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What are the five major factors affecting the high circulation cost of the cabinet industry?

by:Hench Hardware     2021-08-31
Nowadays, my country's economic development has entered the 'new normal'. Under the fierce market competition, the operating costs of the cabinet industry have also increased year by year. With the gradual decline of corporate profits, cabinet companies must make adjustments, reforms and innovations to change the current market status. In general, the circulation cost of cabinet companies is mainly restricted by the following five factors.


   1. Store rents are rising


   In recent years, the contradiction between cabinet merchants and stores has intensified, in large part because of the rising rent of stores. As we all know, the cabinet market adopts a stall system operation mode. In this mode, the owner of the business premises (commercial real estate development operator) and the commodity operator in the market (cabinet commodity operator) are different stakeholders, and there is interest between them. According to the game relationship, commercial real estate development operators must increase rents as much as possible or maintain high rent levels to maximize their own interests; cabinet commodity operators hope to reduce rent expenditures as much as possible to reduce operating expenses and increase or maintain profitability.


   2. The strength of cabinet operators is not good


   Although the leading market development operators in the home furnishing industry have opened many sub-markets with unified brands and unified operations and management across the country or region, they have also obtained certain scale benefits. However, from the cabinet commodity operators (merchants) ) At the level, it is hard to say that there are economies of scale. At present, most of the cabinet commodity operators in my country are small and medium-sized private and individual business enterprises. They are numerous, have a low degree of organization, and have a weak sense of cooperation. They are basically in the acquisition of related resources such as commodity management, business management, and marketing promotion. It is fighting each other, lacking cooperation and unity. This results in the poor scale efficiency of my country's cabinet product circulation, and poor scale efficiency is one of the important reasons for high circulation costs.


  3. Commercial technology application and innovation level are behind


   Nowadays, with the help of modern information technology as the core business technology, the efficiency of international leading trade circulation companies in new store construction, product management, business management, marketing promotion, logistics organization, etc. has been greatly improved, and the circulation cost has been significantly reduced. In the cabinet commodity circulation industry, due to the constraints of the current industry situation, operators have low degree of organization, weak strength, weak awareness of technology application and technological innovation, insufficient support from the government and industry organizations, and the application and innovation of commercial technology are still generally lagging behind Therefore, it greatly restricts the improvement of circulation efficiency and the reduction of circulation costs.


   Fourth, there are many links from production to terminal circulation


   At present, cabinet commodities are basically transported from the production field to the consumer field by means of distribution, that is, through the circulation chain of manufacturers, first-level distributors, second-level distributors, and third-level distributors, the goods are transferred from the production field to The shift in the consumer sector. Each level of distributors incurs circulation costs, and all have profit appeals. The stacking of multi-level distribution will inevitably generate more circulation costs.


   Five, cabinet product logistics costs are too high


   At present, the logistics cost of cabinet products accounts for close to 20% of sales revenue, while the logistics cost of developed countries in Europe, the United States, and Japan is less than 10%. Excessive logistics costs are an important factor pushing up the circulation cost of cabinet products in my country. The high logistics cost is related to the current road toll policy in my country on the one hand; on the other hand, it is related to the unreasonable and unscientific layout of related logistics facilities. Both aspects need reform and improvement.
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