Author | Zhou Zhiyu

In the past 40 years, the booming real estate industry has driven the home decoration industry to become a trillion-dollar market. However, this industry is dominated by guerrilla home renovation teams, and standardization and after-sales service are still major issues.

Wanwu Cloud hopes to create a 'new species' in the home decoration industry, becoming the '4S shop' of the second-hand housing market in the fields of real estate and property management.

At the end of May last year, Wanwu Cloud's housing improvement service brand 'Selected Home' launched a new product. After a year of development, 'Selected Home' has grown into the core business that drives Di Cheng's profit growth.

Zhou Kerui, the head of Selected Home, said in an exclusive interview with Wall Street News that Selected Home is engaged in long-term business and aims to establish a long-term service and accompanying relationship with customers. Currently, Selected Home's development is also in line with his expectations. The growth rate of user orders is much higher than the growth rate of income, which indicates that Selected Home has formed the 'first link' with as many customers as possible.

Unlike traditional home decoration companies that focus on whole-house decoration, Selected Home focuses mainly on partial renovation of stock houses. Within a service radius of three kilometers in Wanwu Cloud Di Cheng, Selected Home conducts business specifically for scenarios such as bathrooms, kitchens, and balconies.

Based on years of property service experience, Selected Home's target customers are mainly houses aged 8 years or more. It is currently operating in more than ten cities across the country where stock houses dominate. The market size of these cities' stock houses provides ample room for Selected Home to grow. Taking Shenzhen as an example, Wanwu Cloud found in its past property services that 85% of customers chose partial renovation and transformation in residential registration. Among them, 75% were completed by guerrilla teams and small shops on the streets, while only 15% chose full-house decoration.

As the Chinese real estate industry undergoes structural changes, people's demands for a better quality of life and improved living comfort continue to increase. The market for housing renovation, especially partial renovation, is further expanding. It can be seen that Ke Holdings' acquisition of Shengdu Home Decoration and former CEO of Ideal Group, Shen Yanan's cross-border entry into the home decoration industry are both aimed at the new opportunities in this market.

Selected Home is also a 'word-of-mouth economy'. Supported by Vanke Property, the fundamental goal of Selected Home's business is to establish a solid trust relationship with users. This is very different from the 'one-time business' model of traditional home decoration, or the mindset of monetizing online traffic.

Starting from the partial renovation of stock houses, providing standard solutions, employing their own craftsmen, and stationing models in communities to run the word-of-mouth economy, Selected Home vows to solve the pain points of the home decoration industry from productivity to standardization. Wanwu Cloud Chairman Zhu Baoquan proposed that 'Selected Home' must achieve 100% customer satisfaction.

Of course, this process will be a long one. Through standardization, reducing errors, and training their own craftsmen, providing a health check-up report for the house throughout its entire lifecycle and offering reliable quality assurance for decoration services. The attitude, time, and speed with which errors are resolved will determine how far this business can go.

If successful, this will subvert the home decoration industry, allowing it to move from manual labor to the industrial age and create a new path for the development of China's home decoration industry.

The property industry can also enter the refined stage after experiencing the initial phase of scale development. This is also a specific manifestation of the real estate industry entering the second half of its development, improving its operational capabilities and efficiency.

Recently, Zhou Kerui had an in-depth exchange with Wall Street News, covering topics such as Selected Home's business ideas and industry trends.

Below is the full text of the conversation (edited):

Wall Street News: In the past three years, the home decoration industry has heated up again, and giants and cross-border players have entered the market. How do you see this phenomenon?

Zhou Kerui: This shows that the current market has undergone changes, the housing market has transitioned from an incremental market to a stock market, and people now want to live in a 'good house' that emphasizes the residential nature of the property. There is a large demand for home repair and renovation, and the diversification of demand cannot be met by the supply side. This change has created many opportunities for the home decoration market, especially the improvement needs in the stock market, which have attracted many companies to enter the market.

Wall Street News: What is the difference between Selected Home and other companies in specific operations?

Zhou Kerui: Selected Home is not doing traditional home decoration. Now, many people have cut out a small part of the market from the larger market, which is similar to Ideal's creation of MEGA for families with two or more children. Selected Home focuses on providing a full cycle of housing services, from providing housing to overall, partial, single-item, and maintenance decoration services, and is mainly aimed at the market for partial renovation of stock houses with a building age of over eight years in Di Cheng's range.

Many people ask me, what's the difference between Yanxuanjia and Ke Holding's services? In my opinion, they both specialize in whole-home decoration, which is closely related to the transaction of second-hand houses and can also benefit from Ke Holding's traffic. Yanxuanjia's model comes from the community of Wanwu Cloud Service. In internet terms, Wanwu Cloud Service's community is our private traffic.

In addition, compared with whole-home decoration, there is a small single order volume for partial housing decoration and renovation business. From the marketing model of whole-home decoration companies, this business is not profitable and it's also a "blank area" in the market. In the past, neither decoration teams nor other decoration service companies would sell related products.

Wall Street News: What is the current level of unit customer value? How to improve customers' willingness to place orders?

Currently, our unit customer value is around RMB 25,000 to RMB 30,000 in general. Of course, we also have some special small-scale partial renovations, with a single order amount of RMB 5,000 to RMB 8,000.

As a service-oriented business, our main goal at the moment is to let users know exactly what we do, and that they can find us when they have a need. This is the most important thing.

Being able to enter the user's home is the main way for us to interact with customers, which is quite different from traditional home decoration through buying and selling or other marketing methods. Our advantage lies in backing property services, and users have a high level of trust in us.

Wall Street News: Why did you choose to focus on the market of partial renovations?

Zhou Kerui: Partial housing decoration and renovation is currently a blank market in the industry. Houses have a longer life span and larger amounts than cars. However, there are few companies that provide services for houses. The reason behind this is that the industry has not had standards, and most related services were provided by "guerrilla teams" in the past. Home improvement companies don't take these orders due to the problem of unit price and marketing model. There is no standardized company to provide related services in the market, which also gives us the opportunity to explore the needs of this market.

Yanxuanjia is backed by Wanwu Cloud and has accumulated experience in the property field, which allows us to capture the needs for home repair, maintenance, and upgrading services within neighborhoods.

Taking Shenzhen as an example, it is a city where the number of old houses is far greater than that of new houses, with more than 67% of houses having an age of more than 10 years. And the aging of houses will increase linearly with their age.

From the property decoration filing data, 85% of customers choose partial decoration and renovation, and only 15% choose whole-home decoration. Among these 85%, three-quarters are completed by "guerrilla teams" and couples.

The demand for whole-home decoration, whole-house customization and other needs in the new housing market is shrinking gradually with the change of the residential market structure. However, the demand in the stock market is increasing linearly with the aging of houses and neighborhoods.

Wall Street News: How do you improve the standardization level of home decoration and ensure the quality delivered to users?

Zhou Kerui: Zhu Baoquan, the chairman of Wanwu Cloud, requires Yanxuanjia to achieve 100% customer satisfaction to be successful. But honestly, home decoration is a systematic project, which needs a matched marketing and delivery, and the duration is uncontrollable due to construction differences. After sales services also need to be guaranteed. Yanxuanjia improves the overall certainty by enhancing the capabilities of each link.

Compared with personalized custom-made whole-home decoration, partial decoration and renovation are actually easier to standardize. What we do is to modularize various scene components inside houses, and conduct partial renovations around big scenes like kitchens, bathrooms, balconies, etc.

Under big scenes, we have done more than 30 SKUs for repairing skirting lines, refreshing wall surfaces, etc. according to the product categories. At the same time, we also established a renovation filing evaluation system to attract talented workers, and improved the service and delivery satisfaction through regular worker training.

Yanxuanjia is also improving the house's physical check report. After Wanwu Cloud enters the neighborhood, it analyzes which scenes in the community may have problems, and what kind of products are needed to meet demand. Through the property's house-call services, it forms a complete house physical check report.

The after-sales service ensures the quality of the maintenance service by forming a warranty card, and consist of clear rules for the different product categories under specific scenes. The entire maintenance service is standardized and productized.

Even if all the links are standardized, there will inevitably be unexpected situations leading to delays in construction periods. Yanxuanjia has a service-oriented gene due to its background in property, with a sincere service attitude and timely problem-solving capabilities to make up for these deviations. Moreover, compared with whole-home decoration, Yanxuanjia is deeply bound to property services, seeking user recognition of the brand and their willingness to repurchase from a long-term perspective, which is fundamentally different from other decoration companies that mainly focus on single deals.

Wall Street News: How do you plan the urban layout of Yanxuanjia?

Zhou Kerui: We have about ten cities in which we expand our business, including first-tier cities such as Beijing, Shanghai, Guangzhou, Shenzhen, and a few second-tier cities. At present, many cities mainly focus on decorating the new housing market, and the second-hand housing decoration has not yet formed a mature market scale.

When evaluating whether the market can enter, we will look at the age of the buildings in the city and the consumer power of the city. If the city has a too low housing price, it is also difficult to do this business.

Wall Street News: What will be the focus of the research and selection strategy in the next 3-5 years?

Zhou Kerui: Currently, we hope to have links with as many customers as possible. From the current performance, the growth in the number of serviced customers far exceeds the growth in the total amount. This means that the number of customers choosing us is increasing, which is in line with my expectations and the first link with customers has been formed.

From the perspective of 3-5 years, we mainly provide services for old houses, especially in scenarios with the most basic and easy-to-standardize products such as kitchens, bathrooms, and balconies, to create better products.

This is a business of time, and houses are getting older day-by-day, which will periodically generate explosive demand for repairs, and customers will also increase. For us, it is necessary to enter the game as early as possible, build the team, and let the brand influence the potential users' minds.