The bankruptcy of home begins with the terminal store industry is a crisis or an opportunity?

In 2014, it was clear for the home furnishing industry that the term “unfavourable years” was fulfilled. From the so-called senior management turnover to the tide of home bankruptcy in the middle of the year, all kinds of ebb and flow, all kinds of winds and clouds. Previously, the dynasty furniture, Jiefeng home and other residential companies have been exposed to serious declines in performance, the days of home business seems to be getting worse. In mid-June, according to industry media reports, Huayuanxuan, one of the Shenzhen home furnishing giants, is applying for bankruptcy. The so-called windless wave, from the IPO of Huayuanxuan blocked to bankruptcy rumors, whether it is unfounded.

In this regard, we must admit that for the fast-moving and ever-changing market economy, the home business is just a boat that wanders on the sea, and there is always the danger of overturning the ship, even if the ship is large enough to withstand the sea storm. The most violent raging, once the structure, fuel problems, or other ships hit, the big ship may still sink. Because of this, Bill Gates often warned the company's employees when he was Microsoft's CEO. "Microsoft is only 18 months away from bankruptcy."

Bankruptcy begins in the store

In recent years, the beginning of the so-called home bankruptcy tide is not the home furnishing industry we are familiar with, but has spread from the terminal stores. In mid-September 2012, American chain giants and the world's largest building materials supermarket Depot closed all large-scale home building materials retail stores in China; not only, since 2013, Beijing Xinglong Home Building Materials City, Jinkaidede Home Store, Oriental Home Lishui Bridge The store, B&Q Qiaoqiao North Store, and the Real Home Dadongfa Store have been in trouble, closing the door, or withdrawing from the venue. In 2013, it was once the rumor that the largest local brand in China, the Oriental Home Building Materials Supermarket, was in a crash. All five stores in Beijing were suspended from business, and its headquarters also filed for bankruptcy.

These facts are all illustrative. In recent years, the home furnishing industry has been in a downturn due to the influence of real estate regulation. Looking at the annual sales for the previous two years, the sales of home building materials above designated size in 2012 decreased by 2.46% compared with the 1,278.192 billion yuan in 2011. The situation in 2013 is also not very optimistic.

As a traditional industry, the emergence of the so-called bankruptcy tide in the home industry has indeed caused some small sensation in the market. As a typical representative of the traditional industry, the home building materials have not been better in the past two years. The collapse of traditional enterprises has undoubtedly given the home building materials that have been full of chills a more shocking shock, a more intense home industry shuffling tide. It is rushing.

Some of the weaker small and medium-sized stores have begun to gradually close their stores, some to reduce the scale of operations, and some simply to withdraw from the market. For the upstream manufacturing industry, the reason for the dilemma is that the domestic real estate market is sluggish, while the export sales are blocked and the engineering volume is reduced. On the other hand, the overall overcapacity of the building materials industry leads to the overall low profit of the industry. The ability to resist risks is reduced.

Is it a "crisis" or an "opportunity"?

Looking back at the few bankruptcy booms in the home industry, the most obvious start can be said to be the bankruptcy caused by the shrinking real estate market in 2005. At the time of the collapse of the tide, whoever falls first will become the target. If you change the angle, this question is nothing more than what caused the company to close down.

In general, the collapse of a business is often the result of many factors working together. For example, capital chain breaks, raw material costs are too high, product design is backward, channel construction is weak, management efficiency is not high, market competition is too fierce, and so on. In terms of importance, capital is undoubtedly the most important factor in determining the survival of a company. As we all know, most of the home furnishing enterprises belong to SMEs. The most important problem of these enterprises is the funding problem. So the answer is obvious. Those companies with tight financial resources should be the first to fall. Facts have also proved that since 2005, the enterprises that have closed down in the household industry are basically small and medium-sized enterprises.

Before 2005, household consumption has been maintained at a very high level, and any household products can be sold quickly. In this benign consumer environment, the home business has a short turnover period, fast capital withdrawal, and very little liquidity, which can maintain the operation of a company.

After 2005, this situation has changed, and the overcapacity of the home furnishing industry has become increasingly serious. Therefore, when large-scale domestic enterprises triumphed, large-scale small and medium-sized enterprises collapsed. According to informal statistics, in 2005 and 2006, there were thousands of home furnishing enterprises closed down; in 2007, there were thousands of home furnishing enterprises in the country closed down; in 2008, under the impact of the financial crisis, there were 7000 across the country. Home furnishing enterprises closed down; from 2009 to 2010, household enterprises closed down more than 1,000 per year on average. Until 2011, the Pearl River Delta and Jiangsu and Zhejiang again reported news of corporate closures. The recent wave of closures, which was caused by changes in the macro environment in 2013.

But no matter which era of bankruptcy, when we carefully summarized, we found that the disease-causing genes of enterprises are always similar: rising corporate costs, overcapacity in the industry, macroeconomic downturn, failure of corporate decision-making, and chaotic operation management. In the past two years, the home industry will face the critical point of change. The overall decline in the home furnishing industry is precisely the opportunity for the industry to upgrade.

The bigger the plate, the more dangerous it is?

The home industry is a special industry. The material, the speciality of the processing technology and the irregularity of the appearance determine that it can only be a semi-mechanical and semi-manual production industry. At the same time, after 30 years of development, China's modern home furnishing industry has entered a state of overcapacity in the industry, excessive expansion of stores, and meager profits.

In this state of the household industry, the dependence on market consumption is very large. Once the consumption power of the market shrinks, it means that there will be a large number of products in this industry that cannot be sold out, and the funds cannot be returned, which will inevitably lead to a part of relying on cash. Enterprises and stores that are alive and well have problems in their operations and have become victims of “shuffle”.

As the Huayuan Xuan bankruptcy rumors at the beginning of the article, the most common reason for the analysis is the tight capital chain. In turn, we can also say that those enterprises that have completed the initial accumulation of funds in the explosive growth period of the home industry and have strong financial strength are also the companies that are likely to become the final winners.

The author believes that as long as the decision-making level maintains a clear mind, large enterprises can “laugh” to the end with the support of strong funds. The market economy has always been a "strong game", and every industry is like this. The big one is Evergrande and the money is king.

However, with the increasing number of home-sized enterprises on the scale of assets in China, the “plates” that entrepreneurs are holding will also become larger and larger, and entrepreneurs will feel more difficult. Market competition is always ruthless. Once a company makes a major mistake, it is likely to collapse in the domino chain reaction, and the results of decades of operation have been ruined. Such examples are too numerous to mention. Therefore, the bosses of home furnishing enterprises should always be "as far as the abyss, such as walking thin ice", and always maintain sufficient crisis awareness.

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