The sanitary hardware industry in China is facing significant challenges, particularly in terms of profit margins. Currently, the relationship between domestic sanitary hardware companies and their upstream and downstream partners is more competitive than collaborative. Suppliers often increase their profits by raising input prices or lowering the quality of materials, which puts pressure on manufacturers. Since raw material costs make up a large portion of total production costs, suppliers hold considerable bargaining power. What makes matters worse is that many of these suppliers are state-owned large-scale metallurgical enterprises, giving them a strong market position and numerous buyers. As a result, when the prices of key materials like aluminum and copper have risen in recent years, most of the cost increases have been passed down to manufacturers.
At the same time, the gap between mid-market brands and low-end manufacturers is shrinking. This has made it difficult for smaller and medium-sized enterprises to enter the mid-range segment, forcing them into price wars as their primary strategy. Even leading domestic brands are trying to move toward the high-end market, but they face challenges due to weak design capabilities, limited R&D investment, and poor patent protection. As a result, many competitors imitate and copy these top brands, leading to a cycle of price competition that further compresses profit margins.
In physical retail, the most common sales channel for hardware and sanitary products is the building materials market. These markets are filled with authorized retailers who sell directly to consumers. By December 2012, there were over 10,000 such markets nationwide. The uniformity in product display and sales methods is striking, with multiple stores selling the same brand within a single market. This intense competition and lack of differentiation create a chaotic environment for both consumers and businesses.
Recently, large hypermarkets like Red Star Meikailong and Home Furnishings have started offering bathroom hardware products, leveraging their extensive distribution networks. Their ability to drive down prices for brand owners is significant and cannot be ignored.
However, the rise of e-commerce is beginning to reshape the supply chain for sanitary hardware companies. With more direct access to consumers, some cost savings from reduced middlemen benefit both producers and customers. But despite this shift, online sales still represent only a small share of the overall market. Additionally, fierce price competition online, combined with high delivery and marketing costs, means that the initial benefits of e-commerce may not last long. As the market becomes more saturated, the advantages of online channels could gradually fade.
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