% for rent, 3% for machine wear and tear, 3% for auxiliary consumables, salaries for management personnel and hospitality) are added. , business trip and other management fees 10%, tax 3%).
2. The cost of packaging reinforcement and transportation
Including the outer frame reinforcement material plus labor, the entire transportation cost (logistics from the surrounding area to the urban distribution center, the urban distribution center to the customer's downstairs, from the downstairs to the customer's home and responsible for the actual cost of installing a single product).
3. The cost of after-sales service provided by furniture manufacturers
If the furniture manufacturer provides after-sales service, for example, it is normal for the solid wood furniture purchased by the customer to have minor problems due to the influence of weather, humidity, etc. You call the factory for door-to-door maintenance, which will also incur costs, then the service is guaranteed but the cost will also increase.
4. Celebrity endorsement fees
A dozen years ago, the endorsement fee for first-line stars was around 300,000 yuan. In recent years, as all walks of life scramble to hire spokespersons, celebrity endorsement fees have risen, ranging from hundreds of thousands to over 10 million. Among them, hundreds of thousands can generally only buy the portrait rights of stars.
5. Environmental certification fees
At present, there are more than 10 kinds of green certification marks in the furniture market. These certification agencies include both official organizations and non-governmental organizations. Various green environmental protection certifications have high and low gold content, such as the China Environmental Labeling Product Certification (ie "Ten"). Ring certification”), with the highest gold content.
6. Exhibiting fees
Large-scale furniture exhibition participation costs, the open space is nearly 1,000 yuan per square meter, and the standard booth is less than 9 square meters. The cost is the minimum.
Complaint: For these reasons, the retail price is 4 times the ex-factory price
Not all furniture can be sold directly from the factory to consumers. Most of the furniture needs to go through the store dealer link, and the cost of the store dealer is also a lot. The dealers in the second and third-tier cities purchase from the brand The price is almost the retail price. one third.
Give an example of the "value-added" process of a piece of furniture (the following is an estimate, the actual price may vary)
Ex-factory price of solid wood bed: The direct production cost of a bed is 3,200 yuan, and the actual ex-factory price should add 28% of indirect costs (3,200/(1-0.28-0.12)=5,333 yuan).
Stores and dealer channels: Stores need 20% of the cost of sales (rent, sales) and dealers must guarantee at least 20% of the theoretical profit (5333/(1-0.4)=8888 yuan).
The price of the solid wood bed: based on the previous one, plus the reinforcement material of the outer frame and the labor of 120 yuan. Therefore, the price of furniture in the store is 8888+120=9008 yuan.
Logistics to the customer's home: Logistics from the surrounding areas of Shanghai - the distribution center 120 yuan - downstairs 40 yuan - the customer's home installation of a single piece of 100-200 yuan, the total transportation cost of 260-360 yuan.
After-sales service and total price: The average after-sales service fee of the factory is 30 yuan for a product, and 9008+260 or 360+30=9298 or 9398 yuan is the final cost of a solid wood bed.
Data: Furniture profits are much lower than other industries
According to the statistical data of the State Administration of Taxation's corporate income tax source report, we selected 6 provinces and cities with different economic development levels, including Shanxi, Shandong, Guangdong, Heilongjiang, Chongqing, and Gansu, to calculate the average profit rate of each industry. Among them, is the profit of the entertainment industry**.
From the perspective of furniture brand companies, a gross profit of 30%-50% is relatively normal in the industry, but a high gross profit does not mean high profits. The average profit margin of the furniture industry is only 3%, and the current situation is worrying.
However, it cannot be ignored that some home furnishing brands have achieved excellent results through the reasonable operation. In the just disclosed financial report for the first quarter of 2017, the net profit of Qumei Home Furnishing, Piano, Bunny, Hollike, Xilinmenjing, and Seagull Sanitary Ware an increased of more than 50%;
Piano with the highest growth rate reached 304.46%. It is predicted that the net profit of Piano in the first half of the year is expected to increase by 85%-125% year-on-year.
Exploration: Why does sky-high furniture not have high profits?
1. The frequency of repeated consumption of furniture is low, and there are few repeat customers
Furniture is a durable product with long service life. The average family can use it for decades after buying it home. Therefore, there are few opportunities for repurchase, and there is no so-called "return customer" like in the clothing industry or other industries.
2. The hypermarket sales model keeps rental costs high
The 2013 annual building materials and furniture prosperity index data show that the cumulative sales of furniture and building materials stores above the designated size in 2013 were 1,248.1 billion yuan, an increase of 0.11% year-on-year.
However, the profit did not increase or even declined, because other channels weakened the influence of the store, and the profit growth rate was not large enough. At the same time, the surplus of building materials and furniture stores greatly increased the cost of the furniture industry.
3. The operating expenses of specialty stores continue to increase
The marketing costs of pan-home furnishing companies include logistics costs, store rental costs, labor costs, advertising and promotion fees, etc. Due to the existence of inflation, the marketing costs of pan-home furnishing companies in China are increasing.
Among them, the continuous increase in the rent of the stores has compressed the profits of dealers, especially the high rents of some mid-to-high-end stores, which discouraged many dealers.
4. High housing prices squeeze the growth space of the furniture industry
In 2014, the transaction volume of new houses and second-hand houses (housing, agency, and rental) in the multi-city real estate market decreased. Affected by this, the home furnishing market gradually felt "cold" - the consumer demand for home furnishing has narrowed, and the competition in the furniture market has become more intense. , The feeling of home improvement building materials companies is particularly obvious.
The traditional furniture industry has two characteristics: the first is huge profits, from the factory to the final consumer, the price will probably be increased several times; the second is small profits, this industry is almost unprofitable, and factories, dealers, and stores are all unprofitable. Can be pictured. From the perspective of production cost alone, furniture is not expensive, but various costs such as rent account for a high proportion, which makes the price deviate from the value itself.
Reflection: Profiteering is eaten by inefficiency
We are more willing to believe the experience and judgment of home furnishing practitioners - many home furnishing enterprises can generally achieve 15-20% profits, and even high profits can be made in half.
Of course, with the increasing pressure of the external environment, this lucrative profit is indeed facing many challenges, but "the army will stop it, and the water will cover the soil", many companies either rely on technology, the management, or the market innovation or take advantage of market opportunities. Normative loopholes, through cutting corners, exaggerated propaganda, non-standard taxation, illegal employment, and other zero-sum games or even negative-sum games, can still achieve the above "excess profits" tortuously.
Opportunities, land rents, and asset appreciation are indeed making a lot of money, and there is no need to do good value-added services. It does pose a lot of pressure on the industry and even the circulation in disguise. But it stands to reason that this is a common phenomenon in all walks of life.
We believe that the key reason is that the power of brand manufacturers is too small. If there are large enterprises such as "Gree", "Haier" and "Midea" in the home furnishing industry, and the stores are repeatedly strong, they can completely build their channels. gas?
It is a pity that there are not only no such giant companies in the home furnishing industry but also few companies that can be considered consumer brands. It is no wonder that other stores will be strong. The market economy is often fair. The so-called factory bullies the shop, the shop bullies the factory, and the game between market players ultimately depends on strength.
Stores or channel brands are powerful, and they will naturally impose some of their own rules on you. These rules may harm you, but as long as they are legal, you can do nothing. Who told you that your brand’s factory is too small? Who told your dealer not to find a good "father" and not run a good brand?
What are the potential disadvantages for consumers when the brand manufacturer is small and the store is strong? First of all, the industry concentration is low, there are many small and medium-sized enterprises, and there are many short-term behaviors, the competition rules are easily disordered, consumers often have no choice, and their interests are not guaranteed;
Second, low industry concentration also means low market efficiency. It is difficult for companies to make excess profits through a monopoly, and it is also difficult to absorb costs through economies of scale and scope. For the same furniture, consumers may often pay more. to buy;
In the end, channel dealers may take the opportunity to "override the house", no longer comfortable with the role of circulation, and even dress themselves up as brand dealers, and add a price to the ex-factory price of household products, so that consumers can spend more money in their pockets. Money is even more worthless.
To get to the bottom of it, we will find that the huge profits are eventually eaten by the inefficiency of the operation and management of home furnishing enterprises!
To improve the efficiency of the industry and the enterprise, the fundamental thing is to make the enterprise bigger and stronger, improve the market concentration, and then form a virtuous circle: home furnishing brands must learn to seek profits from economies of scale, economies of scope or other monopolistic innovations;
Stores and distributors must first learn to seek profit from circulation and service and then from scale, chain, and standardization.
From the perspective of the industry, although many marginal companies are complaining, some mainstream companies seem to be living well, and some are even making a fortune.