Image source @ Visual China
Text | City Boundary, author | Dong Wenshu, Editor | Lei Yanpeng
At the 10th anniversary of Xiaomi in August 2020, Lei Jun specifically mentioned the ecological chain enterprise Stone Technology invested by Xiaomi in his speech.
Chang Jing, once a big factory worker - former Tencent senior product manager, former Baidu senior manager, thus soaring in wealth.
But now, the stone is no longer crazy.
On April 21, the annual report disclosed by Stone Technology showed that the growth rate of net profit attributable to the mother in 2021 was only 2.41%, deducting non-net profit or even negative growth, and the growth rate rarely hit a new low in the past five years.
As of the close of trading on April 29, the total market value of Stone Technology was 38.2 billion, compared with the 99.3 billion market value at the High Point of June 2021, a decrease of 61.1 billion, down more than 60%.
01 Holding hands with "rice" capital
In 2011, with the increase in smartphone penetration, the Meitu software market became increasingly hot. Chang Jing, who was a senior manager at Tencent at the time, also "participated in the war" and started the "Magic Map Genie" App in February, and received investment from Kai-Fu Lee's Innovation Workshop. However, this venture lasted only about 10 months, and it ended in "selling" to Baidu. Changjing also entered Baidu's work.
Working in Baidu for the third year, Changjing's entrepreneurial heart in early 2014 was once again "budding". This time he chose the track for sweeping robots.
The soldiers and horses did not move, and the grain and grass went first.
Before officially starting a business, Changjing began to contact investors intensively. According to the book "Xiaomi Ecological Chain Battlefield Notes", many investors at that time heard the wind, but most of them chose to shake their heads and leave after hearing the words of the sweeping robot. Until July 2014, when the company was incorporated, the investment had not been finalized.
Investors are not optimistic, first, because the sweeping robot market has not yet exploded. But more importantly, investors believe that Changjing's work experience and entrepreneurial experience in large factories are biased towards software, and they are not "knowledgeable" enough about home appliance hardware entrepreneurship.
After several encounters, Chang Jing contacted Xiaomi's investment department and spent 42 days to make a simple product demo.
In the eyes of Xiaomi, Changjing's software experience has become an advantage.
The smart home products of Xiaomi and Mijia brands have always been to knock on the market door with cost-effective explosives. Behind the cost performance is the ultimate compression of the cost of the hardware supply chain. The reputation of explosive products comes from the advantages of software.
Wang Ye, founder of the balance car company No. 9 Company, once described this model as, "investing a lot of research and development resources, replacing hardware with software, and using software to do complex algorithms, so that low-cost hardware can have the performance and security of high-cost hardware, so as to reduce costs."
The main reason why the sweeping robot was regarded as "artificial mental retardation" in the early days is that it has problems such as poor cleaning effect, inaccurate cleaning range, and easy to be stuck.
Although the demo provided by Chang Jing at that time could only be cleaned at "turtle speed", it focused on the product's planning path algorithm, which was able to circumvent the above operating problems.
Xiaomi's Barn Explosives Academy once wrote in an article: (after the Changjing team showed the demo) Xiaomi has a bottom - even if the project is not successful, it is valuable to invest in such a software team.
With the help of Mi Capital, the Stone Technology team spent a total of 26 months to complete the software design of the sweeping robot.
Under the millet mode, Stone Technology is responsible for product research and development, and entrusts the production of sweeping robots to Sunwoda to complete. In September 2016, Stone Technology unveiled the first sweeping robot for Mijia OEM, and the first batch of 3,000 units was priced at 1699 yuan. At that time, the mainstream iRobot, Neato and other products on the market were generally priced at about 6,000 yuan.
In addition to the average price of the "waist chopper" industry, the first Mijia sweeping robot also provides laser navigation functions, which is much smarter than the traditional "where to sweep where" fool sweeper.
Facts have proved that the business experience of "software advantage + low-cost hardware" in the Xiaomi ecological chain has once again worked in the sweeping robot market.
02 Say goodbye to the "millet" cost performance
It can be said that Stone Technology has grown up with the "support" of Xiaomi.
After becoming a "rice chain enterprise", with xiaomi's orders, as well as the advantages of xiaomi's supply chain and marketing channels, stone technology has developed rapidly.
According to the prospectus, in 2016, stone technology revenue was 183 million yuan, and in 2017 it rose to 1.119 billion yuan. In the past two years, the revenue of Stone Technology's FOUNDRY Sweeping Robot was 181 million yuan and 989 million yuan respectively, accounting for 98.58% and 88.36% of the revenue.
Minimising is a double-edged sword.
Break into the market with "millet-style" cost performance and quickly grab the land. This is a commonality in the growth process of many Xiaomi ecological chain enterprises.
However, the other side of the cost performance is that rice chain companies are generally facing the situation of "applauding and not making money". Mijia brand products are generally priced low, and in the sales process, whether the products are directly sold by Stone Technology or through Xiaomi channels, Xiaomi participates in the distribution of benefits.
Therefore, the profitability of Stone Technology in the early days was weak among enterprises in the same industry. In 2016 and 2017, the gross profit margin of Stone Technology was 19.21% and 21.64%, respectively, while the gross profit margin of comparable companies Coworth and Formart was above 30%.
After gaining a firm foothold in the market, Stone Technology began to "de-milletize" and embarked on the road of bidding farewell to "millet-style" cost performance.
Chang Kyung explains: "I think a successful company must be able to survive on its own. From our original intention, Stone Technology does not want to be just an ODM (original design manufacturer) enterprise. ”
The "stone" brand sweeping robot has richer functions than Mijia products, in addition to being able to laser navigation, it also has the function of sweeping and dragging, and the average unit price is higher than that of Mijia products; the "Small Tile" brand launches the traditional random collision type, inertial navigation sweeping robot products, and the average unit price is lower than that of Mijia products.
Taking 2018 as an example, the average unit price of the "stone" sweeper is 1866 yuan, the mijia product is 1160 yuan, and the "small tile" brand is 965 yuan.
With the increase in the proportion of private brand revenue, even if the gross profit margin of the Mijia brand is declining, the comprehensive gross profit margin of Stone Technology is also rising.
According to Zhongyikang data, since 2019, Stone Technology has ranked among the top three queues in the domestic sweeping robot market.
03 The cost of "independent growth"
2020 is a key node in the development of stone science and technology.
However, in this year, the performance growth of Stone Technology encountered a bottleneck.
In the annual report of the first year of listing, the revenue growth rate and attributable net profit growth rate of Stone Technology hit a new low since 2017, 7.74% and 74.92% respectively, and it was far less than the previous three years.
In 2021, stone technology "de-milletization" is more thorough, the proportion of private brand revenue rose to 98.8%, and the proportion of related party transactions with millet in revenue has dropped to about 1%, but the performance still continues the momentum of the previous year's slowdown, although the revenue growth rate has rebounded slightly, it is still not as good as before the listing; the growth rate of net profit attributable to the mother has further slowed down; the growth rate of non-net profit has even shown negative growth.
At the same time, market competition is intensifying, and Stone Technology is facing no small pressure to "grow alone".
Looking back at the past two years, the revenue of Stone Technology in the domestic market has continued to decline, falling by 26.53% in 2020 and 7.1% in 2021.
This also confirms some of the market's concerns about Stone Technology. Liu Buchen, a senior observer of the home appliance industry, told the market: "Asset-light companies like Stone Technology have a characteristic, generally running fast in the early stage and not being able to run in the later stage. ”
The reason for "not being able to run" is not only the problem of rising sales costs that need to be faced by going it alone after losing xiaomi potential energy, but also the risk of intensified market competition faced by the company after the difficulty of technological innovation has increased.
In the Xiaomi ecosystem system, whether it is Mijia OEM products or Stone Technology's own brand products, they can be sold through Xiaomi channels, which invisibly saves sales costs.
In August 2020, Stone Technology announced that it would build a "marketing service and brand construction project" with IPO super-raised funds of 1.022 billion yuan. In 2021, Stone Technology also tried star endorsement, signing a popular artist Xiao Zhan to become the spokesperson for its series of products.
It is conceivable that the cost of "growing alone" will not be low.
In 2020 and 2021, the sales expenses of Stone Technology were 620 million yuan and 938 million yuan, respectively, an increase of 75.24% and 67.74% respectively. The sales expense ratio has also continued to rise in recent years.
Behind the increase in marketing, the comprehensive advantages of Stone Technology are facing challenges.
In the "Stone" brand's focus on the layout of the path planning sweeping robot market, LDS SLAM laser navigation, VSLAM visual navigation is the mainstream navigation technology. In addition to stone technology, sweeping robot companies such as Coworth and Cloud Whale have laid out these types of technologies. Each company has not established an absolute technical barrier, and the product function is becoming more and more homogeneous.
As Liu Buchen said to the market: "At present, the functional differences of major brands of sweeping robot products are not obvious, and there is no obvious brand gradient difference. ”
The development of the most core navigation and obstacle avoidance technology has entered a bottleneck period, and improving the cleaning effect and automation degree of the sweeping robot has become one of the directions of the industry's breakthrough.
In these two segments of the market, Stone Technology will also meet with old rivals such as Coworth and Cloud Whale.
In 2020, Coworth's brand "Tim Coco" released the "Fuwan" series of scrubber products. At present, "Tianke" firmly occupies the domestic scrubber market, with a share of up to about 70%. Stone Technology only entered the scrubber market in August 2021, one step too late.
In June 2021, the stock price of Stone Technology was once close to 1500 yuan / share, setting a new high, with a total market value of nearly 100 billion yuan. However, as of April 29, 2022, the total market capitalization has fallen to $38.2 billion.
In February 2022, Tianjin Jinmi of the "millet system" once again announced its plan to reduce its holdings. Previously, its Shunwei Capital and the "Lei Jun System" have reduced their holdings. At that time, there were voices in the market: stone technology was "de-milletizing", and Lei Jun and Xiaomi were also "abandoning" the stone.
Objectively speaking, from the data point of view, the "de-milletization" has begun to accelerate in 2018.
However, geographically, Stone Technology has become Xiaomi's neighbor.
Resources:
1. "Xiaomi Ecological Chain Battlefield Notes", Xiaomi Ecological Chain Barn Academy
2. "Made in China 2.0: Serving Global Users with Technology and Innovation| Innovation Conference 2021", Geek Park
3. "MiJia Sweeping Robot: Zero Experience Conquers the "Great Demon King"", Barn Explosives Academy
4. "Dialogue with Chang Jing, founder of Stone Technology after the 80s: The brand is not short-term, adhere to scientific and technological innovation to create long-term value", Sohu Finance Zhang Ying
5. The full text of Xiaomi's 10th Anniversary Public Speech, Lei Jun