Opportunities, Challenges and Strategies of China's Third and Fourth Grade Furniture Markets

In the context of global economic integration, the impact of the financial crisis has spread to every country and region in the world. China is no exception. Some export-oriented enterprises with high dependence on foreign countries and labor-intensive industries are particularly affected. According to customs data, the total value of China's imports and exports in the first half of this year was 946.12 billion US dollars, down 23.5% year-on-year. Of this total, exports were US$521.53 billion, down 21.8%; imports were US$424.59 billion, down 25.4%, of which furniture exports were US$11.76 billion, down 9.8%. At present, China's macro economy is in a critical period of stabilization and recovery, and there are still many uncertain factors. In the first half of this year, the total retail sales of consumer goods increased by 15.0% year-on-year. Among them, rural consumption growth has always been faster than that of cities, and it has become a “new force” to stimulate consumer demand and promote economic growth. The historical breakthrough in rural consumption growth has benefited from the implementation of the policy of benefiting farmers such as “home appliances going to the countryside” and “cars and motorcycles going to the countryside”. The government has promoted the expansion of consumption by directly subsidizing rural consumers and achieved good policy effects. . In the domestic furniture market structure, most brand enterprises have regarded the first- and second-tier cities as the market development focus. Since last year, enterprises have found that the first- and second-tier urban furniture market faces the dilemma of insufficient consumer demand. Most furniture companies report that sales in the first half of this year have dropped by about 10% from last year. Visionary entrepreneurs are beginning to look for new growth points and find emerging markets. Therefore, the third and fourth grade markets are increasingly receiving attention from furniture companies. The huge potential of the first, third and fourth grade markets is the strategic opportunity for furniture development. According to the usual furniture market, megacities such as Beijing, Shanghai and Guangzhou are primary markets, and provincial capital cities and some developed prefecture-level cities can be called secondary markets. Other prefecture-level cities and some economically developed county-level markets are tertiary markets. The rural markets of other county-level cities, townships and some developed regions are four-tier markets. According to statistics, there are about 600 prefecture-level cities in the country, about 2,800 county-level cities, and no less than 50,000 townships. Driven by the urbanization process and the domestic demand strategy, the potential of the third- and fourth-tier markets is gradually turning into a realistic purchasing power. According to the author's preliminary estimation, China's third- and fourth-tier markets currently account for about 800 million people and nearly 150 million households. The annual furniture purchase demand is calculated at 30%, and the third- and fourth-class market capacity will reach 150 billion yuan. Moreover, as the overall income level of the third- and fourth-tier markets increases, the purchasing power of residents will also rise, and the sales volume of the third- and fourth-tier markets will become higher and higher in the overall sales increment of enterprises. More and more companies are using the third and fourth grade markets as strategic growth points. Sichuan furniture enterprises represented by All-Friends, Double Tigers and Pearl of the Year have been deeply cultivated through the three- or four-level market for many years, and have achieved remarkable results, and have a high market brand recognition and market share. However, as the third- and fourth-tier markets are in the state of being developed, there are not many well-known brands that really enter the third- and fourth-tier markets, so the competition as a whole is relatively weak, and it will have obvious brand competition advantages for brand enterprises. Second, the challenges facing the third and fourth grade furniture market Faced with huge market potential, the third and fourth grade markets still face many challenges for many companies, especially the first-line brands. Because the consumption level of the third- and fourth-tier markets and the purchasing power of residents are relatively low, the first-line brands that are accustomed to killing in the first- and second-tier markets will have doubts. Even some enterprises think that entering the third-tier and fourth-tier markets will reduce their brand value. Become low-end. Therefore, it is very important to develop and launch products suitable for market demand for the third- and fourth-tier markets. In terms of channel construction, because the market of the third and fourth grades is distributed in a dotted manner throughout the country, the market capacity of a single regional market is small, and the levels are different, the management scope is large and the difficulty is high. For the first-line brands, it is necessary to change the business ideas and establish The in-depth marketing system of regional rolling development establishes a benchmarking market and forms a scale effect. At the same time, it is also very important to strengthen the promotion of regional brands. In addition, the logistics distribution and after-sales service of the third- and fourth-class furniture market may lead to higher cost and quality degradation due to regional dispersion. The development strategy of the third, third and fourth grade furniture market, whether it is export-to-domestic sales or enterprises that have been deeply entrenched in first- and second-tier cities for many years, faces a new topic in order to attack the third- and fourth-tier markets and share huge market cakes. Let us first look at a successful market development case in other industries. Well-known IT company--Lenovo has made major adjustments to its global organizational structure and senior management in response to the global economic crisis. Lenovo Group founder and director Liu Chuanzhi re-launched as chairman of the board of directors of Lenovo Group, while Yang Yuanqing took over the CEO. Jobs and focus on emerging markets. For the Chinese PC market, the market of large and medium-sized cities at all levels is relatively mature at present. It is more difficult for manufacturers to re-examine large growth, but compared with the rural market, the potential is huge. The fast-moving computer to the countryside quickly targeted the vast rural market and adopted a series of effective strategies. In response to the current problems in the rural market, Lenovo Computer has introduced computer products that are more energy-efficient and more suitable for rural consumers. For example, for the education needs of farmers' parents, the Lenovo Jiayue series is pre-installed with the “New Lenovo 100 School” software. It integrates many excellent educational resources, especially the “Live Teacher Live”, which breaks the geographical boundary between rural and urban areas, so that rural children can enjoy real-time guidance from famous teachers in big cities without leaving their homes, helping rural students. Improve your academic performance quickly. For the rich users, built-in "Get rich" software. In the next three years, Lenovo will build 700 county-level “landmark stores” that integrate sales, service, training, publicity and product experience. At the same time, it will build 7,800 channel sales outlets and deepen into 320,000 administrative villages, gradually enabling users to Purchase a Lenovo computer within an hour's drive. Stones from other hills, can learn. Furniture companies develop third- and fourth-tier markets, and can adopt corresponding strategies in terms of products, brands, prices, channel models, advertising, logistics, etc., combined with their own competitive advantages and resources. 1. For the specific needs of the rural market, Lenovo has launched a market segment product that focuses on the concept of power saving, embedded education, and rich software. Furniture companies also need to launch cost-effective targeted products based on research on furniture consumption demand in the third and fourth-tier markets. Furniture consumer analysis and demand research are weak links in the furniture industry. Enterprises use too much in the way of product development to shoot their heads or imitate the popular styles of the market, instead of adopting scientific and quantitative research techniques and means, so they are designing The source is not congenitally insufficient. Through consumer visits, the market is analyzed based on data such as local income, population, and real estate market conditions. Products for the third- and fourth-tier markets not only ensure quality in the manufacturing process, but also reduce the risk of loss due to remote, multiple-transport, and non-standard use, reducing return, reducing rework, and reducing pressure on logistics. Reduce costs and increase profits. 2, brand and price Take the home appliance industry as an example, Kelon refrigerator products have three brands: Kelon, Rongsheng and Kangbaien, respectively positioned in the high-end, mid-to-high-end and low-end markets, of which Kang Baien is specifically for the three four The purpose of the market is to prevent confusion between Kelon and Rongsheng's brand positioning and brand reputation. Many furniture companies have adopted a multi-brand strategy. For companies that are worried about entering the third- and fourth-tier market and affecting the brand value, it will be a very good choice to adjust the brand portfolio or launch a new brand for the third- and fourth-tier markets. For brands that are weak in the competition in the first- and second-tier cities, timely allocation of resources and aggressive attack on the third- and fourth-tier markets is a strategic opportunity to regenerate! The third- and fourth-tier markets have relatively low consumption power and are more sensitive to price than to brands. In different markets, launch different brands, or the same brand, different series, different prices. 3. The characteristics of the third- and fourth-tier channels are wide-ranging, large and scattered. It is impossible for furniture companies to establish branches or offices in each market. Therefore, local distributors must be relied upon to establish a harmonious and win-win relationship with manufacturers. , jointly develop the market. Strengthen the refined marketing of channel terminals in regional markets, including channel integration, regional market layout, marketing strategy, terminal maintenance, shopping guide management, terminal display, information feedback, etc., especially strengthening the training supervision of terminal shopping guides. The brand awareness is weak, what the terminal recommends, what the consumer will buy, and the quality of the terminal shopping guide determines the product sales. 4. The sales volume of advertising in the third- and fourth-tier markets is limited. It is difficult to support the high advertising promotion costs alone, and consumers' understanding of the brand is relatively weak. Therefore, it is very necessary for manufacturers to coordinate national resources and moderately support the promotion of the third- and fourth-tier markets. Strong companies can be launched in CCTV and other national mainstream media, which is very helpful for quickly upgrading brands. It is also a cost-effective choice for local stores and outdoor advertising. It can also be combined with local market characteristics to plan targeted promotion activities, such as community promotion and special event promotion, such as furniture “caravan” activities operated by Sichuan enterprises. Directly pulling furniture to the countryside, selling along the way, and even replacing agricultural products, is also a good method at a certain time. 5. The logistics and distribution problems are common in the third- and fourth-level logistics markets. Small batch delivery, frequent distribution, and unpredictable return and exchange have caused great pressure on logistics. Every effort has been made to reduce logistics costs and become a compulsory course for manufacturers. At present, many enterprises have begun effective trials and explorations. Some well-known Guangdong furniture enterprises, including Xingli, Huayuanxuan and Dafuhao, have begun to establish their own logistics distribution centers in many regional central cities across the country. The center radiates the surrounding market. The Sichuan enterprises solved the national logistics distribution system earlier and more thoroughly, thus occupying a strong competitive advantage in the market radiation capacity. While improving the hardware construction of the logistics system, enterprises should pay attention to the construction of soft information systems. By knowing the inventory and sales situation in a timely manner, it is more accurate and efficient in delivery. According to the "Analysis Report on the Macroeconomic Situation of the Second Quarter of 2009" issued by the Survey and Statistics Department of the People's Bank of China, the recovery rate of the national economy exceeded expectations in the second quarter, and the confidence of economic entities increased steadily. GDP growth rebounded year-on-year, and chain growth continued to accelerate; industrial production growth accelerated significantly, domestic investment demand rebounded strongly; credit supply increased substantially, and banks' liquidity was abundant. These positive news indicates that the Chinese economy will take the lead in getting out of the global economic downturn. The Chinese market will be the most important and largest market in the world. Furniture companies should grasp the national strategy of stimulating domestic demand in a timely manner and start the third- and fourth-tier markets, which will be the key to future development.

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