On August 12th, Beike, a technology driven one-stop new residential service platform, released its financial performance for the second quarter of 2024. With a series of policy support, the market recovered in the second quarter, and Beike's scientific management and operational measures also supported its performance beyond expectations.
During the reporting period, Beike achieved a total transaction volume (GTV) of RMB 839 billion and a net income of RMB 23.4 billion, a year-on-year increase of 19.9%. The gross profit margin is 27.9%. The net profit was 1.9 billion yuan, a year-on-year increase of 46.2%, and the adjusted net profit reached 2.69 billion yuan, a year-on-year increase of 13.9%.
With the market validation of Beike's home decoration and rental business capabilities and models, the "One Body Three Wings" strategy has shown strong vitality and foresight. During the reporting period, the revenue from non real estate transaction services increased by 85.3% year-on-year, accounting for approximately 35%, a significant increase of 12.2 percentage points compared to the same period last year.
As an important "wing" of Shell's strategy, the home decoration and home furnishing business continues to perform well. In the second quarter, Beike's home decoration and furnishing business achieved a contract amount of 4.2 billion yuan, a year-on-year increase of 22.3%, a net income of 4 billion yuan, a year-on-year increase of 53.9%, and a profit margin of 31.3% for the home decoration and furnishing business. The new retail contract amount, including customized furniture, soft furnishings, etc., is 1.22 billion yuan.
In fact, based on the consideration of accumulated experience and polishing ability, Beike has taken the initiative to slow down the expansion of its home decoration and home furnishing business this year, and has invested a lot of energy into system construction. The purpose of this move is to focus on the long term, but its effects have already been gradually manifested.
Embrace more important challenges
Beike announced the upgrade of its "one body, two wings" strategy in 2021, and acquired Shengdu Home Decoration the following year. With the addition of its own brand Bedding Decoration, Beike has since focused on its home decoration and home furnishing business.
In the past two years, Beike has achieved a breakthrough in the scale of its home decoration and home furnishing business by relying on its strong brand effect and supply chain integration capabilities, and has a leading market share in multiple key cities.
The business process of home decoration is complex, involving a wide range of personnel and a wide variety of products. To change the industry, deep technological empowerment and process reengineering are needed. During this process, Beike also utilized digital technologies such as VR, AI, AR, and big data to digitize various processes of traditional home decoration, and to some extent solved industry pain points such as opaque construction sites, lack of effective management, and lack of standardization in service processes.
Therefore, with its business capabilities and models already validated by the market, Beike will proactively slow down its pace in 2024, focus on accumulating experience and honing its system capabilities, in order to accumulate strength and make steady progress.
During the Q2 2024 earnings conference call for Beike, Peng Yongdong, co-founder, chairman, and CEO, stated that Beike's home decoration business achieved a breakthrough in scale last year while balancing reputation and quality, which also boosted the team's confidence. But if we run too fast for the sake of 'confidence', the quality of service will be affected, and there is a risk of losing customer trust.
Peng Yongdong believes that achieving a balance between scale and quality, establishing trust, is the next challenge facing Beike's home decoration business.
This is also the background of its proactive "stepping on the brake".
With last year's performance, we are confident that this matter is reliable. This year, we can slow down and tackle the next more important challenge, "said Peng Yongdong.
Strengthen the 'big arteries'
Faced with "more important challenges", Beike has launched two strategies. On the one hand, enhancing the capacity building of one-stop integrated solutions, including the ability to provide complete package products, integrated delivery, service providers, and supply chain management, as well as the improvement of corresponding system infrastructure.
On the other hand, we will promote the construction of digital capabilities in the middle platform and push for the realization of a unified standardized business model framework.
The digital construction of the middle platform is the "main artery" of Beike's home decoration business, which connects service providers and enables all links to operate on a standardized process of continuous reconstruction.
For a long time, the home decoration industry has relied on manpower and subjective experience, lacking standardized processes and digital management systems, resulting in many industry problems. Therefore, the construction of a digital middleware system is crucial.
Beike realizes the digitalization of the middle platform through the Home SaaS system. This year, the system has been iterated to version 2.5, which mainly upgrades and optimizes the BIM SSC platform module and material performance integration module compared to previous versions.
The former generates standardized construction drawings through BIM, which can automatically provide decoration quotations, thereby improving designer efficiency and reducing error rates, and consolidating all design and construction plan data in the central platform system; The latter has promoted the standardization of product data and achieved online unified scheduling of multiple main material categories to increase the certainty of material delivery.
It is reported that the system has been implemented in Beijing, Shanghai, Chengdu and other places, and is planned to be promoted nationwide.
The strengthening of the "main artery", coupled with measures such as improving dispatching efficiency and perfecting construction processes, has also optimized the delivery capability of Beike. In the second quarter of this year, the construction period for shell base and main materials was about 100 days, which was 11 days shorter than the same period last year.
The improvement of these abilities is crucial, as they not only provide bonuses in terms of processes, quality, and delivery, but also directly reflect in performance.
In the first half of this year, the revenue growth rate of Beike's home decoration business was higher than the contract amount growth rate, which is a manifestation of the enhanced service capability.
Slow is fast
It is not a simple matter to break the traditional mode and transform the industry with industrial Internet thinking. But if we put it in the context of the industry where the pain points of quality housing consumption need to be resolved, and the policy background of promoting the release of domestic demand potential, the significance of this move becomes very important.
Since the beginning of this year, regulatory authorities have issued multiple documents supporting the promotion of large-scale equipment updates and the trade in of consumer goods. Among them, with the arrival of the stock era, the market space for home decoration consumer goods is huge.
Liu Wenjie, Vice President of the China Household Electrical Appliance Service and Maintenance Association, pointed out that there are currently 180 million units of existing housing in China, of which about 80 million were built before 2010. If we were to install them every 10 years, with a reinstallation rate of about 5%, there would be 5 million old houses entering the stage of renovation every year.
However, at the same time, there are still many pain points in this field in terms of local renovation, replacement of large items, and aging adaptation renovation.
Therefore, in order to eat this' cake ', one must have sufficient ability.
Analysts point out that Beike is focusing on improving its mid-range digital capabilities, service capabilities, and delivery capabilities, which are the solutions to these pain points. In the face of the Sina trend, there has always been no shortcut to improving one's abilities, and taking one step at a time is precisely the fastest path.
The founder of Lianjia and Beike, Zuo Hui, once put forward the famous viewpoint of "slow is fast", which means that by not taking shortcuts and doing difficult but correct things, the success rate is actually higher. This concept has made Lianjia and Beike pioneers in the real estate brokerage industry. Nowadays, Beike is leading the transformation of the home industry in the same way.
Since the beginning of this year, Beike has taken more substantial actions in empowering the industry.
In May of this year, the "Good Home Standard" for the home decoration industry was released, with Bedding and Shengdu as the chief editors and participating units fully involved in the drafting and formulation of the "Construction and Delivery Standards for Hidden Home Decoration Projects" in the series. In July, the China Real Estate Industry Association promoted the compilation of the "Complete Decoration Service Standard", with Shengdu Home Decoration as one of the chief editing units.
Chen Yiming, Vice President and Secretary General of the China Real Estate Industry Association, pointed out that there are two issues that have always affected the healthy development of the real estate industry: one is rough housing, and the other is after-sales service. The full package model implemented by companies such as Beike is a reflection of industry progress.
Wen/Liang Dong