Tycoon Accelerated Entry, Internet Home Decoration Industry Or Usher In A Change?

In March 14th, Alibaba (China) Network Technology Co., Ltd. invested more than 20% of Mdt InfoTech Ltd in Henan.

The latter's business scope includes decoration engineering design, installation and maintenance of lamps and lanterns, moving services, construction works and so on.

In fact, there are not only Alibaba giants who think big about home decoration industry.

In September 2018, Jingdong and Qu Mei jointly opened the "home of the United States Jingdong", launched the "complete + custom + finished products + soft clothes + life" mode; in October 2018, Tencent announced a comprehensive strategic cooperation with the red star, and said it will help the home industry in terms of traffic, data, marketing, technology, social networking, and scenes, and explore the value chain reconstruction of home retail industry.

After experiencing the gloomy and negative industry in 2018, with the rapid development of the giants, the home decoration industry will bring about a steady return to the home improvement industry in 2019 if it brings rich flow, abundant capital and technology empowerment for the home decoration industry.

Analysis of the value of the Internet home decoration industry under the Metcalf framework:

The pioneer of computer network, Robert Metcalfe, founder of 3Com, once thought that the value of the network should be increased by the number of users squared. The value of a network is equal to the square of the number of nodes in the network, and the value of the network is proportional to the square of the number of users connected to the network.

According to some scholars, the value of the Internet lies in the interconnections between nodes. Each N node may be associated with other N-1 nodes. The potential correlation is N (N-1), or N 2.

Therefore, the value of Internet Co is V=N: 2, of which V is Internet value and N is the number of users.

Later, this "user first" judgment criterion was perfected. In 2015, the Guotai Junan strategic group thought that the value of Internet enterprises was composed of four core elements, namely realizable factor, premium rate, number of users or potential users, and high quality network nodes.

Among them, V is the Internet value, K is the realization factor, P is the premium rate coefficient (mainly depends on the status in the industry), N is the network user, and R is the distance between the network nodes (customer interaction factor).

Therefore, we might as well use this formula as an anchor, taking tuba and Qijia net as an example to analyze the value of the Internet home decoration industry.

In terms of user conversion rate or payment rate, after years of development, tuba rabbit has accumulated a large number of users, decoration enterprises, interior designers and supplier resources, and has become the largest online home decoration platform in China.

According to the data, by the end of June 30, 2018, the tuba rabbit had 26 million 300 thousand users, 8.45 thousands of decoration enterprises, 1 million 73 thousand interior designers, and 1290 suppliers.

It can be said that the user base of the Internet home dress industry is large, that is, the N value is very large, and the conversion rate of the Internet home wear industry is always good.

According to the data, in the first half of 2018, the conversion rate of Tuba rabbit was 10.5%, compared with the average conversion rate of 8% of the Internet products, it has been commendable to achieve such a result in such a low frequency industry.

To achieve such a conversion rate, the essence is that the Internet home decoration industry is indeed helping to solve the pain problem of traditional home decoration industry. The traditional home decoration industry does have many pain points.

For example, a huge profit, only a soft decoration, if the cost is 100 thousand yuan, then the price will dare to reach 30-40 yuan.

Although the emergence of the Internet has a huge impact on the industry, it still can not fundamentally solve the problem.

From the perspective of the P premium rate coefficient of the home decoration industry, according to the classical business theory, the excess earnings of the enterprises come from the moat.

So what is the moat in the home decoration industry?

In the Internet Group, it seems that the moat of home decoration industry can solve the pain of traditional home decoration industry, reconstruct the ecological industry chain of home decoration industry, coincide with the essence of the Internet, and the essence of the Internet is nothing more than two points: first, break the barriers of information and connect everything.

The second is to reconstruct the industrial ecology and maximize efficiency.

All along, home decoration industry has three major pain points.

First, the industrial chain is long and the capacity is dispersed.

Often you have to deal with more than 20 suppliers alone.

Secondly, the information asymmetry between the buyer and the seller and the complexity of the process lead to the increase of the rebate from design to construction.

Finally, for the owners, the decoration is cumbersome, let people break up the heart, stomach, lung and lungs, and seriously hit people's yearning for a better life.

It can be said that the appearance of home furnishings on the Internet has theoretically solved the pain points in the field of home furnishings, concentrating the scattered production capacity, avoiding the exploitation of middlemen, and simplifying the tedious home furnishings, which undoubtedly provided value for the society.

But the reality is that the current Internet home decoration industry not only has no excess profits, but is a continuous loss.

In the current home decoration industry, no matter the tuba rabbit, Qi family network or many two or three line platforms, they are now in a state of continuous loss.

According to the financial report, from 2015 to 2017, the net profit of Qijia net profit reached 163 million, 154 million and 109 million.

Like the Qijia network, tuba rabbit has never been able to get rid of the continuous loss situation. Only in the first half of 2018, tuba rabbit lost 636 million yuan.

Judging from the R value of customer interaction factor, the reason why the industry is currently in a continuous loss and no excess return is due to two factors, such as homogenization competition, price war and so on.

On the one hand, the Internet home decoration industry is a very low-frequency industry.

Venture capital circle has such a view that it is called low frequency but not high frequency.

As Zhu Xiaohu, who invested in many drops of taxi, ofo and a group of Unicorn enterprises, said that a successful Unicorn enterprise must meet the three characteristics of "high frequency, rigid demand and scale", as well as those of Jinsha River.

Although the home furnishings industry is just needed, low frequency user behavior determines that its user stickiness is not strong, and this has created a high cost for the home furnishings industry.

According to the boss of a decoration company, the home decoration business can only rely on word of mouth, so this is a slow business.

Moreover, because of low frequency, a customer may not come again in ten years, and the need to constantly acquire new customers leads to the high cost of sales per month.

It can be said that due to the slow growth of users and the low rate of repeat purchase, the core revenue source of Internet Jiezhuang company, traffic and paction matching business, will also face the pressure of rising customer cost in the future.

Because of the low frequency characteristics, the value of the Internet home decoration industry is reflected in the formula that there is no excess return, that is, the P value is low, and the R value of customer interaction factor is too large.

On the other hand, most of the Internet home decoration industry, to a certain extent, is still doing the traffic trafficking and matching pactions. It is still limited to intermediary functions. It is hard to say that it has played a catalytic role in today's home decoration industry.

For example, from the material supply side to the design side, to the construction terminal, although most platforms claim to be "large-scale and standardized", according to the feedback of most practitioners, there is still no difference between the traditional home decoration and any other processes. Instead, through the platform's operation, there are a large number of people to arrange, handle and coordinate the sorting and pportation of materials, and the intermediate links become longer.

What is the key to Internet pformation of traditional industries?

In my view, it is necessary to reconstruct the industrial chain of traditional enterprises by information superiority and speed up the circulation of industrial chain from the whole ecosystem.

From this point of view, the Internet home decoration industry still has a long way to go.

Generally speaking, although the Internet home decoration industry has the advantages of high unit price and rigid demand, it is still a long way to go to try to pform the industry only by means of information intermediaries.

Although the real estate industry is no longer in the golden age, the property has ushered in the stock age, but it can not be considered that the demand for home decoration industry will decline sharply.

With the wave of consumption upgrading, demand for old buildings and local decoration is still rising. Coupled with the obvious demand and high price per unit price, the home decoration industry market is still a trillion scale market of change opportunities.

In the Internet (ID:VIPIT1) view, Internet home decoration companies want to break the situation, they must no longer walk in the past just acting as information intermediaries, in essence, are doing matching pactions and traffic patterns.

Therefore, we must start from the nature of the Internet, and use the Internet to re divide and integrate the whole home decoration industry chain.

The platform must take part in the specific process of home decoration and formulate unified standards.

Users who often have Internet home decoration reflect the following problems: the average price is high, the decoration materials are poor, and the decoration companies are running away.

To a large extent, the reason for this is that the platform just wants to be an information platform for "lying to earn", and has not really participated in the field of home decoration.

In addition, there is a lack of measurable standards for home decoration design, such as which brands of home decoration materials, floors and so on.

Therefore, if the home decoration industry wants to scale up and achieve long-term and stable profits, then we must take the heavy model and implement the route that can be duplicated and standardized in design, because only standardization can guarantee the quality, so it is easy to copy and enlarge.

For those high-end, niche demand design, even if the single profit is large, but the crowd is small, does not conform to the theory of Internet scale economy, it may not be much cheaper.

It is impossible to have both fish and bear's paw. The most important thing is to fill the stomach first.

A senior practitioner once admitted that Jiezhuang itself is not a product, but a service, and it is a service with a long cycle and very heavy links.

Therefore, in the face of various problems in the industry, only the platform wading in person, in other words, let the mode be heavier, can we really play the role of empowering the home decoration industry.

At present, the Internet home decoration industry is mostly low price gimmicks, but the quality is not able to keep up with, and even large-scale loss.

In my opinion, on the one hand, the platform wants to create a low price explosion with the Internet thinking.

On the other hand, on the basis of the failure to control the supply chain, we can only subsidize the two parties of home decoration companies and users, making it difficult to make profits and low price.

Therefore, if we want to break the situation, we can also create a burst economy. We must take the route of scale economy.

Specifically, the supply chain should be grasped in its own hands, and the entire supply chain should be leveraged by order to rebuild the ecology of the home decoration market.

For example, when the decoration design scheme is standardized, the company should directly participate in one-stop procurement of decoration materials, reduce the price of decoration and reduce its competitiveness by way of scale economy and reducing the participation of middlemen.

In short, as Ali and Tencent enter the home decoration industry, while bringing huge flow and abundant capital to the home decoration industry, they will also repurchase the value chain and resource allocation of home decoration industry from the aspects of technology, scene and industry chain.

At the same time, those "information intermediaries" pseudo Internet home decoration that just want to lie down will be phased out. A number of brand-new Internet home decoration companies that can really bring value to the industry will surely rise up.