[Asia Economy Reporter Kim Jong-hwa] Hanssem and LG Hausys are engaged in fierce competition reminiscent of a war to dominate the domestic interior remodeling market worth 41.5 trillion won.
As living trends change and the spread of the novel coronavirus disease (COVID-19) has increased demand for interior remodeling of existing homes, the related market size is expanding. At the same time, the market expansion policies of furniture and building materials companies are intensifying the competition.
According to analyses by the Korea Construction Industry Research Institute and Korea Investment & Securities, the domestic interior remodeling market size is expected to grow from 9.1 trillion won in 2000 to 27.5 trillion won in 2015, 41.5 trillion won this year, and 49.3 trillion won in 2023, indicating a bright outlook.
In fact, the growth of the interior remodeling divisions of the two companies is remarkable. Hanssem has solidified its position as the industry leader with its 'Rehouse' brand. Rehouse is a total service product that covers everything from space package product planning, consultation, design, measurement, estimation, construction, to after-sales service, highlighting Hanssem’s unique strengths.
Customers can listen to explanations from interior experts called 'Rehouse Designers (RD)' and view the remodeled appearance of the entrance, living room, bedroom, kitchen, etc., in 3D through virtual reality (VR) services on PCs or mobile devices. Hanssem is also putting great effort into nurturing RDs. As of June, about 2,000 RDs are active at 510 Rehouse dealerships nationwide, and continuous recruitment and training are underway to increase the number to 2,500.
Thanks to this strategy, Hanssem achieved a remarkable increase in sales volume, with the number of sales in the first and second quarters of this year rising by 286% and 201%, respectively, compared to the same period last year. Hanssem has designated the Rehouse division as a next-generation core business and set a goal to sell 10,000 units per month within three years.
A Hanssem official said, "Although the current economic downturn is challenging, from a mid- to long-term perspective, it will serve as an opportunity to expand market share based on unrivaled competitiveness in the remodeling and interior market and to solidify our position as a market-leading business."
In response, LG Hausys is focusing on building a new distribution channel where customers can purchase home appliances and interior products in one stop. Last year, LG opened a Z:IN interior store at LG Electronics Best Shop, and last month, it entered large home appliance specialty marts of retailers such as E-Mart Electromart and Lotte Hi-Mart Megastore.
The strategy is to target customers who purchase interior and home appliances simultaneously during home remodeling and to create synergy through the combination of sales and consultation stores. LG Hausys operates Z:IN interior stores at about 20 Best Shops in the metropolitan area and major cities and plans to expand to about 80 nationwide by the end of the year.
Additionally, LG Hausys is accelerating the expansion of the interior B2C (business-to-consumer) market by selling windows through home shopping broadcasts. Although first-quarter sales decreased by 4% year-on-year to 723.7 billion won, operating profit increased by 90% to 20.8 billion won during the same period. About 70% of sales come from the building materials sector, and if the sale of the automotive materials division, which has been dragging down performance, is realized, second-quarter results are expected to gain further momentum.
Conflicts have also arisen due to LG Hausys’ recruitment of talent as a latecomer. This year, LG Hausys hired former Hanssem Vice President No Ji-young as an advisor and former Hanssem Manager Choi Sang-ho as Executive Director in charge of strategy. No, who graduated from Seoul National University’s Department of Forest Products Processing, joined Hanssem in 1983 and worked there for 33 years until retiring as vice president. He served as head of the development office and achieved outstanding results in the IK (Interior Kitchen) business and kitchen dealership business. In addition, more than 10 mid-level managers and staff from Hanssem have moved to LG Hausys, which has now become a competitor.
LG Hausys stated, "This year, as a premium interior materials brand, Z:IN will accelerate growth in the interior B2C market targeting end consumers by combining the expertise accumulated by Z:IN with the high trust and familiarity of the LG brand."
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