2024.06.17 12:34
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ONEWO stirs up the home decoration industry

Golden opportunity in the stock market

Author | Zhou Zhiyu

In the past 40 years, the booming residential market has driven the home improvement industry to become a trillion-dollar market. However, large-scale enterprises in this industry are rare, and the "guerrilla warfare" of home improvement remains the main force in the market. The lack of standards and difficulties in ensuring after-sales service continue to plague the industry.

ONEWO aims to create a "new species" in the home improvement industry, becoming a second-hand house 4S store in the real estate and property fields.

At the end of May last year, ONEWO's home improvement service brand "Yanxuanjia" released a brand new product. After a year of development, "Yanxuanjia" has grown into a core business format driving profit growth.

Zhou Kerui, the head of Yanxuanjia, stated in an exclusive interview with Wall Street News that Yanxuanjia is in it for the long haul, aiming to establish long-term service and companion relationships with clients. Currently, Yanxuanjia's development is in line with his expectations, with the growth rate of user orders far exceeding the growth rate of income, indicating that Yanxuanjia has established a "first connection" with as many clients as possible.

Different from traditional whole-house home improvement, Yanxuanjia mainly targets partial renovations in existing homes. Within ONEWO's scope, specifically within a three-kilometer service radius in Butterfly City, Yanxuanjia carries out home improvement business focusing on transformations in areas such as bathrooms, kitchens, and balconies.

Based on years of property service experience, Yanxuanjia primarily targets homes over 8 years old, and is currently operating in over ten cities where existing homes dominate the market. The market size of existing homes in these cities provides Yanxuanjia with ample room for development. Taking Shenzhen as an example, ONEWO found that in past property services, 85% of customers chose partial renovations and modifications, while only 15% opted for whole-house renovations. Among partial renovations, 75% were completed by roadside guerrilla teams and small family-owned stores.

As the Chinese real estate industry undergoes structural changes, the demand for a better quality of life and improved living comfort continues to rise. The market for home renovations, especially partial renovations, is further expanding. It can be seen that Shell's acquisition of Shengdu Home Decoration and the former president of Li Auto, Shen Yanan, entering the home improvement industry are both targeting new opportunities in the market.

Yanxuanjia also operates on the basis of "relationship economy." Backed by Vanke Property, the fundamental principle of Yanxuanjia's business is to establish a solid trust relationship with users. This is very different from the traditional one-time business model of home improvement or the traffic monetization approach.

By entering the field of partial renovations in existing homes, providing standardized solutions, employing in-house workers, and establishing a model with on-site presence in communities to build a relationship economy, Yanxuanjia aims to address the pain points of the home improvement industry from engineering to productization. Zhu Baoquan, Chairman of ONEWO, has put forward the goal that "Yanxuanjia" should achieve 100% customer satisfaction.

Of course, this process will be lengthy. Training in-house workers, providing comprehensive lifecycle inspection reports for homes, offering reliable quality assurance for renovation services, and reducing errors through standardization. The attitude, time, and speed of resolving errors will determine how far this business can go.

If successful, this will revolutionize the home improvement industry, transforming it from manual labor with Qin bricks and Han tiles to the industrial age, and establishing a new path for the development of China's home improvement industry The property industry can also enter the stage of refined operation after experiencing initial scale development. This is also a specific manifestation of the real estate industry entering the second half of development, enhancing operational capabilities and efficiency.

Recently, Zhou Kerui had an in-depth exchange with Wall Street News, involving topics such as the business philosophy of research and selection professionals and industry trends.

The following is the full dialogue (edited):

Wall Street News: In the past three years, the home decoration industry has become hot again, with giants and cross-border players entering the market. How do you view this phenomenon?

Zhou Kerui: This is a change in the current market, as the residential market transitions from an incremental market to a stock market. People now want to live in a "good house" and emphasize the residential attributes of the property. There is a large demand for house maintenance and renovation in the market, with diverse needs that the supply side cannot meet. This change has created many opportunities in the home decoration market, especially in the improvement demand within the stock market, attracting various players to enter.

Wall Street News: What are the differences between Research and Selection professionals and other companies in specific business operations?

Zhou Kerui: Research and Selection professionals do not engage in traditional home decoration. Many people are now cutting out a small market segment within a larger market, somewhat similar to Li Auto targeting families with two or three children. Research and Selection professionals provide 4S store services for houses, within the scope of Butterfly City, offering services from housing provision to complete decoration, partial decoration, individual products, and maintenance, building a full-cycle service for houses. The main target market is properties in communities that are over eight years old, focusing on partial decoration and modification of existing stock properties in this market segment.

Many people ask me about the differences between Research and Selection and the services provided by Beike Shengdu. In my opinion, they focus on complete decoration and renovation, which is closely related to second-hand property transactions and can also benefit from Beike's traffic. Research and Selection's model is derived from ONEWO's community services, which in internet terms, ONEWO's community services are our private domain traffic.

In addition, compared to complete decoration and renovation, the business of partial decoration and modification of houses has a smaller average order value. From the marketing model of complete decoration companies, this business is not profitable and is a "blank space" in the market. In the past, neither decoration teams nor other decoration service companies were willing to sell related products.

Wall Street News: What is the current average order value? How to increase user willingness to place orders?

Currently, our average order value ranges from 25,000 to 30,000 RMB. Of course, we also have some very small partial renovations with order values ranging from 5,000 to 8,000 RMB.

We are a service-oriented business, and the most important thing for us at the moment is to let users know what we do and that they can find us when they have needs.

Being able to visit homes is the primary way we interact with users, which is quite different from traditional home decoration methods that rely on buying and selling or other marketing approaches. Our advantage lies in being backed by property services, which leads to a high level of trust from users.

Wall Street News: Why choose to focus on the market for partial renovations?

Zhou Kerui: Partial decoration and modification is currently an untapped market in the industry. Houses have a longer lifespan and higher value compared to cars, but there are very few companies providing services for houses. The reason behind this is that the industry has lacked standards, and most related services were previously handled by "guerrilla teams." Due to the issues with customer unit price and marketing model, home improvement companies are unwilling to take on such orders. The lack of standardized companies in the market has also given us the opportunity to explore related market demands.

Yanxuanjia, backed by ONEWO, has leveraged its past accumulation in the property field to capture the demand for house maintenance, upkeep, and upgrade services within communities.

Taking Shenzhen as an example, it is a city where the number of old houses far exceeds that of new houses, with over 67% of houses being over 10 years old. Furthermore, the degree of house aging increases linearly with the age of the building.

From the property renovation filing data, 85% of customers choose partial renovation and remodeling, while only 15% opt for full house renovation. Within this 85%, three-quarters are completed by "guerrilla teams" and small family-owned stores.

The demand in the new housing market for whole-house decoration and customization is gradually shrinking as the residential market structure changes; meanwhile, the demand in the existing housing market is linearly increasing with the aging of houses and communities.

Wall Street News: How do you improve the standardization level of home decoration to ensure the quality delivered to customers?

Zhou Kerui: ONEWO Chairman Zhu Baoquan requires that "Yanxuanjia" must achieve 100% customer satisfaction to be considered successful. However, to be frank, home decoration is a systematic project that requires marketing and delivery alignment, and there are uncontrollable factors due to construction differences, as well as the need for post-sales support. Yanxuanjia enhances the capabilities of each link to increase overall certainty.

Compared to personalized custom whole-house decoration, partial renovation and remodeling are actually easier to standardize. What we are doing is modularizing various scene components within the house, such as focusing on major scenes like the kitchen, bathroom, balcony, etc., for partial renovation.

In major scenes, based on product categories, such as skirting board repair, wall refreshing, etc., we have developed over 30 SKUs; at the same time, we have established a renovation filing evaluation system to attract excellent work teams and enhance workers' service capabilities and customer satisfaction through regular worker training.

Yanxuanjia is also improving the house inspection report. After ONEWO enters a community, it first analyzes which scenes in the community may have issues, what kind of products are needed to meet the demands, and then forms a complete house inspection report through property entry services.

For after-sales service, we create warranty cards with clear regulations for different product categories in specific scenes. We standardize and productize the entire maintenance service to ensure the quality of maintenance services.

However, even with standardizing every link, unexpected delays in construction are inevitable. With a background in property management, Yanxuanjia has a service-oriented gene, sincere service attitude, and the ability to promptly resolve issues to compensate for these deviations. Moreover, compared to whole-house decoration, Yanxuanjia is deeply integrated with property management, focusing on long-term service and high trust, aiming for user brand recognition and repeat purchases. This is fundamentally different from the model of other decoration companies that focus on one-time business. This is also the most essential difference.

Wall Street News: How does Yanxuanjia consider city layout in its expansion?

Zhou Kerui: We operate in approximately ten cities, including first-tier cities like Beijing, Shanghai, Guangzhou, Shenzhen, and a few second-tier cities. Currently, many cities mainly focus on new housing market decoration, and the second-hand housing decoration market has not yet formed a mature market scale When evaluating whether the market can enter, we look at the age of the city's buildings and the city's consumer power. If it is a city with low housing prices, it is also very difficult to start this business.

Wall Street News: In the next 3-5 years, what is the strategic focus of the research and selection team?

Zhou Kerui: Currently, we hope to have links with as many customers as possible. From the current performance, the growth in the number of serviced customers far exceeds the growth in total amount. This means that the number of customers choosing us is increasing, which is in line with my expectations, and the first connection with customers has been established.

From a 3-5 year perspective, we mainly focus on providing services around old houses, especially in the most essential and easily standardized scenarios such as kitchens, bathrooms, and balconies, to create better products.

This is a business of time, as houses are getting older day by day, there will be periodic explosive demand for renovations, and more and more customers. For us, it is necessary to enter the market early, build the team, and let the brand influence the minds of potential users