In addition, in order to break the embarrassing situation of long-term low profits and homogeneity and seek survival and development in the market reshuffle, LED display companies have successively made active arrangements in terms of operational differentiation. Listed LED display companies represented by Lianjian Optoelectronics, Leyard, Absen, Lehman, etc. have changed their development ideas, begun to explore new service and profit models, and set their sights on high-end leasing, cultural media, sports, finance and other fields. Through cooperation or external mergers and acquisitions, explore the emerging business strategy of "LED display +" and thus become a "pioneer" in LED display model innovation.
Terminal product structure changes
Value-based and experience-based consumers are popular
“If you don’t do a hypermarket, you’re waiting for death, but if you do a hypermarket, you’re courting death.” When hypermarkets became the mainstream of business, many companies expressed this sentiment. The unprofitable situation of hypermarkets has even forced some companies’ agents to quit acting as agents and let manufacturers do the work directly. Because agents cannot bear long-term huge losses, but manufacturers can bear strategic losses due to strategic considerations.
70% of personnel, 70% of policies, and 70% of sales come from hypermarkets, but they only contribute 30% of profits. This pattern has confused enterprises for a long time. This also shows from another aspect that although traditional channels only account for 30% of sales, they contribute 70% of profits. It is based on this judgment that the price of channel products is low, but the value is not necessarily low.
The above dilemma was also encountered 15 years ago when hypermarkets were popularizing in China. In the cycle of retail business, this phenomenon occurs repeatedly and follows the following rules: when a new mass business model appears, the sales volume is not large and it is unattractive to large enterprises. It is even rejected because the price system is inconsistent with the original price system; but because the price is low, it is attractive to consumers. Since most of the early participants were small businesses, competition was not fierce, so profits were huge. When new mass commerce becomes the general trend, traditional large enterprises make strategic investments and competition intensifies. However, because the product system of large enterprises is not separated from the original product system during the investment process, it is easy to cause huge losses.
Modern terminals, mainly new mainstream LED products, increase prices, increase high added value, enhance the value of individual consumers, and adapt to the high-end needs of consumers. LED lighting e-commerce develops independent products to meet the needs of price-sensitive consumers of LED lighting fixtures and maintains sales through high-frequency activities.
In terms of technical means for marketing, the key is combination, such as overall communication, etc., and the product structure of modern terminals is changing. The customer base of modern terminals has also changed, gradually becoming mainly value-based and experience-based consumers. New mainstream products have three characteristics: word-of-mouth (really good, worthy of word of mouth), charm (pleasing to the eye, willing to buy), and value (high added value). Such products are sold in physical stores and do not require vigorous promotion or participation in various activities organized by hypermarkets to generate sales naturally. Therefore, physical stores will be the mainstream profit source in the future. After a short period of discomfort, physical stores will transform from their original business model focused on impulse into a store focused on profit.
Cultural media has become the first choice for LED cross-industry
In recent years, LED displays have rapidly conquered the outdoor advertising market with their advantages such as high brightness, strong visual impact, wide viewing angle range and excellent color reproduction capabilities. As an outdoor media with great development prospects, the unique communication value created by LED display screens is beyond the reach of other traditional outdoor media, and has become the business card of cities in the new era.
As an important medium for outdoor advertising communication, LED display screens have naturally become the focus of cultural media companies. Therefore, entering the media field has naturally become the first choice for LED display companies. Listed company Lianjian Optoelectronics is the LED display company that has delved most deeply into the cultural media business so far. In 2012, Linkage Culture was established to enter LED outdoor advertising; in 2013, it merged with Timeshare Media to deepen its layout in the outdoor advertising industry; in 2014, it merged with Easystar and Youtuo Public Relations to realize the leap in the advertising chain from media to upstream public relations services.
The benefits brought to enterprises by deploying the media field are obvious. According to the 2015 annual report of Lianjian Optoelectronics, Lianjian Optoelectronics achieved a 72.49% increase in total profit in 2015. The company stated that the completion of the acquisitions of Youtuo Public Relations, Easystar and Accurate Focus Media has enabled the company to further optimize its vertical industrial layout, and the prototype of a "Digital Outdoor Media Group" with digital equipment technology, brand public relations services and outdoor media networks as its core businesses has emerged. During the reporting period, the company's media segment business revenue was 742 million yuan, an increase of 116% over the same period last year.
LED display companies targeting the media field also include Leyard and Lehman. In 2015, Leyard acquired 100% shares of Guangzhou Lifeng Culture Technology Co., Ltd. and Beijing Jinlixiang Yicai Technology Co., Ltd. This move is seen as an important step for Leyard to build its cultural media business segment. In addition, as early as 2012, Lehman Holdings invested 10 million to establish Shenzhen Lehman Cultural Media Investment Co., Ltd., which specializes in investing and operating outdoor LED advertising, thus opening up a new business field and cooperating with the Chinese Super League to establish its position in the field of sports media.
According to relevant statistics, in the first half of 2015, the total amount of outdoor advertising in mainland China reached 61.5 billion yuan, an increase of 11.6% compared with the same period last year. At the same time, driven by informatization, the global outdoor advertising market is expected to reach US$50.7 billion in 2020.
The popularity of the outdoor advertising market is an important driving force for LED display companies to enter the media field. Nowadays, in addition to directly establishing or investing in media companies, LED display companies are more likely to choose the "advertising-for-screen" cooperation model, that is, LED display manufacturers first invest in building screens, and then use advertising revenue to pay for the goods or share advertising. If the cooperation goes smoothly, LED display screen manufacturing companies can not only successfully sign contracts with media companies, but also obtain certain profits by relying on LED display advertising. From a long-term perspective, advertising screen replacement will strengthen the direct influence of LED display companies in the field of outdoor advertising and gradually penetrate into terminal channels.
Sports has become the new “outlet” of the LED industry
Today, the application tentacles of LED display products have already extended to the sports industry. Last year, the "Several Opinions on Accelerating the Development of the Sports Industry and Promoting Sports Consumption" issued by the State Council pointed out that by 2025, the total scale of the sports industry will exceed 5 trillion yuan. This means that the compound growth rate of the sports industry in the next 10 years will reach more than 27%. Therefore, China's sports industry will usher in rapid development in the next 10 years.
Spurred by relevant national policies, China's sports industry has quickly moved onto the fast lane. In recent years, giants including Alibaba, Tencent, PPTV, Wanda, Suning, etc. have frequently deployed in the sports industry.
Cross-border sports for LED display companies are nothing new. Before cross-border, LED display companies had been active in projects in gymnasiums in various places and provincial sports games in various provinces. Companies including Lehman Group, Alto Electronics, and Unilumin Technology are eyeing the LED sports screen market. Among them, Lehman Holdings has done the best in this field. As early as 2011, Lehman Holdings began to deploy the sports industry. At present, a development pattern has been formed with LED as the main business and extending to the sports media field. With the help of the country's favorable policies on football development, we will lay out the football industry chain, create a good sports business model, and develop LED and football businesses in parallel.
In 2015, Lehman Co., Ltd. implemented the dual-main business strategy of LED and sports, and its securities abbreviation was changed to "Lehman Co., Ltd." On the one hand, we will expand and strengthen our main LED business, and conduct connotative development and extensional mergers and acquisitions in the three directions of LED display, LED lighting, and LED packaging. On the other hand, we will actively cultivate the sports industry, and on the basis of occupying the commanding heights of the Chinese Football Super League and the Chinese Football League, we will deeply cultivate the football ecological industry chain and extend to related sports fields. It is understood that as a sports business resource operator, Lehman Co., Ltd. provided LED displays for the five major European leagues as early as 2011. Now it provides full-color display equipment and advertising film editing services for football events including the Chinese Super League, Chinese League One, Football Association Cup, China Team, etc. every year. The company now has scarce business resources for the Chinese Super League and the Chinese Premier League, the top domestic football competitions, and has initiated the establishment of the Lehman Kaixing Sports Culture Fund.
In addition, there are classic cases such as Alto Electronics providing LED display system construction for many top international events such as the World Cup and European Cup; Leyard joined hands with the China Tennis Open and became the exclusive LED display partner of the China Open. On the one hand, these actions demonstrate the determination of LED display companies to enter the sports field, and also indicate that LED displays will usher in major development in subdivisions during the economic transformation period.
It is reported that the sports sector, as the relevant consumer sector that the 2016 strategy focuses on, is also an important direction for the business transformation of related listed companies. Nowadays, as more and more screen companies join in, the giants will form a "carve-up" trend in various sports projects.
It is better to fight for price than to fight for model
At present, the LED display industry has entered a "mature period". Price wars and industry reshuffle have become the new normal. Compared with some companies that are busy fighting "price wars", some companies appear relatively rational. They are not keen on fighting "price wars", but find other ways to break through the "Red Ocean" market with innovative marketing thinking and business models.
In addition to extending into the fields of cultural media, outdoor advertising and sports, LED display companies have gradually begun to break away from "hardware thinking" and proposed new models such as "screen-for-resources" and "advertising cost sharing". In this regard, Absen is already at the forefront of the industry. Last year, the "hotel screen, free installation" model first proposed by Absen detonated the LED display industry. In this model, the company provides free LED display products to hotels, which are mainly installed in areas such as hotel banquet halls or conference rooms. In the later stage, the company will share with the hotel through the collection of usage fees and advertising fees to achieve win-win cooperation. The proposal of this service model has challenged the traditional hardware-centered profit model. As we all know, LED displays are expensive options in the field of large-screen displays. This free hardware provision model is a bold attempt.
From the hotel level, the company provides hardware for free. While providing the hotel with a more high-end and fashionable information release system, it can also bring actual benefits to the hotel. It can achieve a double harvest of hotel image and profit at almost no cost, and it is naturally easy to win the favor of the hotel.
As for LED display companies, although they need to pay huge equipment expenditures in the short term, in the long term, the demand for LED displays in hotels will continue to rise. Relying on the current and future demand for use of various performances, exhibitions, conferences, etc. in my country's hotel industry, the subsequent benefits will be considerable in terms of scale and sustainability.
Developing the Internet of Things
Intelligence + Service + Internet
Currently, innovative products and service models have become new choices for screen companies. It can be seen from the "Outline of the Company's Strategic Development Plan from 2015 to 2018" passed by the Sixth Meeting of the Strategy Committee of the Second Board of Directors of Unilumin Technology that Unilumin proposed a steady transformation based on its main business and steadily promoted the strategic planning direction of building the company into an "intelligent hardware + service + Internet (Internet of Things)" platform company.
The emergence of a new business form and becoming mainstream will definitely provide consumers with three aspects of satisfaction, namely price (satisfaction in price), convenience (satisfaction in consumption time) and comfort (shopping environment, lifestyle satisfaction). For mass consumer goods, the first two satisfactions are the main ones.
Whether it is the LED industry or the entire mass commerce, the initial satisfaction brought to consumers is undoubtedly price satisfaction. The rise of hypermarkets and the rapid development of e-commerce have also had a certain impact on the sales of LED lamps. At present, China has formed three typical business forms: traditional channels, modern hypermarkets and e-commerce. Correspondingly, enterprises must have three sets of products corresponding to them:
The first set of products: low-price, high-value channel products. Many people believe that channel products are low-priced and of low value. This is an illusion. In essence, channel products have always been very profitable, but the low price masks the high value. This set of products also has the problem of mainstream shifting. When urban mainstream products complete the shift, the original mainstream products in the urban market may enter the channel market and form new mainstream products in the channel.
The second set of products: high-price, high-value end products. In physical stores, the time has come for mainstream products to shift gears. Therefore, physical stores need to reposition themselves and compete for high value-added consumers instead of blindly engaging in price wars with e-commerce.
When price-sensitive consumers move to e-commerce, the purchasing power of offline consumers increases, and the value of a single consumer increases. Of course, after the physical store is repositioned, the experience function of the physical store must be improved and redesigned.
The third set of products: e-commerce products that compete on price. There are two types of sources for e-commerce products. One is off-stock goods from physical stores. This was more common in the past two years. Now e-commerce products have been designed in a targeted manner, and the pricing system must also adapt to the reality of frequent e-commerce promotions.
In the future, as competition in the LED display market becomes increasingly fierce, cross-border integration around the main business and innovative marketing models to expand business scope through mergers, acquisitions and reorganizations have become the new focus of major companies. It is foreseeable that technological progress and collaborative innovation of marketing models will become the new melody, new thinking, and new model of the LED display industry in the future, which will continue to stretch the industrial chain and promote the industry to become bigger and stronger.
ANNA