Sweeping robots, the price reduction can't be sold
Dingjiaoone original
Author | Jin Yufan
Edit | Fang Zhanbo
Who remembers how beautiful the robot vacuum was? Now it's unusually low-key.
During this year's Double 11, major e-commerce platforms no longer compete with GMV battle reports, but brand battle reports are swiped, but there are few sweepers in it. Now that the promotion has come to an end, as the "double leader" of the industry, Ecovacs and Roborock have not officially announced the battle report, which is in stark contrast to the high-profile announcement of turnover and growth rate in the previous two promotions.
Sweepers are a category with a high proportion of e-commerce sales, and the Double 11 promotion is an important node of the year for major brands. However, all signs show that the sweeper track has braked sharply after the rapid rise of the lazy economy under the epidemic.
From 2020 to 2022, sweepers will be sold more and more expensive by relying on the improvement of product power and perfect functions, and the average industry price of a sweeper will rise from 1435 yuan to 2812 yuan, doubling in two years.
In this process, the basic functions of sweepers, as a new type of home appliance that replaces brooms and vacuum cleaners, have been perfected, and manufacturers have begun to add intelligent functions (drying, sterilization, etc.) to maintain high prices, but after the end of 2022, sales have declined.
Liang Jie, an entrepreneur of smart household appliances, analyzed the "fixed focus" that the sweeper has passed the stage of initial penetration by product power, and next, price popularization and consumer education are the key to continued penetration.
The sweeper industry will indeed be forced to start "exchanging price for volume" in 2023, but the pain has been reflected in the industry leader.
Ecovacs, which was once called "sweeping the floor", has a net profit drop of 92% in the latest quarter, and its stock price has already begun to fall, as of November 13, the closing stock price is 46.94 yuan, with a market value of 26.488 billion, which has evaporated hundreds of billions from the high point two years ago, and if calculated from the beginning of this year, the decline has also exceeded 35%.
On the other hand, although the performance of the former thousand-yuan bull stock Rock Technology in the latest quarter is acceptable, the current stock price has fallen by nearly eighty percent from the high point, and it has been reduced by many shareholders since the beginning of this year. As of November 13, its closing stock price was 298.40 yuan, with a market value of 39.233 billion.
The capital market reflects future expectations, and the outside world has to sweat for this track of "high growth is no longer and net profit is declining". What is the effect of "exchanging price for volume", and how long will it last? When will the next round of functional iteration cycle of sweepers come, and whether going overseas to find new increments and develop new categories of floor scrubbers can become a new growth pole for the company? These questions still need time to verify.
Sweeper: The pattern is stable, but it can't go up
During this year's Double 11, the sweeper track uncharacteristically presented a scene of "crying at the head and laughing at the waist".
The two giants in the industry, Ecovacs and Roborock, did not release sales reports as in previous years. You know, both of these companies are mainly online sales in the domestic market. This year's Double 11, because of the increase in subsidies for e-commerce platforms, the overall increase in the intensity of concessions to merchants, the category of sweepers, high customer unit price, high user value, high contribution to the e-commerce platform, the more the head of the more hope to benefit.
On the contrary, Cloud Whale Intelligence and Dreame Technology, which ranked low in the track, posted a high-profile double 11 battle report. Cloud Whale announced on November 1 that the cumulative payment amount of Cloud Whale omni-channel exceeded 350 million yuan, and the sales volume exceeded 618 in 4 hours, with a year-on-year increase of 31% on all platforms;Dreame announced on November 12 that the omni-channel sales of Dreame exceeded 2.1 billion yuan during the "Double 11" period, a year-on-year increase of 100%.
In the view of Chen Le, an investor who pays attention to the sweeper market, "the old people are low-key, and the newcomers are high-profile" does not represent the change of the industry pattern, and the industry pattern is still relatively solid before the next round of functional iteration cycle. According to the data of the research agency Aowei Cloud Network as of August 25, the top 5 brands in the overall sales market share of sweepers are Ecovacs (32.6%), Roborock (20.1%), Xiaomi (17.1%), Cloud Whale (8.8%), and Dreame (8.1%, online only).
"But the 'Big Two' are really stuck in sluggish growth. Chen Le added.
Ecovacs, which has turned from a foundry, has been firmly in the top spot, with a market share of about 40.6% in 2020, and its stock price has risen wildly from April 2020 to July 2021, with a market value increase of more than 130 billion yuan, thus giving it the title of "sweeping the floor". So far, Ecovacs is still the first sweeper in China, but its share has dropped slightly to 39.8%.
As the second in the sweeper industry, many people may have forgotten that it was once a member of the Xiaomi ecological chain. In 2019, when the sweeper market entered a period of rapid development, Roborock was no longer satisfied with being Xiaomi's foundry, and in 2021, it got rid of its dependence on Xiaomi's revenue and relied on its own brand income to achieve a "self-supporting portal", and its market share jumped from 13.5% to 21.3% in the two years from 2021 to 2022.
From 2020 to 2021, Ecovacs, as a "sweeping grass" in the secondary market, has been transmitted to the primary market, and the two companies have obtained multiple rounds of financing and entered the stage of burning money and grabbing share, and have successively grabbed the third and fourth positions in market share.
Source / Visual China
However, the timing of these two efforts is in order. Cloud Whale entered the top three in the industry in 2021, with a market share of 15.0% in 2022. Dreame caught up in the second half of 2021 and broke into the fifth place in the industry in 2022, with a share of 7.0%.
Correspondingly, Xiaomi's market share has been diluted from 15.6% in 2020 to 9.5% in 2022, ranking fourth.
No matter where they are in the industry, players are facing the same problem: the robot vacuum cleaner is "rising" and not moving.
2021-2022 was a watershed year for the industry. From 2017 to 2021, the market size of mainland sweeping robots soared from 5.6 billion yuan to 10.8 billion yuan. According to the data of Aowei cloud network, the domestic sales of sweepers in 2020 will be 6.54 million units, which is the high point of the industry, and in 2022, the industry will feel the downward pressure for the first time, with sales falling by 24% to 4.41 million units, returning to the level of 2017, and both online and offline sales have fallen by two to three percent.
As a company listed on the sweeper, this business contributes 8 to 90% of the revenue of Ecovacs and Roborock. The change in people's enthusiasm for sweepers is directly reflected in the financial reports of these two companies. In 2022, Ecovacs sold about 3.119 million units, down 12.5% year-on-year, and Roborock sold 2.246 million sweepers, down 20.4% year-on-year.
Entering 2023, the market is not improving. According to the data of Aowei Cloud Network, in the first half of 2023, the sales volume of sweeping robots will be 1.45 million units, a year-on-year decrease of 5.39%, and the sales volume will be about 4.7 billion yuan, a year-on-year decrease of 3.66%.
Chen Le's analysis of "fixed focus" shows that the industry sales in 2023 are estimated to shrink by about 30% compared with last year, and "industry players are even more difficult this year than last year."
From constant price increases to having to reduce prices
What are the factors that cause the sweeping robot to not sell?
Liang Jie analysis said that the sweeper belongs to the emerging small household appliances that young people like, and its sales are declining, which is related to the increase in product prices, and the weak market environment for optional consumption is also one of the reasons.
Looking back on the development history of sweeping robots in the past few years, it can be said to be a "history of price increases". Every technological innovation is accompanied by a round of market penetration, and at the same time, the more the product is sold because of the increase in functions or the optimization of the experience, the more expensive it is, and the mainstream brands have high-end models of four to six thousand yuan.
Yuan Cong, a former practitioner of a sweeping robot manufacturer, told "Fixed Focus" that especially after the sweeper of the all-round base station became mainstream in 2022, the price of the sweeper of each company has at least doubled. The data shows that the average retail price of sweepers has risen from 1435 yuan in 2020 to 2812 yuan in 2022;In the first quarter of 2023, the average price of the industry will continue to rise to 2965 yuan, and the proportion of all-round + self-cleaning sweeping robots will reach more than ninety.
After Ecovacs went overseas, they also insisted on taking the high-end route, which is more expensive than iRobot, the global leader in sweeping robots (with a global market share of 46% in 2020). Taking the price on the Amazon platform in the United States as an example, the price range of Ecovacs and Roborock is more than $800 and $1,400 respectively, which is significantly higher than that of iRobot. iRobot's hottest item costs around $250.
On the surface, Ecovacs sells more expensive because the products are higher-end. Ecovacs and Roborock's flagship machine is an all-round sweeping and mopping product that integrates self-cleaning and self-dust collection functions, while iRobot's highest-end product only includes self-dust collection performance as of March this year.
But essentially, Ecovacs, Roborock, and iRobot have opted for two different expansion strategies. China's leading manufacturers are taking the high-end route, so they are more motivated to accelerate product updates and iterations to continue to increase the unit price of products and obtain profits. iRobot, on the other hand, is to reduce costs and increase market penetration with cost-effective products through scale effects.
Under the high-end strategy, Ecovacs consumers are more inclined to "buy new rather than old", that is, they are more willing to buy upgraded products at a higher price in exchange for a better user experience.
But when the function of the sweeper "can not rise", the price has risen all the way, and we all know the result: when the penetration rate of the sweeper is not high, the product has a crisis of declining sales.
According to Yuan Cong's analysis, the retention rate of sweeping robots in urban families is less than 10%, and there is still plenty of room for penetration. However, as a functional product that requires rigidity, after the underlying functions of suction and mopping, self-cleaning and dust collection are satisfied, manufacturers can rely on upgrading non-rigid functions such as suction, drying, and sterilization, which are more expensive to sell, and the pull of permeability is relatively limited.
In the third quarter of 2022, the industry's leading players were the first to suffer. Ecovacs' revenue growth rate fell to 22.8%, net profit fell 15.7% to 1.124 billion yuan, and the market value of 100 billion yuan fell by two-thirds to 34.7 billion yuan in one year.
For a new category, product power (whether the function is practical and convenient to use) is the main factor for the early penetration of price-insensitive consumers. When the product enters the stage of micro-innovation, the growth rate is inevitable, in this case, the new category should continue to deeply penetrate the market, and the price is the most important factor for mass consumers. The sweeper has reached such a stage, and the price is popular in order to grab a larger market.
Since the end of 2022, the sweeper industry has begun to "exchange price for volume". An example is that, according to Guosen Securities, the sales growth rate of the sweeper industry began to exceed the sales growth rate.
In order to stop the decline in sales, even if the profitability is damaged, the top players have to temporarily put down the high-end strategy and start a "price war".
Ecovacs, which has a higher market share, took the lead in cutting prices significantly in August 2022, and its main product in the domestic market, T10 OMNI, was reduced by 800 yuan to 3,999 yuan. Subsequently, Dreame, Xiaomi, etc. followed up with price reductions.
In 2023, the average price of all-round products in the industry will drop from 5,076 yuan to 4,084 yuan, and during the 618 period, the head brand will reduce the price to around 3,000 yuan, and the price of self-cleaning products will also drop from 3,618 yuan to 3,124 yuan. During this year's Double 11, the price of sweepers continued to drop, for example, the aforementioned Ecovacs T10 OMNI dropped to 2699 yuan, and the rock technology P10 dropped from 3000+ to 2799 yuan.
On the whole, according to Yuan Cong's analysis, the head manufacturers did not carry out large-scale price reductions for the whole line of products, therefore, the small range of price reductions has brought a slight increase in the sales of the corresponding products, but it has not changed the trend of the overall sales decline of sweepers, nor has it reversed the performance of the head players in the capital market.
The performance of the industry leader Ecovacs in the first three quarters of this year was not ideal. In the first two quarters of this year, revenue maintained a slight increase, but net profit decreased by nearly one-third year-on-year; in the third quarter of this year, its net profit fell by 92 percent; on the whole, the revenue of 10 billion yuan in the first three quarters of this year was only exchanged for a net profit of 600 million. The market capitalization has fallen from more than 140 billion at its peak (mid-2021) to 26.4 billion today.
In the first three quarters of this year, revenue and profits have maintained growth, and the stock price has also increased, but on the whole, the stock price has fallen from the highest point of 1494.99 yuan to 298 yuan, and the market value has fallen by nearly eighty percent, and it is currently 39.2 billion.
The track of the sweeper, the real name deduces what it means to "rise higher, fall worse".
The next battlefield
Whenever an industry is about to enter the moment of "involution", it seems inevitable to go overseas to pan for gold. Ecovacs and Roborock, the two major sweeper giants, acted earlier, going overseas in 2012 and 2017 respectively.
Globally, the American sweeper manufacturer iRobot ranks first, but some market shares are being eaten away by Chinese manufacturers such as Ecovacs and Roborock.
In terms of markets, the global market except for the Chinese market is dominated by North America and Europe.
The top two manufacturers in the North American market are iRobot and Shark in the United States, and it is very difficult for Chinese manufacturers to expand, but Ecovacs and Roborock still choose to attack with "staggered peaks".
Before 2020, Ecovacs finally squeezed into the top three in the North American market, with a market share of only 3%. Since 2021, Roborock has begun to emerge in online channels, according to the data of Guosen Securities in June 2023, Roborock has entered the third place of Amazon sweepers in the United States with a share of more than 15%, and Ecovacs's share in Amazon has not changed much, still below 5%.
Not only the Chinese market, but since the end of 2022, the sweepers in the American market have also entered the stage of exchanging price for volume. Taking the Amazon channel in the United States as an example, the average price of products has dropped from more than $300 per piece in 2021 to slightly more than $250 per piece since 2023.
However, since 2023, the sales of sweepers in the European market have recovered strongly, and in this market, the advantages of Chinese brands are very obvious: Ecovacs, which was deployed earlier, ranks third in terms of market share, and Roborock, which entered the market late, ranks second. iRobot's share is constantly being squeezed, but it still sits on the top spot.
Reflected in the financial report, Ecovacs' overseas revenue in 2022 and the first half of 2023 accounted for 30%, specifically, Ecovacs brand sweepers and Timco (Ecovacs sub-brand) floor scrubbers contributed 1.2 billion yuan and 1 billion yuan respectively.
Unlike Ecovacs, which mainly relies on the domestic market, Roborock's overseas revenue even exceeds its domestic revenue, and it has not disclosed its overseas revenue in the first half of this year, but according to its 2022 annual report, overseas revenue reached 3.48 billion yuan, accounting for 53% of the company's revenue (6.63 billion yuan).
At a time when the sweeper market has been quite involuted, the head players have to open up new product lines to maintain growth while going to sea to survive. At this point, Ecovacs and Roborock, the two "enemies", "collided" together again, eyeing the same new battlefield - floor scrubber.
It should be emphasized that the floor scrubber and the overseas battlefield are not separated, and the products of Ecovacs and Roborock to the sea have both sweepers and floor scrubbers.
After sweepers, floor scrubbers are considered to be the best track for cleaning electrical appliances. According to Everbright Securities' research report, the industry's sales are expected to exceed 5 million units in 2023, or it will surpass the sales of sweepers in one fell swoop.
Chen Le believes that because the floor scrubber is more "foolish" to use, the consumer circle is theoretically larger. The main function of the sweeper is to sweep + suction, because the more and more functions are done, it needs to be matched, mapped, partitioned, etc., and consumers need to learn to use it. The floor scrubber is an upgraded version of the vacuum cleaner, which combines the function of "vacuuming + strong stain removal" into one, which can suck up dry and wet garbage at the same time, and has a lower threshold for use, and is more suitable for the unique hard ground of the mainland.
The price of floor scrubbers has also dropped more significantly. Compared with the past sweepers that rely on price increases to drive growth, the price curve of floor scrubbers is downward, which is also conducive to accelerating consumer education. The average industry price of floor scrubbers in 2021 was 3,124 yuan, and it dropped to 2,597 yuan in the first half of 2023.
According to Chen Le's understanding, there is a lot of room for cost reduction in the future of floor scrubbers. Because the sweeper is algorithm-driven, the cost of intelligent components and development is higher, while the floor scrubber is hardware-led, the domestic production rate of parts is high, and most of them are ordinary materials, so there is more room for cost reduction.
In the field of floor scrubbers, Ecovacs' Timco ranks first in the market, with a market share of 47% in China in 2022 since the product was launched in 2020. In the first half of this year, its revenue from floor scrubbers (3.28 billion yuan) accounted for almost half of the country.
In contrast, Roborock's basic disk is still a sweeper. Its floor scrubbers were launched a year later than Ecovacs (2021), the overall positioning is more mid-range, and with its overseas experience, it has begun to sell floor scrubbers on Amazon in the United States in 2022, bringing new increments to overseas business, but it has not separately announced the revenue of floor scrubbers in the financial report.
On the whole, it is the trend of the domestic sweeper market to exchange price for volume, and the two giants in the industry, Ecovacs and Roborock, one bets on floor scrubbers, and the other turns to overseas markets.
Both have their own challenges. Floor scrubbers, like sweepers, are optional consumer products, and sales are bound to be affected by the economic environment. In the face of the sluggish economic environment in overseas markets and the counteroffensive of the old rival iRobot, the performance may fluctuate greatly due to the increase in the proportion of overseas business.
In the current environment, the first priority of Ecovacs and Roborock is to optimize the supply chain and ensure that profits are not eroded too much while reducing prices to boost sales. In this process, wait for the recovery of optional consumption and wait for the next round of function iteration cycle.
*Image courtesy of Visual China. At the request of the interviewee, Liang Jie, Chen Le, and Yuan Cong are pseudonyms in the article