According to CRI analysis, the regional distribution of the landscape industry is consistent with the economy of corresponding regions. In the developed southeastern coastal areas, there are a great number of landscape engineering companies and advanced municipal landscape. In other regions, the state of the landscape industry varies greatly across regions due to different levels of urbanization, economic growth and climates.
CRI market research shows that downstream clients in the landscape industry are mainly local governments and real estate companies. In general, the prosperity of the landscape industry is in accordance with macro-economic cycles.
Landscape engineering is heavily affected by weather because it involves outdoor operation and transplantation of plants. In northern China, winter is the slack season due to poor operation conditions. The climate in the south is quite moderate, so landscape engineering is not much affected throughout the year except for the period around the Spring Festival.
There are a lot of landscape companies in China. Each company gains a small share of sales revenue and covers a small area. The concentration rate of the industry is low. Whether a landscape company can operate cross-regionally depends on multiple factors, the key of which lies in abilities to undertake cross-regional businesses and to manage cross-regional projects.
The landscape industry is a typical capital-intensive industry. Players operate with light assets and external financing is difficult. Landscape engineering projects, especially governments’ municipal projects, are paid by contractors in installments, forcing companies to cover expenses for a long period of time. Their business expansion depends on the turnover of capital. Therefore, capital strength is the bottleneck impeding engineering companies from undertaking large engineering projects and expanding to the national market. As a result, landscape companies with strong financing capabilities are able to continue with business expansion and have stronger competitive advantages.
Currently, gross margins of municipal landscape projects are higher than those of real estate projects. The former usually involves longer periods of time and larger scales and requires companies to cover expenses with extended payoff period, resulting in high barriers and moderate competitions. By contrast, the latter involves shorter periods of time, smaller scales and shorter payoff periods, resulting in fierce competition and, consequently, lower gross margin.