TMTPOST--How long does it take for a Chinese cross-border seller to achieve revenue of tens of billions of yuan from scratch?
It took Anker Innovation ten years. Four Shenzhen-based cross-border e-commerce companies have not generated 10 billion yuan in revenue so far. However, it will take 15 years, as estimated byZielHome Furnishing Technology(ZielHome), an online one-stop home furnishing companythat aims to emulate the success of IKEA,witha few brandsincludingSongmics Home.
According to the financial reportsofZielHome, the annualrevenue ofZielHomein the past five years was 2.32 billion yuan, 3.97 billion yuan, 5.97 billion yuan, 5.45 billion yuan, and 6.07 billion yuan respectively. According to the performancetarget of the equity incentive plan disclosed by ZielHome,basedonthe target growth rate of 25% per year, ZielHome's revenue will reach 7.5 billion yuan in fiscal year 2024, and will exceed 10 billion yuan and reach 11.8 billion yuan by the end of 2026.
From its foundingin 2010 to 2024, ZielHomehas undergone three phases, namely, the exploration period of the initial cross-border home furnishing business, the development period of accepting financing to improve corporate governance, and the period of moving from a product-based seller to a branded enterprise.
Like ZielHome, building a global brand is the dream of many Chinese cross-border sellers.
The former store group model and distribution route made many people rich overnight, butamidAmazon's store closure,many sellers who only opened stores but did not build basic capabilities collapsed. Anker Innovation, which is deeply engaged in branding, has become the only cross-border seller that has reported over 10 billionyuan in revenueat present.
"Ten billionyuan" seems to be an "invisible ceiling" for cross-border sellers.
For cross-border sellers, is "tens of billions" the inevitable result of "branding" or the premise of "branding"? Can ZielHomebecome the first potential player to hit the scale of tens of billions yuan after Anker Innovation? With this in mind, we will break down the global brand readiness index in an all-round way to see how far ZielHomeis from becoming a global brand.
The growth of a company is closely related to the character of its founder. The "product-based" gene of ZielHomehas already appeared in the early business period.
At the earliest, Song Chuan, the founder of ZielHome, relied on the foreign trade resources accumulated during his study in Germany to engage in mannequin props business.
While its peers only produce ordinaryproducts, Song and the founding team have been looking for better product models, and can produce 12 new models every year. To this end, they specially recruited professional sculpture designers to pinch templates.
"At the beginning, the designers' muscles were not consistent, so we bought second-hand mannequin props from overseas. Sometimes those who lacked arms and legs also bought them and built them ourselves, so that the designers could learn," said the co-founder of ZielHome,also a "witness" deeply involved in this experience with Songin the early days, toAsianFin. As mannequin props are large commodities and require large storage space, Songalso became one of the first sellers to tap intothe overseas warehousemarketin Germany.
In 2010, the ZIELDISPLAY brand of ZielHomewas unparalleled in the mannequin props industry. But at the same time, the ceiling of the mannequin props industryappeared. With the rapid development of online retail, the demand for offline mannequin props has shrunk.
ZielHomeseeks transformation and has researchedother popular cross-border e-commerce marketssuch as clothing and 3C electronics. However, Zhengzhou, where ZielHomeis located, is an inland city,and does not have the advantage of supply chain aggregation. At that time, clothing, shoes and 3C electronic players on cross-border platforms gathered together. Saiwei Times and SHEIN hadbeen established for two years, and Baseus, Anker, Green Alliance, etc. hadalso entered the corresponding field.
Later, Song discovered through his experience of studying in Germany that international students often move and have to re-purchase household goods every time. This category has certain fast-moving consumer goods attributes. Song turned his attention to the category of furniture and home furnishings.
Compared with the rapid rise of clothing and consumer electronics and the ups and downs of rapid iterations, the furniture and home furnishing track is a "slow life and slow death" industry.
The product iteration cycle of fast fashion clothing is twoweeks, and the iteration cycle of mobile phones is oneyear. In the "fast life and fast death" track, large single products are easy to explode, and a single product may drive a brand, but if it can't keep up with the iteration of technology and the earth-shaking changes in consumer demand, it will be eliminated quickly.
Furniture is a durable consumer product and has a longer service life. Taking mattresses as an example, the replacement cycle of Chinese families is often as long as five to tenyears. The repurchase rate of durable consumer goodsis low, and the strategy of large single products is difficult to work. However, the advantage is that the market demand is relatively stable. Even if the popular shapes, styles, and designs are out of vogue, the market share will not be lost quickly.
"This is a track where the global market is less subject to cyclical fluctuations." Qin Yongji, secretary of the board of directors ofZielHome, noted.
Although in the Chinese market, the furniture and home furnishing market has been affected by the cycle of the real estate industry, the compound growth rate of the globalfurniture market in the next five years is expected tostill reach 5.31%. The compound growth rates of mature furniture and home consumption markets such as Europe and the United States in the next five years will reach 3.34% and 3.82% respectively.
It can be seen from the data of the General Administration of Customs that the export of furniture and parts has been on the rise in the past ten years. From January to July 2024, the export volume of this category reached US $40.067 billion, an increase of 11.9% over the same period last year.
From Qin's point of view, there is a certain inevitability behind the contingency of ZielHome's choice of this track.
First of all, there is a lot of spacein this market. According to data, the global furniture and home furnishing market will reach US $1,736.7 billion in 2023, of which the online saleswill reach US $236 billion. The furnituremarket capacity is very large, second only to clothing and consumer electronics (and accessories).
Secondly, different categories have different capabilities to build industry barriers. In order to "upgrade new products quickly" in clothing and shoes, peoplecan make use of the flexible supply chain and adopt the mode of quick return of small orders to reduce costs and quickly seize the market. Generally, the product upgrade cycle can be shortened within two weeks. At the same time, clothing is mainly packaged with standard parts, and air cargo can be used for quick trial sales and return orders, which greatly shortens the response cycle. The computer, communicationand consumer electronicscategory havea strong R&D technology threshold, and product iteration is driven by technology iteration.
However, in the field of furniture and home furnishing, because the product form is fixed, breakthrough innovationsaredifficult, and functional innovation and quality improvement are the main ones. Large-item household products are based on sea transportation, with long transportation cycles and large cost fluctuations. The logistics cycle is as long as more than 60 days, and the supply chain response cycle is lengthened. The brand's moat will be more reflected in the warehousing and supply chain.
These two points are exactly the advantages that ZielHomehas accumulated during the mannequin props business period.
Based on the high-quality awareness and local warehouse advantages developed during the mannequin props business period, ZielHomehas developed rapidly in the home furnishing field. "2014 verified that our choice was very correct. The annual sales growth rate reached more than 100% and the profit margin was very high. At that time, everyone was crowded in the 3C track, and almost no one was doing home furnishing," the co-founder of ZielHometold AsianFin.
"Notmany competitors in this field"indicates the lack ofbig-namebrands.
The clothing and footwear category has emerged from SHEIN, a platform with global brand nature, ranking first in the e-commerce category with a global market share of 2.5%. The consumer electronics category has also seen smart charging brand Anker Innovation. Only the furniture and home furnishing category lacks majorbrands.
The data shows that the leading five brands in the globalhome market in terms ofmarket share had a combined 8.7%of the market, which is low in concentration. In contrast, the top fivesmartphoneshipments accounted for more than 65%of the global totalin 2020, and the brand market concentration is extremely high. The CR5of global sportswear also exceeds 30%. Although the CR5of the global apparel e-commerce industry is only 10.1%, it is still higher than that of the home furnishing industry.(no jargons in journalism)
A large market capacity and a slight increase in brand market share meansa lot of room forbusinessgrowth. As a result, taking European furniture leader"IKEA" as an example, IKEA's global market share will only account for 4.9% in 2020, and many more furniture companies will only account for less than 1%.
If ZielHomereally becomes an "online IKEA", taking the global furniture and home furnishing market size in 2023 as a reference, if it can occupy more than 1% of the overall market share, it will be a closingof US $17.3 billion. If it occupies the online market share About 5% will be a closing of US $16.3 billion.
Although the market size is considerable, it is difficult for users to build their minds,(better delete it) and the strategy of large single products is difficult to work. This is the difficulty of building a "slow-living"brand driven by functionality, and it is also a long-term problem thatZielHomewill face.
"Do we want to be a product-oriented company? We have to do it. Product is our core competitiveness." "What do we want to grow into in the future? It must be a brand company."(A brand company 似乎英文里没用这个用法)
In the past three years, such conversations have been heardmore than once within ZielHome.
2021 wasa very special year for ZielHome.
In thatyear, ZielHomefaced the "sequelae of the pandemicoutbreak" and a marketcrowded with competitors.
With high market demand during thepandemic, some home furnishing factories began to transform from OEM (Original Equipment Manufacturer) to ODM (Original Design Manufacturer) and independent brands. Coupled with old competitors such as Yaheetech and AosomE-CommerceInc,competition became increasingly fierce.
In the same year, the tide of Amazon's account banning broke out,and the cross-border big seller Zebao had a large inventory backlog due to the accountbanning incident. Shenzhen Youkeshu Technology Co. Ltdwas blocked for illegal operation of creatinga large number of accounts, and about 236 million yuan of Aoji's funds were frozen. ZielHomehas not been affected by thisincident, largely because of its long-standing compliance. Rather than creatinghundreds of accounts in many online cross-border marketplaces, ZealHomehas only one platform account.
Although Ziel Homewasnot directly impacted by the ban,Songand his team realized that the market was becoming more and more cruel and needed to seek longer-term and stable development. With various thoughts on supply chain management, brand marketing, and digital systems, ZielHomeestablished a Shenzhen branch.
A group of executives with 3Celectronics or automobile cross-border imprints and experience in marketing, supply chain management, brand building, and product research and development entered Songmics Home. Marketing department, brand building department, product research and development department, supply chain department, insight department, etc. began planning and construction.
Peter, vice president of ZielHome’sProductsDepartment, had beenresponsible for the product design of many global brands such as Panasonic, DELL, and Signify during the golden age when foreign companies entered the Chinese marketbefore joiningZielHome. In 2022, "cross-border" will be recruited into SongmicsHome,responsible for product strategic planning and branding. After crossing the border, Peter often felt the difficulties caused by the differences between industries. "The experience of being a technology consumer goods brand cannot be completely replicated in the furniture and home furnishing track, and the development law of this industry must be respected."
Regarding the matter of "how to make a brand for cross-border sellers of furniture and home furnishings", Songmics Homehas done a lot of discussions and practices internally.
At the beginning, Songmics Homeinvested a lot of resources in shooting beautiful advertising blockbusters, but with little success. "There is neither a continuous closed loop of localized products and services to undertake, nor has it been converted into e-commerce sales."
"Why is it not effective? Without revenue conversion, should we continue to be a brand?" Such voices have never stopped within Songmics Home.
Sean, brand director of Songmics Home, said frankly that people in the business department once said bluntly, "At this stage, we don't need to build a brand, we just need to make good products."
He said, "When did you start (making a brand), how much to invest, and whether you can see benefits? In this process, there have been swings, hesitations and even quarrels."
After many internal collisions and confrontations, Songmics Homehas reached a consensus on how to achieve a balance among brand, market and cost: brand work does not mean just spending a lot of money, and sales volume is not the only measurement result of brand. Brand work is a brand building process closely related to all ports, and it is a link and bridge to achieve the same frequency with consumers, thus gaining consumers' trust.
Under the consensus, Songmics Homehas undergone matching changes in three levels: brand focus, brand vision, and brand structure.
First, focus on the brand Songmics Home. Songmics Homehas incorporated the three brands of home furnishing brand Songmics, style furniture brand VASAGLE, and pet home furnishing brand Feandrea, which were scattered in the past, into Songmics Home. In the view of the management of Songmics Home, in the era of attention economy, it is not easy for consumers to remember one brand, let alone three brands.
Second, while maintaining brand consistency, explore localized brand reach methods, such as adding Latino, African-American and other models that are more representative of multiculturalism to promotional pictures and videos. The content is no longer purely aesthetic, but more in line with the actual life scenes of consumers. For another example, Songmics Homecreatively changed the packaging box of cat tree climbing products into a simple cat nest that can be tailored for consumers to recycle and improve consumer brand recognition. Although the design of carton pattern is not difficult, in the actual implementation process, the error of a few millimeters of cardboard is superimposed, which is a huge logistics cost. After several rounds of repeated debugging, Songmics Homereally achieved the ideal effect.
Third, and most importantly, establish a product-driven whole-process brand management system. For example, in order to prevent brand building work from being completely taken away by sales and ROI, brand management and marketing are divided into two separate departments.
Unlike most companies that put the brand department under the marketing system, the brand department of Songmics Homeis classified under the product system, and the entire process of product production, operation, and sales is guided based on brand consistency. The marketing department is in the sales system, not only responsible for user growth and independent stations, but also responsible for event marketing, advertising and so on.
Even in the sales department, Roxanne, the marketing director, told AsianFin, "We will not operate independent websites entirely from the perspective of sales. Its value in brand building and private domain operations is equally important. Through products, services and operations, gain the recognition and liking of users, and then enable users to actively spread the brand."
After experiencing "detours", a co-founder of Songmics Homeconcluded, "Being a brand is not equal to smashing advertisements. Before building a brand, creating differentiated products is a priority problem." The "veteran" of Songmics Homehas seen the ups and downs of many cross-border players, and is more firmly convinced that a good enough product is the most direct means to accumulate brand effects, and it is also the bottom line of brand survival.
Product power is the most basic carrier of brand power. Based on this consensus, the first step taken by Songmics Homeis to deepen the cultivation of differentiated products.
It is positively correlated with the difference and innovation intensity of brand products. Sufficiently differentiated and innovative products coupled with mature operating models can be approximately equal to the formation of brands.
However, at present, in the furniture industry with highly overlapping categories, the most prominent problem in the furniture industry is that the product form is fixed, the technology is mature, the materials are universal, and the difficulty of product innovation is the most prominent problem in the furniture industry.
It is the norm in the industry to quickly "copy" the whole network after an explosion. Most enterprises are unwilling to invest a lot of money, manpower and material resources to innovate, and even lead to innovation that is not as good as "copying new ones", and the problem of product "homogenization" is getting worse and worse.
Take the product pictures of Aoji and Songmics Homeon the Amazon platform. Both parties have overlapping categories in bed frames, bookcases, coffee tables, etc.
In the category of furniture and home furnishing, which is difficult to make differences, how to reflect product strength? Songmics Homehas repeatedly emphasized the saying "good-looking but not expensive".
From insight to product research and development, "design with the brand competition system." This is the concept put forward by Peter, vice president of Songmics HomeProducts.
At the end of 2021, Songmics Homeestablished a dedicated insight team. In addition to the original insight based on Amazon user reviews, it will understand and observe future product trends and user habits through interviews and surveys with overseas teams, trying to plan more suitable for local products from a localized perspective. Products that consumer aesthetics and usage habits.
When faced with different regions and different channels, Songmics Homealso tries its best to "make the greatest differentiation with the smallest changes". Under the condition that the production process is controllable, the products can be differentiated and meet the needs of different countries and regions. Meet three parts: cost, transportation and assembly, practicality and beauty.
"Some overseas consumers reject Chinese brands and think that Chinese brands rely on copying. We want to do something different. First, we don't be copied, and second, we don't copy others." It is understood that Songmics Homehas been applying for patents at the rate of adding 100 new patents every year.
"90% of Songmics Home's products are independently designed. The first is to protect ourselves, and the second is to build barriers to promote industry growth." Peter told AsianFin.
At the same time, the structure of the after-sales service department has been adjusted, and its functions are not limited to customer service, but have become a tentacle for product improvement.
In 2022, the customer service center will establish a middle office department and a product line improvement department: the middle office is responsible for three major sectors: system docking, personnel training and process optimization; The product line improvement department is responsible for analyzing customer complaints and customer needs, and promoting corresponding improvements.
Through daily monitoring of product complaints and after-sales processing frequency, the quality improvement department deeply explores consumer needs, connects with relevant product departments, promotes product updates and iterations, and judges whether it is necessary to start the freezing inspection process. Once the after-sales frequency exceeds the normal range, the linkage mechanism will be automatically triggered to check all goods in the warehouse, intercept the problem products from flowing to customers, and ensure that all products are adjusted and qualified before continuing shipments.
"Through after-sales guarantee services, we understand customer needs at the same time, and push back product improvements." Patrizia told AsianFin.
Patriziajoined Songmics Homein 2016 and is the head of the after-sales service team. She clearly felt the change in the goal of Songmics Home's customer service system from "ending with the satisfaction of customer complaint resolution" to "ending with the satisfaction of purchase needs and the improvement of experience".
The difference between the two is very big. For example, for customer complaints about problematic products, "Return goods is the most efficient means to improve customer complaint satisfaction, but the customer's demand to buy a favorite piece of furniture has not been met."
From product localization insights to product research and development that small players are unwilling to invest costs to the linkage between after-sales and product research and development, Songmics Homehas formed a closed loop at three levels: product research and development, quality and service.
Local warehousing is the first position for cross-border sellers to establish local influence, and it is also the starting point for the localization operation of most tangible product brands.
Local warehouse storage and logistics directly affect the efficiency of contract fulfillment and after-sales service. They are one of the most direct perceptual touch points for local consumers to the brand, and they are also the areas where Songmics Homehas taken the lead in establishing a moat.
In Europe, Songmics Home, which entered the market earlier, not only has the cost advantage of early warehouse leasing, but also takes the lead in realizing the self-delivery of large goods within 3-4 days through deep binding with DPD, a local tail-end service provider. Under the transportation capacity of European technology, it is unable to support the entry of new big sellers, which has strengthened Songmics Home's first-mover advantage in Germany. In the United States, in order to increase the penetration rate, Songmics Homeis accelerating the expansion of positions, with a view to achieving a layout of 5 positions covering the United States in the next four to five years. Up to now, the warehouse scale of Songmics Homein the United States exceeds 56,000 square meters. Among the overseas teams of more than 100 people in the European and American branches of Songmics Home, the warehousing and logistics department team accounts for nearly 80%. As the "business middle office" in the overseas team, it is allocated and managed according to the warehouse, focusing on logistics operations. Manage a storage area of more than 350,000 square meters.
The localized warehousing logistics and operation team constitutes the capability base of Songmics Home's multi-channel strategy. At present, in addition to the advantageous platform Amazon, Songmics Homehas opened local e-commerce platforms in Europe and the United States and emerging cross-border platforms in China such as Temu and TikTok Shop. Only self-built warehousing can support simultaneous delivery of multiple platforms, further improve logistics efficiency and reduce logistics warehousing costs.
"On the basis of channel traffic, more efforts in logistics will lead to a lot of cross-border sales." Carte told AsianFin, "But to form a global brand, the focus is to move from a full-functional company to Inward expansion, product research and development, production and manufacturing, financial system, and digital capabilities must be completed as a whole. This is what Songmics Homeis doing now."
In addition to local warehousing and local services, Songmics Homeis developing local offline KA channels and recruiting a larger local sales team, with a view to forming the future growth point of Songmics Home.
According to the head of the German branch of Songmics Homeand the head of the American branch, offline KA channels have very traditional working habits and culture in both Germany and the United States. Taking Wal-Mart and Target as examples, buyers are almost always in a fixed circle, and it is easier to enter with the help of local sales representatives. Most of these local sales representatives have more than ten years of experience in the industry and understand the needs of offline supermarket channels and buyers.
Without exception, mature Chinese overseas brands have strong localization capabilities and teams, such as TCL, Huawei, Xiaomi, etc., and have complete functions such as sales centers, production centers, product research and development centers, and after-sales service centers in overseas markets.
From the perspective of the localization team, Carte, vice president of supply chain of Songmics Home, believes that "Songmics Homeis in its infancy", and the final direction is that "the local management is composed of local employees and a few Chinese employees, and other functional positions are almost local employees."
"Only by integrating the strengths of people in different regions to match the local market situation is the essence of a global brand," he concluded.
"Supply chain capabilities will be the watershed to distinguish big sellers from brands," said Carte, who has been infiltrated in ZTE, an established overseas giant. In his view, introducing digital supply chain capabilities from industries such as communications and consumer electronics into the furniture industry can further raise the ceiling of the industry.
At the end of 2021 and the beginning of 2022, the demand of the global consumer market will fall rapidly, and the entire home furniture export industry will also enter the destocking stage.
"I've never seen so many goods!" Alex, vice president of sales of Songmics Home, told AsianFin.
At that time, Songmics Homefaced a massive inventory of onebillion, resulting in the inability of funds to return and new goods to enter. According to Alex, the onebillion inventory puts tremendous pressure on operations. Finally, I made up my mind to clear the inventory at a discount and return to the normal level of 600 million.
This is just a side portrayal of the supply chain brought by changes in the market environment to Songmics Home. Supply chain resilience is related to a series of calculation problems such as product innovation, capital operation efficiency, and cost optimization space.
According to Carte, Songmics Home's supply chain has three main lines, namely ecology, globalization, and digitalization.
Ecologicalization refers to the integration of logistics and production partners with Songmics Homethrough the establishment of ecological rules and collaboration processes, and at the same time combined with informatization for rapid linkage.
It is understood that the number of Songmics Homesuppliers has reached more than 400. More than a dozen companies have joined forces with Songmics Hometo develop in Southeast Asia. Through the information system, on the one hand, production planning is used to improve the efficiency of the overall chain, and on the other hand, collaboration is quickly realized through unified processes.
Globalization exists at three levels: factories, warehouses and materials.
At the factory level, in terms of household tariffs, compared with Europe's close to zero tariffs, the tariff cost of special categories in the United States can reach up to 25%. The production chain of products sold to Europe is more cost-effective in China. Products sold to the United States can take advantage of policy advantages to go overseas to avoid tariffs. For example, go to Vietnam to produce. Even if the procurement cost rises by 10%, the logistics cost will remain unchanged. Avoiding the 25% tariff can save 15% of the cost.
Songmics Homeis planning to move more than 50% of its shipments to the US market to Southeast Asia. "Some of them are placed in Vietnam, which is relatively mature, and some of the hardware products are placed in Cambodia. Hardware is shipped from China to Cambodia, which is much more favorable than local purchasing in Vietnam." Carte, vice president of supply chain of Songmics Home, explained.
In addition, Songmics Homealso plans to set up factories in Eastern Europe in the future to improve the response speed of the supply chain in the European market.
At the warehouse level, the United States has deployed five warehouses across the United States; In addition to Germany, Europe, France, Italy and Spain have set up front-end warehouses, close to key markets.
At the level of secondary materials, it is to give full play to the advantages of global procurement and purchase in global advantageous markets to achieve the optimal total cost.
Digitalization refers to the online management of each execution system of Songmics Hometo improve operational efficiency; At the same time, through a powerful planning system matching intelligent algorithm, the optimal layout and scheduling of the supply network are realized.
The global layout of the supply chain generally aims at improving the company's operational efficiency, reducing operating costs and preventing operational risks. For Songmics Home, the global layout of the supply chain can support Songmics Hometo provide more cost-effective products. When other companies need to price 100 yuan, Songmics Homeonly needs to sell 90 yuan, which brings about competitive space unimaginable.
In addition, the global layout of the supply chain is also an important dimension to support product richness. Product R&D and innovation are usually inseparable from the support of technology and materials. The richness, precision and efficiency of suppliers' craftsmanship have become an important part of Songmics Home's polishing products.
With product innovation, the demand, research and optimization of new processes are increasing day by day. The material side, process side and product development side need to continuously optimize and communicate with each other.
In order to create such a collaborative and efficient global supply chain, Songmics Homehas independently developed a digital system, involving sales forecasting, warehouse scheduling, logistics route management, supply and marketing collaboration and other aspects, weaving a supply network from sales to production to logistics and distribution. Under digital management, the inventory turnover days of Songmics Homehave been reduced by more than 30 days.
Under Songmics Home's product differentiation strategy of "good-looking but not expensive", the supply chain plays a very important role. The incremental space and cost reduction brought about by supply chain optimization are the most important supports for realizing Songmics Home's product strength and brand strength.
As a big seller on Amazon, 90% of Songmics Home's revenue in the past came from the Amazon platform. The excessive proportion of a single channel has always been criticized by cross-border big sellers.
However, Songmics Homeis actively adjusting. The financial report shows that from 2020 to 2023, the proportion of Songmics Home's revenue from Amazon will drop from 80.25% to 76.19%, of which the proportion of Amazon Seller Center revenue has dropped to less than 70%. The continuous increase in the total revenue scale proves that the proportion of revenue from other channels has increased.
According to the growth rate expectation, by the end of 2026, Songmics Homemay exceed the scale of 10 billion. Where will the remaining 4 billion revenue scale come from?
First, the American online market.
Songmics Homehas always been strong in Europe and weak in the United States. In the U.S. market, Songmics Home's revenue is only about 2 billion yuan. Compared with the scale of 6-7 billion yuan of other companies such as Aoji in North America, Songmics Homeonly accounts for a small part of the 100 billion-dollar home furnishing market in the United States. a small part. While developing e-commerce markets such as Amazon America Station, the American team is planning a local warehouse network, hoping to achieve five warehouses throughout the United States and give consumers a faster shopping experience.
Second, European and American offline markets.
In mid-2023, Songmics Homeestablished a North American KA team to specialize in offline channels. In one year, Songmics Homehas received three KA orders from Hobby Lobby, Target, and HomeGoods.
"From 0 to 1 last year, the offline sales in North America amounted to more than 30 million yuan and nearly 40 million yuan." Alex, vice president of sales of Songmics Home, introduced AsianFin.
Since last year, Songmics Homehas been participating in various home exhibitions in Europe and America, looking for interested customers, such as Las Vegas Furniture and Home Decoration Exhibition in California, Frankfurt Exhibition in Germany, Pet Exhibition in France, Dubai Furniture Exhibition in the Middle East, etc.
"Orders were placed at the exhibitions in the United States and Germany!" Alex told AsianFin, referring to the results of participating in the conference.
To develop offline channels, it is necessary to open a separate product supply chain and marketing brand chain support within Songmics Home, which involves huge human, financial and material costs. In order to support the expansion of To B channels, Songmics HomeMarketing Department has specially increased the marketing methods of offline channels such as exhibitions and social media.
However, the business characteristics of To B and e-commerce quick turnover are quite different. "To B's decision-making link is very long. It takes us half a year or even a year from building the database of offline customers to actually having orders. Being able to endure loneliness means really holding this business to get the order." Alex said.
Third, outside Amazon, online multi-channel parallel.
In the past two years, Songmics Homehas opened a number of online e-commerce platform accounts. In the United States, Songmics Homelaunched Wayfair, the number one household goods platform in the United States, as well as online platforms such as Wal-Mart and Target, and successively launched Shein and Temu.
In Germany, Songmics Homelaunched its local platform OTTO. The financial report shows that in 2023, Songmics Home's revenue in OTTO will be close to 250 million yuan. For Songmics Home, OTTO's policy of opening only 50 overseas entity companies to the outside world every year effectively protects Songmics Home's increment and profits on OTTO.
Based on different platforms, Songmics Homehas adopted different brand strategies. Three sub-brands on Amazon are running in parallel at the same time. The products on Wayfair are mainly large furniture with relatively high unit prices. In order to fit the maternal and infant attributes of Shein's clothing, Shein has put jewelry cabinets, trash cans, shelves and other products on the shelves.
Independent stations are also a new source of growth for Songmics Home. Roxanne said that starting from 2024, the quarterly revenue of independent stations will grow rapidly, nearly doubling year-on-year, much higher than the growth rate of other mature channels, and the repurchase rate is twice that of Amazon.
According to Alex's forecast, the turnover on Temu by the end of the year may surpass Wayfair, the second largest revenue platform of Songmics Homein the United States. The revenue volume of the United States this year will surpass that of Germany, becoming the single country market with the largest revenue of Songmics Home.
Fourth, among the 110 sub-categories of Songmics Home, the top 20% of products contributed about 70% of sales. The continuous enrichment and expansion of product categories from small pieces, medium pieces to large pieces of furniture will bring market growth to Songmics Home. In addition, the stock products are good enough, and the advantages of brand resources can also seize part of the small seller market.
In order to achieve the goal of tens of billions, the German and American branches are making preparations. According to Kong Yi, the head of the German branch, Germany needs to increase its business volume by at least 50%, and the number of personnel will increase to more than 100 people; The number of warehouses will be increased from 5 to 8, and the warehouse area will be increased by at least 30,000 square meters to 40,000 square meters in 2024 to carry cargo capacity.
Cross-border e-commerce sellers are generally divided into four stages, the first stage is distribution, the second stage is fine shopping, the third stage is product-based companies, and the fourth stage is brand-based companies.
Overall, Songmics Homeis in the third to fourth stages. The growth rate and quality of growth determine whether Songmics Homecan break through the "hidden ceiling".
From cross-border sales to global brands, we need to rely on product innovation capabilities, localized operation capabilities, brand and marketing capabilities, user service capabilities, supply chain optimization capabilities, and organizational management capabilities to build competition barriers.
China's entire furniture and home furnishing industry has a low degree of concentration due to its non-standardization, low threshold and decentralization characteristics. There are very few furniture companies with a market share of more than 5%, and there are even fewer national brands in the true sense. Brands that fully participate in international competition are even rarer.
Songmics Homestarted as a cross-border e-commerce platform and has natural global market genes. However, to truly grow into a global brand like IKEA, it still needs to cross many thresholds, such as product depth, local marketing, comprehensive channels, brand recognition and other levels.
In the German market, Songmics Homehas enjoyed the premium brought by the brand, but in the American market, Songmics Homehas not yet ranked in the top ten.
As a Chinese company racing on the international track, when the goal of becoming an international brand was established, it was destined to be a difficult and tortuous road, and it also needed to overcome the desire to make quick money.
Can Songmics Homebecome the first cross-border seller brand to break through the ceiling of 10 billion after Anker Innovation? Can it become a leading furniture and home furnishing brand outside IKEA? We will wait and see, this result will be verified in 2026.
Based on this interview with more than 10 members of Songmics Homein different positions and third-party data collection, at present, the high industry space and low industry concentration of the furniture and home furnishing track not only give Songmics Homeroom to grow and become a leading brand. The scale imagination is naturally more difficult.
Judging from the results, Songmics Homecurrently covers more than 70 countries on 5 continents, of which mature developed markets account for a high proportion and emerging markets account for less; The Google search popularity of the overall brand of Songmics Homeis relatively high. At the same time, the natural search volume of its three products is more stable than that of similar competing products (not driven by promotions, activities, etc.). The natural search and direct traffic of independent websites account for more than 70%. However, the user attention and interactivity of its overseas mainstream social media need to be improved, and the product has achieved initial user mind occupation; In terms of channel expansion, Songmics Homehas established a relatively complete channel layout, which has gone from Amazon's single center layout to more than ten online channels such as OTTO, Temu, and independent stations, as well as a number of offline channels in Europe and America. However, the type and scale expansion of offline channels are still early.
From the perspective of internal capabilities, Songmics Homehas a certain local after-sales service team derived from local warehouses in Europe, but it has just started with local insight and local marketing teams and still needs follow-up verification; As the supply chain has become the cornerstone of the brand, Songmics Homehas created strong support through ecology, internationalization, and digitalization. After the warehousing capacity in the United States is sound, the tail process and after-sales service in the United States will be further improved; Finally, in terms of brand consistency, Songmics Homevisualized brand value, established a global unified brand visual identity system, and applied it to brand pages, product packaging, etc. to form the consistency of brand impression. However, like most Chinese brands, Songmics Homestill lacks brand stories that can impress global consumers.
Internally and externally, individual products of Songmics Homehave certain "explosive" attributes in Amazon's sales, and Amazon's user evaluation is also higher than the average score of the platform. However, the R&D investment is lower than the median of the domestic furniture industry. Through Songmics HomeWith continuous R&D investment, the company's product strength can still be effectively improved.
