Net profit plummeted 92%, what happened to this home furnishings giant?

With the rapid growth of the cross-border e-commerce industry, many companies have begun to turn to cross-border e-commerce business. However, at the same time, the tightening of policies of mainstream cross-border e-commerce platforms such as Amazon and the increase in a series of operating costs such as shipping costs and storage fees have also had a certain impact on the revenue of cross-border sellers.

Just now, another cross-border home furnishing giant has released its 2021 annual report. While this giant achieved revenue growth, its net profit fell sharply.

Mujia Home Furnishing’s annual report was released, with net profit falling by more than 92%!

Recently, Zhejiang cross-border seller Mujia Home Furnishing released its 2021 annual report. The annual report shows that in 2021, Mujia Home Furnishing's operating income was about 550 million yuan, an increase of 10.49% over the same period last year, and the net profit attributable to shareholders of the listed company was 3.67 million yuan, a decrease of 92.41% over the same period last year.

Mujia Furniture's operating profit fell sharply, which was to a certain extent attributed to the fact that the growth of operating income in 2021 slowed down due to factors such as the epidemic. At the same time, costs such as shipping costs, raw materials, energy consumption costs and Amazon platform fees increased significantly compared with the previous year, resulting in a decline in net profit this year.

It is reported that in 2021, Mujia Home Furnishing's sales expenses were 351 million yuan, an increase of 82.76 million yuan from 2020, an increase of more than 30.82%. Sales expenses are mainly used to increase advertising investment, as well as rising overseas delivery and storage fees. At the same time, in order to avoid product shortages, Mujia Home Furnishing is also investing funds to expand its own overseas storage sites, which is also a major reason for the increase in costs.

In addition, in order to maintain its competitive advantage in the industry, Mujia Home Furnishing is constantly increasing its research and development. In 2021, Mujia Home Furnishing's research and development expenses were 1.73 million yuan, mainly used for equipment production, system software customization development, and independent station research and development.

Zhejiang Mujia Home Furnishing was established in 2004. After years of development, it has become a mature cross-border e-commerce company. Its main products include curtains, cushions, bedding, tablecloths and other home textiles. Its products are mainly aimed at consumers in many overseas countries such as the United States, Europe, and Japan.

Mujia home furnishing products mainly adopt the "independent brand R&D and design + own production" model, complete production and manufacturing domestically, and are sent to overseas warehouses after passing quality inspection and warehousing, and then sold through mainstream cross-border e-commerce platforms such as Amazon and Wayfair.

Mujia Home Furnishing's own brand Deconovo has many hot-selling links on Amazon with more than 10,000 reviews, and consumers have given the product very good reviews. Its store has a 100% favorable review rate within 90 days and a 99% favorable review rate throughout the year, which shows that the product quality of Mujia Home Furnishing is still very good.

In addition to Amazon, the brand's official website is also an important sales channel for Mujia Home Furnishing. Although the sales data of its official website is not as good as Amazon, Mujia Home Furnishing is also actively using social media channels such as TikTok to attract brand traffic. On TikTok, the Deconovo account already has 184,000 followers .

Based on the current sales of Mujia Home Furnishing, it can be seen that it still has a lot of room for development in the future, but at the same time, Mujia Home Furnishing also has some operating risks that cannot be ignored. With the rapid development of the cross-border e-commerce industry, the number of companies that have begun to switch to cross-border e-commerce business is also increasing, which will lead to increasingly fierce competition in the cross-border sales of home textiles.

At the same time, as Mujia Home Furnishing's sales share on e-commerce platforms such as Amazon continues to grow, its product sales are to a certain extent dependent on these e-commerce platforms. If these e-commerce platforms increase their service fee standards, it will affect the company's profitability.

As a foreign trade company, Mujia Home Furnishing's products are mainly sold overseas and settled in foreign currencies such as the US dollar, euro, and yen. Changes in exchange rates of various currencies will have a certain impact on the company's performance. Mujia Home Furnishing needs to bear the risk of exchange gains and losses caused by exchange rate fluctuations.

In addition, Mujia Home Furnishing’s sales on Amazon are mainly operated using the FBA model, which involves certain inventory management risks.

Fortunately, despite the impact of the epidemic, the prospects for the home textile industry in which Mujia Home Furnishing is located are still very bright.

Current situation and development prospects of home textile industry

In the textile industry, home textiles , clothing textiles and industrial textiles form a three-way split . As an important category of textiles, home textiles are called soft decoration in the home decoration, and play an important role in creating an environmental atmosphere .

Data shows that in 2021 , 1,548 large and medium-sized enterprises in China's home textile industry achieved a total industrial output value of 209.765 billion yuan, export delivery value of 53.911 billion yuan, total profit of 12.240 billion yuan, and a production and sales rate of 97.97%.

Among them, clothing textile consumption accounts for about 65% of the total textile consumption , while household textile consumption accounts for only 23%, and the per capita consumption of household textiles accounts for less than 1% of consumer expenditure. The home textile industry is the sub-industry with the best development prospects and the fastest growth rate in the current textile industry.

In addition, according to Euromonitor International statistics, the domestic home textile industry market size was 191.8 billion yuan in 2015, and increased to 231 billion yuan in 2019, with a compound annual growth rate of 4.8%. In 2021, the home textile industry market size will reach 258.7 billion yuan, and the home textile industry market size will grow steadily.

As for the export situation of the home textile industry, according to customs statistics, the cumulative export value of China's home textile products in the first three quarters of 2021 reached US$34.749 billion, a year-on-year increase of 37.33%. Excluding exchange rate factors, the year-on-year increase was 26.71%, and the average growth in the past two years was 9.19%.

At this stage, my country's home textile product exports have recovered and even exceeded pre-epidemic levels, but the growth rate has slowed down and is gradually returning to normal trade levels.

In terms of categories, bedding and fabric products are the two major categories of China's textile exports, accounting for 69.5% of the industry's total exports. Blankets, carpets, kitchen and dining textiles and towels are relatively small, accounting for 8.5%, 7.9%, 6.6% and 5.7% respectively.

According to market research firm Technavio , the global home textile retail market will increase in value by $52.43 billion between 2020 and 2025. The market grew 4.72% year-on-year in 2021 and will grow at a compound annual growth rate of 6% during the forecast period .

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Asia Pacific holds the largest home textile market share and currently accounts for 35% of the global market share. Factors such as increasing urbanization, rising household disposable income, increasing penetration of the internet and smartphones, and rising fashion sensitivity for home decor are driving the growth of the regional market.

With the rise of the trend of focusing on decoration and ignoring renovation in the home furnishing industry, the decorative function of home textiles has gradually become apparent, and the home textile industry has regained vitality worldwide.

However, the home textile industry is not a quick success industry. Merchants need to develop marketable products for different regional markets and consider the differences in needs of different groups of people. At the same time, they also need to strengthen inventory management, improve the comprehensive shopping experience of stores, and work hard to achieve long-term development.

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