With the rising cost of raw materials, paint companies are facing mounting pressure. Many small and medium-sized enterprises (SMEs) that once gained market share by offering low prices are now struggling to maintain their competitive edge as production costs soar. As a result, these businesses are losing ground, and many have either shut down or shifted to different industries. In response to this financial strain, several companies have begun gradually increasing their product prices, helping to ease some of the pressure on the market.
At the same time, regulatory authorities have introduced stricter controls over the production, sale, and storage of hazardous chemicals. Initially, the “3C†certification became mandatory for wood lacquer products in the circulation market. Any paint without the “3C†mark is now banned from being sold. Later, fire safety inspections were intensified, requiring all companies to meet strict fire safety standards or risk having their production licenses revoked. Additionally, oil-based paint manufacturers must now apply for a "dangerous chemicals safety production license," and there are even more stringent requirements for the storage and transportation of chemical raw materials. These measures have made it even harder for companies already struggling with rising costs.
The ongoing increase in raw material prices has placed immense operational pressure on companies, leading to declining market prospects and shrinking market shares. Many business leaders feel overwhelmed, unsure of how to move forward. Some companies, especially those producing architectural coatings, are finding it increasingly difficult to compete against major industry players.
A key issue behind this crisis is the excessive homogeneity of products across the industry. Most companies lack clear differentiation, resulting in fierce competition and thin profit margins. To thrive, paint companies need to first identify their unique competitive advantages and strategically reposition themselves to avoid falling into the trap of generic competition. Many companies operate within rigid frameworks, where certain processes may not be profitable or add significant value. However, due to long-standing habits, these inefficiencies often go unnoticed, preventing companies from adapting and evolving.
As the industry enters a period of consolidation, companies—especially those that have faced recent challenges—must embrace change. It's crucial to eliminate outdated thinking and re-evaluate internal operations. This includes optimizing resources, integrating functions, and redefining future strategies to stay relevant in a rapidly changing market.
One effective way to stand out is through product positioning and specialization. While product homogeneity is common in the coatings industry, companies can carve out new market spaces by adjusting formulations, introducing innovative concepts, or recombining existing products. Adjusting formulas is a popular approach, but with limited R&D capabilities in China’s paint sector, the short-term benefits of such changes are often hard to see. Companies that adopt a technology- or cost-leading strategy may experience greater impact from formula adjustments.
Many Chinese paint companies have turned to concept-driven innovation, such as "nano" or "photocatalytic" coatings. However, the effectiveness of these products remains questionable, and some rely heavily on marketing rather than real innovation. A good product, well-formulated and packaged, can gain traction quickly—but without substance, it's just empty hype.
Given the size and financial limitations of most Chinese paint companies, trying to do everything at once is a recipe for failure. Instead, focusing on a niche market and developing specialized products is the smarter path. The example of Hideyoshi, known as the "kingdom of floor paints," shows how a focused strategy can lead to success.
In addition to product differentiation, improving customer service is another critical area for growth. Paint is a technical product, and many consumers and even professionals lack the knowledge to use it correctly. Excellent service can build trust and loyalty, giving companies a competitive edge. Companies like China Resources Coating have already recognized this, offering professional services that set them apart in the market.
Finally, smart marketing strategies can help companies reach the right audience. There are three main channels: direct sales to professional users, traditional retail distribution, and specialized engineering projects. With large-scale construction projects such as the Olympics, World Expo, and Western Development initiatives, there are plenty of opportunities for coating companies to grow. Choosing the right channel based on the company’s strengths and market conditions can significantly boost performance.
In conclusion, the paint industry is undergoing a transformation, and companies must adapt to survive. By focusing on differentiation, enhancing service quality, and refining marketing approaches, Chinese paint companies can navigate this challenging period and secure a stronger future.
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