This is a ceramic dealer's business wisdom. For FMCG peers, the market conditions are quite similar. Let's see how he does it!

"Ceramic business is really tough this year, tougher than last year."

We hear this every year. Business is indeed difficult, but we persist year after year. Since we've chosen this industry, we can only move forward. We've invested in store renovations, time, and energy. Can we just quit because it's hard? That would be a bigger loss.

Now, product homogenization is severe; everyone is competing on price, and profit margins are already thin. If we keep cutting prices, it's unsustainable. This is an era of thin profits, especially for stores not selling high-end brands. There's little room for further price cuts. Without a reasonable profit margin, it's hard to maintain product quality and after-sales service.

So, we must find ways to increase profit margins to ensure we make money while selling products.

▋▏Don't focus on competitors; focus on customers

Some people keep an eye on competitors, quickly copying what sells well for them. But by then, competitors have already seized the advantage. If you're always following others, can you go far? Our focus should be on the market and customers. We should spend more time figuring out what customers need, how to stimulate their desire to buy, how to increase conversion rates, and how to improve product profit margins. That's what we should be thinking about.

▋▏Avoid the enemy's strength, play to your own

I sell tiles in a small rural town with a population of only tens of thousands. I chose this place because, first, competition is relatively low here. For a small player like me with limited capital, I can avoid the enemy's main forces and target markets others overlook. Second, I saw that the area is undergoing new rural construction, creating high demand for ceramics. Looking back, I'm not sure if my choice was right or wrong.

In my town, there are several ceramic stores, and in another town three kilometers away, there are a few more. But currently, my store has the best business and the highest profit margins for the same products. My store is the largest among these ten-plus stores, with the most samples. If anyone needs tiles, they'll first consider visiting my store, giving me a first-mover advantage.

▋▏Don't compete on low prices; instead, uncover customer needs

As everyone knows, products on the market are similar, but I never compete on price. For example, for 300x600 interior wall tiles, others quote 5 yuan, another quotes 5.5 yuan. In others' eyes, they're the same. I deliberately quote 8.5 yuan, giving the impression of high quality, because most people equate higher price with better quality. Tiles are a low-involvement product; customers usually don't spend much effort researching before buying. For something they don't understand, most people use price as a quality indicator.

In most people's minds, Guangdong Foshan tiles are the best. But selling genuine Foshan tiles in rural markets leaves no profit. Everyone sells Jiangxi or Henan tiles. What to do? I can't tell customers they're not from Guangdong.

So, I got some Foshan product labels from a friend there and stuck them on. I tell customers these are Guangdong tiles, and they can verify online with the factory phone and address. But honestly, few people actually check. (Is this a bit unethical?) My mobile number is from Foshan, and I say it's provided by the factory. Sometimes I even believe I'm selling Foshan tiles. Sigh...

▋▏Display samples selectively, not excessively

Initially, I displayed many samples in my store—over 60 interior wall tiles and dozens of floor tiles. I thought more samples meant customers would find something they like. But I later realized this was counterproductive. Too many choices confused customers; they found everything attractive yet unsatisfying, and after a long time, they couldn't decide.

Too many choices burden customers with decision-making. Those with decision paralysis might just leave, wasting my effort and time that could be spent on other customers, potentially losing other sales. So, I removed a large portion of samples, keeping only about 30 interior wall tiles and 30 floor tiles. Now customers find it easier to choose, and my conversion rate has increased.

When displaying samples, I deliberately place ugly ones—those most people dislike—next to beautiful ones to create a stark contrast. Then I quote a higher price for the ugly ones and a lower price for the beautiful ones. I first recommend the ugly, high-priced product. Customers are shocked: "So ugly and so expensive?" That's my goal. Then I introduce the adjacent one, and they see it's both beautiful and cheaper, so they basically decide on it.

▋▏Don't talk price; talk value

Once the product is chosen, bargaining begins. Many say, "Why so expensive? Give a discount." In reality, no matter what price you quote, customers will say it's expensive. Even if you quote below cost, they'll still complain. It's human nature. What customers really want isn't a discount but a reason for the high price.

Remember, this is crucial: don't immediately lower the price. If you do, you're dead. Customers will think, "Wow, there's a lot of markup, so there's room for more discounts." Human greed is insatiable; the more you cut, the more they want. At this point, you need some professional knowledge to explain why it's expensive. For example, the length of the kiln for Guangdong tiles, the tonnage of the press, the firing temperature. But just talking about these doesn't help; they don't care or understand. You need to explain the differences and their impact.

Use the FAB (Features, Advantages, Benefits) rule appropriately. Point out the product's attributes, the advantages they bring, and the specific benefits. For instance, "Our factory uses a 7800-ton press, which gives the tiles excellent density. Higher density means lower water absorption, so your tiles will maintain their gloss for years. If the tiles are poor, they'll darken over time..." At this point, you can exaggerate the pain point, painting a vivid picture of the consequences of buying cheap tiles. This requires some improvisation.

After all that, if they still think it's expensive, don't lower the price. Tell them, "If you want cheap tiles, go to XX store. Their tiles are cheap. If you want quality tiles, come here." Of course, never badmouth competitors—that's unprofessional and will make you look bad. Just hint at it. About 20% will go, and of those, 70% will come back. I'm speechless.

▋▏Create pleasant surprises, exceed customer expectations

After closing a deal, I usually give customers some inexpensive but practical gifts, like brooms, mops, or plastic basins. These are cheap but useful. Of course, I don't mention them beforehand; I give them after the deal. Customers don't want cheap; they want to feel they're getting a bargain. Free stuff is always welcome. It's a pleasant surprise. Exceeding expectations is what makes it a surprise. So, many customers refer their friends and relatives. Rural people don't trust ads or flyers; they trust recommendations from family and friends. Once they trust you, the rest is easy.

Given the overall environment and industry trends, the entire industry agrees that furniture dealers can no longer follow past business models; change is inevitable. Looking at recent developments, there are multiple options for furniture dealers' future growth.

How can furniture dealers break through? The ceramic dealer above offers one approach. From a broader perspective, consider the following directions:

No.1 Rely on traditional channels, continue to deepen the market

Zhou Libo has a famous saying: "One meter wide, one thousand meters deep!" Since we've chosen the home furnishing industry, we should focus on it, identify problems, solve them, and strive to overcome difficulties to achieve transformation!

For furniture dealers, traditional channel models are still expanding, meaning there's still significant market potential. However, the original market environment has changed. If dealers choose to stay, they must make corresponding adjustments.

1. Adjust operational thinking

Some dealers complain about difficult markets and high operating costs, and some even exit due to losses. But compared to exiting, many dealers actively respond to market adjustments.

2. Follow market hotspots

Although many dealers lament the sluggish market, a closer look at China's furniture market in recent years reveals bright spots. From custom wardrobes to high-end customization, to home soft furnishing, and increasingly popular smart home, these have created market hotspots with strong demand.

No.2 Build your own brand, transform into brand operation

A great brand is the only way for a company to maintain excess profits. To achieve sustainable profitability, brand building, maintenance, and promotion are crucial.

Furniture dealers establishing their own brands and operating them is a mature model abroad. In the past two years, many domestic dealers visited the US market and valued this model. Although rare in China, it doesn't prevent dealers from moving in this direction.

1. Build brand operation via emerging channels

In traditional Chinese furniture channels, dealers are the final link in sales, but they don't own the brand or usually the store. This is why dealers often feel they lack industry advantages.

During rapid market growth, dealers profited handsomely, so they didn't resist this status quo. But as the market enters adjustment, traditional models concentrate all market risks on dealers—companies require payment before shipping, and mall rents remain unchanged. This means dealers bear the most market pressure. E-commerce, as an emerging channel, gives dealers hope.

2. Build brand operation via traditional channels

If building a brand and operating via emerging channels is market-driven, then building a brand and operating via traditional channels is a higher-level development approach.

Compared to self-built brands entering e-commerce, building a brand and entering traditional channels demands more from dealers: from capital strength to brand operation, from product design to production supply, from store design to terminal sales—all these need to be fully addressed.

No.3 Based on your situation, explore new models

During the high-speed development of China's furniture industry, few thought about its business model. But after years of adjustment, many industry insiders are pondering the future of China's furniture business model. The Chinese model, with home furnishing malls as platforms, differs significantly from mature European and American markets. This has become a key industry discussion. For dealers, if conditions allow, they can try foreign channel models to drive their next step.

1. Transform into service providers

Strictly speaking, this is a market segment in the European and American furniture industry, including product logistics and distribution (including last mile), installation and repair, and payment settlement. Currently, China's furniture industry is relatively crude in this regard, with manufacturers, logistics providers, and dealers all involved in some aspects.

This model hasn't been seen in China yet, but many strong dealers have expressed interest, and some have even started planning. This model can save dealers time and capital investment, allowing them to focus on sales, while making brand operation more rational and efficient.

2. Establish self-owned stores

Furniture dealers choosing to establish self-owned stores has always existed, and it's happening everywhere now. Looking at China's furniture industry history, giants like Red Star Macalline, Moon Star Home, or JSWB all started as furniture dealers.

Currently, in first- and second-tier cities, few dealers have self-owned stores. On one hand, these areas are dominated by chain home furnishing malls, making it hard for dealers to compete in brand or financial strength. Also, with many furniture brands concentrated there, it's difficult for dealers to build brand advantages even with self-owned stores.

Conversely, third- and fourth-tier cities are where dealer self-owned stores are most concentrated, for two reasons. First, these areas are hubs for Sichuan furniture brands, where the big-store model thrives. Single stores often exceed 3,000 square meters. After becoming agents for a Sichuan brand, dealers often add other differentiated brands, like solid wood or office furniture, effectively creating a large self-owned store. Second, from a brand perspective, due to limited coverage in these areas, early furniture brands were few and often controlled by one or a few dealers. Plus, early home furnishing malls were underdeveloped, so dealers chose to build their own stores.

For dealers, in some third-tier and most fourth-tier cities, due to limited market capacity, large malls face difficulties in attracting tenants, so building self-owned stores offers significant growth potential.

The 2017 (3rd) FMCG + Internet Conference will be held in Chongqing in November 2017. The conference will focus on the theme "New Forces, New Ecosystem," inviting 1,000+ dealers, 500+ brand owners, 200+ B2B platform founders, and 100+ investment institutions to explore new chapters of cross-industry integration!

Click the link below to review the highlights of the first and second FMCG + Internet conferences:

2016 "FMCG + Internet" Summit Forum

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