Domestic sweeping robots go to sea to share the cake, and the domestic volume is low

作者 | 《财经》新媒体 刘芬 编辑 | 蒋诗舟

When the global industrial chain pattern is deeply reconstructed, batches of Chinese enterprises are rewriting the business map.

Judging from the existing competition pattern, it has been less than 7 years since the initial exploration of overseas markets, and half of the overseas sweeping robot market has been captured by Chinese companies. According to GfK statistics, by the end of 2022, domestic sweeping robots accounted for more than 50% of the overseas market share, and in Southeast Asia and Europe, the market share of domestic sweeping robots reached 68% and 55% respectively.

At the same time, the global sweeping robot sales crown "changed hands". The American brand iRobot used to be the top of the global market share of sweeping robots, but its market share has gradually declined in recent years, and the lost share is basically snatched by national brands. In the head-to-head confrontation with iRobot, Dreame, Cloud Whale, and Ecovacs have all overtaken in a single market and reached the top. At present, the crown of the world's largest sales volume of sweeping robots has been taken by the Chinese brand Roborock.

As mentioned in the research report and interviewees, behind the reshaping of the pattern in just a few years, it is not only the transformation of products, channels and brands of domestic manufacturers, stepping on the demand gap and stepping out of various differentiated routes, but also due to the hardware manufacturing capabilities accumulated by Chinese OEMs, the opportunities brought by the development of cross-border e-commerce, the experience of faster iteration of innovative products to meet demand, and various global first-mover advantages such as design and software algorithms.

However, with the dividends of the Amazon platform reaching the middle and late stages, the competition is differentiated in the fierce battle of channels, products, and marketing, and the Matthew effect appears. For large and small manufacturers, how to further develop the market will be a problem full of infinite opportunities and challenges.

1. What gap to step on?

In terms of the timeline, domestic sweeper brands began to intensively enter the overseas market around 2018, but there were restrictions such as channels, brand awareness, products, and patent barriers in the early stage.

At that time, overseas offline shopping channels were relatively concentrated, and domestic brands needed a long certification period to enter offline channels without brand recognition. And the living habits of China and the West are different, the domestic use of wooden flooring is more, Europe and the United States and other places have a stronger demand for carpet cleaning, more attention to vacuuming rather than mopping, product demand is different.

Channels, first of all, have become a breakthrough for domestic manufacturers.

In contrast, it can be seen that the European market is relatively easy to enter due to the fragmentation of the pattern and the low dependence of consumers on the brand, and it is the main market occupied by national brands in the early stage of going overseas. Roborock was the first to choose the European market through the dealer model. Due to the concentration of the U.S. market, iRobot's patent barriers and brand effect in the local area, and the difficulty of offline KA chains to enter, as overseas online shopping habits gradually form after the epidemic, domestic brands choose to enter online first.

A brokerage analyst bluntly said to the new media of "Caijing" that domestic sweepers have been able to open up the overseas market in recent years, in addition to the improvement of product strength, it is also related to the promotion of consumption habits to online in a specific period. Although the proportion of online channels in the overall overseas channels of sweepers is relatively limited, the expansion of e-commerce business is very beneficial to the shaping of brand reputation, and it is more inclined to the asset-light model. Judging from the current top-ranked domestic brands on the Amazon platform, it is a relatively clear development direction to enter the offline with the help of online word-of-mouth.

Judging from the disclosures of other brands, the competition with iRobot is not an easy one. In the face of iRobot's channel monopoly, national brands often find another way and make adjustments according to different markets. For example, Ecovacs entered the Australian offline market in the early days by cooperating with agents, displaying products next to the cash register and advertising on the radio during the time when parents pick up their children. Cloud Whale has also made efforts in online channels in the Japanese and American markets to prove itself "reliable" through various ways.

Overall, behind the market share of domestic brands is a combination of channels, products and marketing. In the early days, overseas mainstream sweeping robots used random collisions as a solution and did not enter the intelligent stage. The product differences based on new technologies leave a gap for domestic players who are waiting for the opportunity to catch up.

Su Chen, an analyst at Guojin Securities, said in the research report that in the past, iRobot had been unable to bypass patent barriers to develop new products because of the preemptive registration of visual navigation patents. However, Ecovacs and Roborock have both successfully developed LDS SLAM products, successfully bypassing iRobot's visual navigation patent barriers, and achieving better performance, which has ushered in a period of rapid growth for China's sweeper products.

At present, the patent barriers that iRobot can exploit have been reduced, and the number of patent applications has declined in recent years, and there are no new patent applications even in 2022. Compared with overseas versions of sweeper products, Guopai has obvious advantages in base station capabilities, obstacle avoidance methods, and sweeper function integration. Guopai took the lead in launching products with more complete functions and better user experience, occupying the mid-to-high-end market share, while the proportion of iRobot's high-end products declined.

"The positioning of domestic brands in the middle and high-end is also suitable for taking a differentiated route, so as to establish customer awareness. In the view of Wang Minjun, an analyst at Donghai Securities, iRobot also used Chinese factories for OEM in the early days, and some of them were transferred to Malaysia in the later stage, so hardware manufacturing does not constitute a barrier that cannot catch up. For sweepers, design and software algorithms are particularly important, and this is the advantage of Chinese brands. Based on extensive and discerning consumer data, domestic brands have carried out multiple rounds of iterations of their products.

Second, go to sea to share the cake, and the domestic roll is low

With the release of the dividends of sweeping robots, there are more and more players on the track, and the competitive environment at home and abroad has been divided in a fierce battle.

Under the current situation of sluggish demand for domestic sweeping robots, declining sales, and increasingly popular floor scrubbers, many companies choose to reduce prices in order to compete for market share, and their profit margins are further compressed. According to Zhongyikang's report, in the first half of 2023, the market size of China's sweeping robots will reach 6.36 billion yuan, a year-on-year decrease of 0.6% (the market size increased by 9% year-on-year in the same period last year).

Ecovacs pointed out in the "2023 Annual Results Reduction Announcement" that in 2023, its net profit deducted from non-attributable to the parent company is expected to decrease by 1.11 billion yuan to 1.19 billion yuan year-on-year, a decrease of 68.27% to 73.19%. In the financial report for the first half of 2023, Ecovacs' revenue increased by 4.7%, and the net profit attributable to the parent decreased by 33.4%.

When sweeping robot manufacturers rely on low prices in China to exchange for increments, they can seize the market share of iRobot at high-end prices abroad, and it has become a new trend for manufacturers to increase their going overseas. In contrast, higher-end products bring higher gross profit margin and net profit margin to Guopai, while the deepening of iRobot's product structure has led to a deterioration in profitability. According to the financial report, iRobot's net loss in the first three quarters of 2023 was US$240 million, compared with a loss of US$220 million in the same period last year, and the loss continued to expand, with a net profit margin of -41.4%.

While the leading manufacturers are seizing the global share, the competition gap is also widening, and it is becoming more difficult for latecomers to enter the game.

"The key reason for the differentiation is the gap in the technology experience and the gap in the level of operation of different companies. The relevant person in charge of Roborock said bluntly to the new media of "Caijing" that how the sweeping robot can solve the user's problem well is the key to whether the user will choose. In addition, overseas operations are a very costly thing, and it is necessary to strive for good results and balance costs and returns well. Roborock's approach is to design products around the needs of users in the target market, and not to do large-scale marketing, but to find a group of technology bloggers who really understand technology products and have market appeal.

"Many merchants have seized the opportunity of Amazon's expansion and enjoyed early dividends. However, in the later stage, as Amazon moves from extensive development to a new stage of standardization and maturity, increasing compliance review and adjusting the fee mechanism will increase the online operating costs of some brands. The above-mentioned unnamed brokerage analyst told Caijing New Media that this is good for the head brands that entered the game early, but it is a challenge to new merchants. At present, some domestic brands of sweepers are also deployed on TikTok and Temu, but they are mainly based on publicity and drainage, and sales are still in the exploratory period.

In her view, product and channel operation is an important reason for the differentiation of manufacturers going overseas. For consumers, price and evaluation are two common reference items when choosing a product. For some categories of home appliances, the visual improvement brought to consumers by technological micro-innovation or parameter upgrade is not obvious, and it is difficult to reflect the outstanding advantages of the product and construct the premium of the product. However, the special thing about the sweeper is that its cleaning level, mapping planning and other performance are convenient for intuitive quantitative display through evaluation details. Based on the experience of domestic social media and the ability to change products quickly, domestic brands have room to further lead overseas competitors in overseas marketing.

Wang Minjun predicts that in the future, the price band layout of the head domestic brands will be differentiated, and high-end products will mainly test the water with new functions and demonstrate their strength, while simplifying non-essential functions and launching affordable products. The improvement of category penetration also needs to take into account the consumer's acceptance of price and the stability of product performance. In the long run, cost reduction depends on the improvement of the supply chain. The leading company has focused on extending upstream, such as Ecovacs' layout of lithium battery projects and Roborock's self-built Huizhou factory.

3. How will the future be rolled?

According to data from Kaiyuan Securities, in 2022, the number of sweepers per 100 households in the United States, Italy, Canada, the United Kingdom, and Spain will be 13.6, 4.7, 3.5, and 20 respectively, while the number of sweepers per 100 households in China will only be 4.6. IDC predicts that the global intelligent sweeping robot market shipments will continue to increase at a compound annual growth rate of 6% in the next five years, and global shipments are expected to be close to 25 million units in 2028.

"The current industry is on the eve of a new round of breakthroughs. Some manufacturers told Caijing new media that the category characteristics of sweeping robots determine that the market has long-term growth space. The sweeping robot itself solves the pain points of high-frequency and time-consuming users, which is very similar to washing machines.

According to its analysis, the current penetration rate is not high mainly because of the lack of market education and awareness, many people do not know about this kind of products, or there are some misunderstandings about this category, thinking that this category is still as clean as in the early years. Compared with ten years ago, the intelligent level, cleaning ability, and self-cleaning ability of this category have been very mature, laying the foundation for a breakthrough in penetration.

In the view of the above-mentioned brokerage analysts, the improvement of the long-term penetration rate of the domestic market is still worth looking forward to. At present, the overall penetration rate of domestic sweeping robots is less than 10%, and the market penetration rate in the United States is about 15%. However, in terms of regions, first- and second-tier cities dominate the proportion of domestic sales, and the actual penetration rate is expected to benchmark with overseas developed countries.

According to Aowei cloud network, from 2016 to 2020, the domestic sweeper market has experienced a period of rapid growth, with annual sales increasing from 2.74 million units to 6.54 million units, and sales increasing from 3.8 billion yuan to 9.4 billion yuan. Since then, due to the increase in the unit price of the industry and the fluctuation of the external consumption environment, the industry has entered a period of adjustment, but in 2023, the "Double 11", the effect of exchanging price for volume in the industry will gradually appear, and the scale of the domestic industry will exceed 12 billion yuan in 2023.

If the performance of affordable sweeper products is significantly improved, in the next four or five years, it may still be possible to expect the vigorous development of the first- and second-tier mainstream markets. In the lower-tier market, the pace of penetration growth will be slower based on multiple factors such as the use environment, consumption habits, and price. Third- and fourth-tier cities are relatively low-margin markets with price competition, and whether brands are willing to enter and whether it is necessary to enter may be differentiated. In first- and second-tier cities, the competition between several leading brands will become more intense.

"It's not that small and medium-sized brands don't have room to survive. She said that some small and medium-sized brands have better flexibility in small market segments and channel segments. For example, there are currently sweepers specifically for pet families, monitoring pet dynamics and shooting through the camera on the product. As far as the industry as a whole is concerned, there are still a lot of market gaps in China, and some brands can explore through channels such as WeChat private domain communities and Xiaohongshu. These small and medium-sized brands can not only promote the price of the industry, but also promote the growth of the industry.

PayPal also told Caijing New Media that in the early stage of many merchants expanding overseas markets, most of them used e-commerce platforms such as Amazon and eBay to reach overseas consumers. In recent years, the independent station model has attracted more and more attention from merchants, and the layout of overseas business through multiple channels has become the first choice for Chinese merchants to expand overseas markets. The development of cross-border e-commerce has also led to the transformation and upgrading of merchants' business models. Chinese manufacturers focusing on going overseas are changing from extensive growth to intensive growth, and domestic overseas products are becoming more and more high-quality and branded.

China's sweeping robots have had a good start on the global stage, but foreign local brands will also accumulate strength to fight back. In Roborock's view, the most important thing for Chinese sweeping robot brands overseas is technology and user experience, and we must continue to make efforts in technology to consolidate our hard-won market position.

Some interviewees also talked about the details of software customization, noise reduction, and intelligent interconnection, and domestic sweeping robot manufacturers can further innovate and upgrade. There are many directions, and the focus is on whether the product can be commercialized quickly after it is made. Some innovations are not profitable in the short term, but are demand-driven explorations.