Winning or losing doesn't matter. "Chain" and "expansion" — these two popular terms have fueled the ambitions of many home distribution enterprises, pushing them into a frenzy of growth. However, this rapid expansion has led to an uncontrolled market, where blind competition and overreach have ultimately resulted in a cycle of illusion turning into nightmare for many companies.
Wuhan Ouyada Home Furnishing Group's tragic story in Hangzhou is not an isolated case. When Hangzhou Binjiang Ouyada Furniture Co., Ltd. and Zhejiang Zhongnan Nanjian Construction Group Co., Ltd. hastily left two years ago, another player, Hangzhou Juran's Home Investment Holdings Group, remained behind. It quietly swallowed the losses with Hangzhou Tianxinglong Building Materials Decoration Exhibition Management Co., resulting in bitter legal battles known as "marriage flashed away."
The same unforeseen downfall and rapid decline have shaken the home distribution industry in Hangzhou, reflecting the confusion and pain faced by the entire Chinese home furnishing sector at this stage.
**Ouyada Riverside Store has stopped cash register this week.**
**Zhongnan transforms self-operated shopping mall into shopping mall.**
On July 16, Ouyada Hangzhou Binjiang Store officially notified merchants that the furniture pavilion would close on July 31, 2013, and no longer operate outside. According to Xia, General Manager of Wuhan Ouyada Group Marketing Center, due to the large number of merchants needing negotiation, the closing date might be extended to August 15. However, it was reported that the store had already stopped accepting payments this week.
According to the notice, Ouyada Hangzhou Binjiang Store and the mall owner, Zhejiang Zhongnan Group, terminated their lease contract and reached an agreement on merchant withdrawal. According to the arrangement, Zhongnan Group will do its best to protect merchants before they leave, ensuring the normal operation of property equipment and services, and actively supporting the orderly exit of merchants from the Binjiang Store. The goal is to clear inventory quickly and reduce losses.
The reporter contacted Wu Jianrong, chairman of Zhejiang Zhongnan Group, who stated that from the perspective of maintaining stability, Zhongnan Group has reached a preliminary settlement with Wuhan Ouyada Group, making a “concession†by reducing late payment penalties and interest incurred by Ouyada’s breach of contract. This provided Ou Yada and its dealers with more time to handle the aftermath.
According to Wu Jianrong, the Ouyada Hangzhou Binjiang Store, which will be taken back during liquidation, will be fully owned by the group. The business format will be transformed, introducing popular items such as cinemas, supermarkets, clothing, cosmetics, catering, and leisure and entertainment. These new products are expected to align with the planned Zhongnan Shopping Center and a five-star hotel to open next year, forming a “Central South City†shopping mall covering 250,000 square meters.
This means that the Zhongnan Group, which many merchants had hoped would take over, failed to maintain operations. Many merchants are still scrambling to find suitable shops this summer.
“The Group will prioritize the withdrawal merchants who intend to enter the Eurasian Qiutao and Tianyi stores, offering rent-free periods to reduce their losses,†said the management of Ouyada Hangzhou Binjiang Store. From July 16 to 21, different groups of merchants were contacted to discuss store withdrawal, and at the same time, performance bonds, warranty deposits, and decoration deposits were returned.
The delivery, return, and exchange of home products sold by Ouyada Hangzhou Binjiang Store, which is of most concern to consumers, was addressed by Xia Xia, who responded to the media on behalf of the Group. She mentioned that Ouyada will sign a “post-sales commitment†with each withdrawing merchant, clearly requiring merchants to use effective methods to ensure product quality, quantity, timely delivery, and continued after-sales service.
**Actually, the Hangzhou store has been vacant for 2 years.**
**The lonely “market ruins†in the golden business district.**
An 18-year lease was withdrawn in just one year, shocking the industry. Standing at the intersection of Xintang Road and Fengqi East Road in Cheshuilong, the Wufu Tianxinglong Building Shopping Mall (formerly Beijing Residence Ran House) now has a dilapidated facade with many holes from demolition. “In fact, the ‘Juran Fengqi Road Store’ has been removed, but the ‘big house’ still carries a heavy ‘actual trace’ with its blue-aluminum-plastic panel façade and window advertising.â€
According to the official statement from the Hangzhou store during the “retreat†in July 2011, the Juran Fengqi Road Store was only temporarily closed for adjustment, and the market management and after-sales team would not leave. However, according to the Group’s strategic adjustments, the Fengqi Road location must definitely change its economic category, no longer continuing as a furniture mall.
Two years later, will Juran Home return? Why are commercial properties in such prime locations always abandoned? What’s the secret?
The reporter found Xu Shuimu, chairman of the property leaser Hangzhou Tianxinglong, who revealed that “temporary closure†was just a public statement. In fact, in August 2011, Beijing Juran Home had already unilaterally terminated the contract in writing.
According to the earliest lease contract provided by Tianxinglong, from January 1, 2010, Hangzhou Tianxinglong leased commercial buildings totaling 41,003.7 square meters, with an 18-year lease period and a 6-month rent-free period. However, just a few years later, in July 2011, Beijing Juran Home and Hangzhou Tianxinglong had already terminated the contract prematurely.
Since then, the litigation has gone through multiple courts, including Jianggan District People’s Court, Hangzhou Intermediate People’s Court, and now the Zhejiang Provincial High Court. This long-standing dispute has turned the once high-end commercial property into one of the most dazzling “market ruins†in the Qiutao home business district.
It is understood that the parties involved in the litigation have not yet reached a settlement regarding liquidated damages, damages, and liability issues arising from the early termination. This unresolved dispute has forced the originally high-end commercial properties to remain closed.
“Looking back now, maybe Tianxinglong should have taken a bite at the time, insisting on a differentiated high-end building materials camp mall, and the results might have been very different now,†said Hu Shiwei, general manager of the Starry Dragon Decoration Expo Center and current head of Tianxinglong Creative Design Plaza. “At that time, Tianxinglong lost more than 10 million to the original building materials merchants.â€
The long-believed Fengjialu store, actually Juran Home, now finds itself competing with East China Furniture and Ouyada Qiutao stores in the business district. Under the circumstances of an oversupplied Hangzhou furniture market, continuing to position and operate mid-to-high-end furniture is seen as a risky decision with a high probability of failure.
**The chain model has been “dead†in Hangzhou.**
**The size and number of single fights are blowing big bubbles.**
“It can be said that the home furnishing chain has not formed a truly successful model in Hangzhou,†said an industry veteran who preferred to remain anonymous. He added that the unconventional development speed induced dangerous expansion ambitions among entrepreneurs, and the Chinese-style rodeo movement further inflated the seemingly gorgeous store bubble.
“In reality, the home store chain is very fragile,†he said. Using local economic policies for low-cost enclosures and attracting well-known home furnishing brands to cooperate in investment promotion became a favorite game for many real estate developers. Promising generous returns and cutting retail store funds in advance led to rapid expansion of home distribution companies.
According to statistics from the China Furniture Association, the actual purchasing power of a store area of 20 million square meters is sufficient for the current Chinese home furnishing market, while the total area of domestic home furnishing stores has exceeded 40 million square meters. This means that 50% of the store area is surplus.
Not long ago, the “home store†was even predicted by the media and economic community as a likely bankruptcy wave in one of the seven major industries in China.
“Today’s chain home furnishing enterprises mainly focus on scale, fighting for the number of stores, and trying to overwhelm opponents through mass expansion. This model now appears weak and difficult to sustain,†said an industry expert. “At this point, first- and second-tier cities across the country, where the expansion of chain home furnishing enterprises is most serious, have begun to gradually expose problems, including Hangzhou and Ningbo in Zhejiang.â€
Jiang Hongyuan, president of the Zhejiang Furniture Association, added that since the impact of the financial crisis, the export of the home furnishing industry has sharply declined over the past two years, leading many foreign-invested enterprises to shift to domestic sales. This has intensified competition in the domestic household market.
Under a bad economic environment, many home furnishing enterprises are facing declining single-store sales and increasing rent and operating costs. This has made traditional channel-based brand bundling and store-opening strategies increasingly met with resistance from manufacturers and distributors.
“This contradiction will become more intense in the future,†Jiang warned.
“How to make production enterprises, distributors, and consumers become a community of interests for home stores, and treat each other sincerely for sustainable development, is a proposition that needs urgent solving for home furnishing chain enterprises,†Jiang concluded.
In fact, the home furnishing chain model has been “frustrated†since it entered Hangzhou. Whether it was Shenzhen Hundred Years Home Furnishing’s deep Meiting Home, or national home circulation giants like Dragon, Ouyada, Actual Home, Yuexing Home Furnishing, and local strong players like New Era Home Life Plaza, all have experienced their own bitterness along the way.
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