Ecovacs at a Crossroads

"TEK Was Just a Trading Company; It Lacked Technology"

TEK, which was once the predecessor of Ecovacs and primarily engaged in trade, quickly rose to become one of the top three players in the industry within just a few years. However, it faced persistent criticism for its lack of technological prowess and quality.

"Ecovacs' robot vacuums are nothing but toys with no practical use," some argued. "Just look at how many companies have stopped their robot vacuum projects." Another critique was that Ecovacs insisted on selling under its own brand when exporting, rather than using private labels for customers, making it difficult to sell.

"Ecovacs spends so much on marketing each year; all of its sales are driven by advertising. It can't compare to companies like Roborock, which truly represent cutting-edge technology," said many investors after Ecovacs went public.

"Tineco is a brand no one has heard of—how can it command prices as high as Dyson? Where does this confidence come from?" And "Their hard floor washers are completely impractical. Major international brands struggle to sell even a few units per year, so how can they possibly succeed at such high prices?"

All these doubts were dispelled in 2020.

In 2020, the rise of live-streaming sales and the global impact of the pandemic led Tineco's hard floor washers to become an instant hit. The product not only opened up a new category but also became synonymous with its market leadership. Leveraging this success, Ecovacs' stock price surged 12-fold in 2020, reaching a market capitalization of over 150 billion yuan.

The Factors Behind Tineco's Explosive Growth in 2020-2021 and Why It Can't Be Replicated

Tineco’s explosive growth between 2020 and 2021 was driven by multiple factors, making it difficult to replicate:

1. Unique Product Offering: In 2020, Tineco was the only brand in the industry offering a hard floor washer. This allowed Tineco to leverage this product across all channels. Other brands began following suit with their own hard floor washers by late May or June of 2021, but by then, Tineco had already released several new generations of products.

1. Increased Demand Due to the Pandemic: The outbreak of the pandemic significantly boosted demand for cleaning appliances. During the early stages of the pandemic, people were confined at home and their primary activities revolved around household chores and cooking.

1. Rise of Live Streaming E-commerce: Traditional e-commerce channels like JD and Taobao struggled to effectively market new categories such as hard floor washers due to a lack of consumer awareness and traffic pools. However, the rise of live streaming and short videos changed this dynamic. Through the promotion by KOLs (Key Opinion Leaders) and MCN (Multi-Channel Network) influencers, Tineco was able to reach a broader audience quickly and generate substantial sales.

These factors collectively contributed to Tineco’s remarkable success during 2020-2021.

While industry insiders now attribute Tineco's growth to sheer luck, the reality is that it was not an easy journey for Ecovacs. The path taken by its CEO, Qian Dongqi, has been seen as flawless, but a closer look reveals that the company faced numerous challenges along the way.

Money Boss's Sharp Market Vision

Money Boss has a keen market vision and is always ahead of the curve in spotting various opportunities (early cyclonic vacuum cleaners, robot vacuums, hard floor washers were no exception). However, due to technical limitations, many times he sees an opportunity but cannot develop a suitable product. For a company leader, making the right judgment at such critical moments and sticking with it is extremely rare. If someone can make key decisions multiple times, it indicates that they are not relying on luck.

Currently, Money Boss is optimistic about another product: smart wok cookers. He has actively promoted this cooker in various public appearances, and I have personally endorsed the product myself. Personally, I do not hold high expectations for the short-term performance of the smart wok cooker because its form factor is still too early-stage. However, it's possible that after 2-3 iterations, smart wok cookers could become as ubiquitous as microwave ovens or ovens.

As an entrepreneur, the success or failure of a single product does not determine the fate of the company. Cultivating a capable successor to take over the business is the most important task before retiring.

David Qian Cheng (born in 1990 in Nanjing, Jiangsu), graduated from the University of British Columbia with a bachelor's degree. He joined Ecovacs in 2012 and currently serves as Deputy Chairman of the Ecovacs Group and General Manager of the Home Robot Division. Unlike other second-generation entrepreneurs who hold many titles in family businesses without much involvement, Qian is the actual driving force behind Ecovacs' robot vacuum cleaner business.

Qian Dongqi and the Evolution of Industry Leaders

Many of the factory owners in Suzhou, including older-generation entrepreneurs like Qian Dongqi, have been at the helm of their businesses since founding them on the front lines. As they age and the market environment continues to evolve, many find themselves struggling against younger entrepreneurs such as Chen Jing from Roborock and Yu Hao from Dreame, who leverage internet, capital, and innovative marketing strategies. However, David Qian Cheng, a 90s CEO with extensive experience in various roles, is leading Ecovacs into direct competition with these new competitors.

Just as Tineco's hard floor washers have disrupted the vacuum cleaner industry, Ecovacs' X1 represents a direct challenge to the robot vacuum market.

After Roborock launched its self-cleaning robot vacuum J1 and iRobot introduced its Dust Collector robot, which both achieved success, several leading companies followed suit. Xiaomi, Roborock, Ecovacs, Dreame, and Tineco all promptly released similar products in the market. However, Ecovacs not only launched the Dust Collector robot but also the self-cleaning floor washer N9+ in 2021, and even went on to release the flagship robot X1 for that year. This product combined both functionalities into one unit, potentially making standalone Dust Collectors and self-cleaning floor washers transitional products.

According to rumors, Ecovacs aimed to sell 1.5 million units of its 2022 flagship model X1. Some friends questioned whether this target was too ambitious and unlikely to be achieved. Given that the standalone self-cleaning floor washer from Narwal sold around 900,000 units in 2021, Ecovacs could easily achieve such a goal with increased marketing efforts and slightly reduced pricing.

During Cheng Qian's tenure at Ecovacs, these products showed significant improvements in product quality and design compared to the company’s previous focus on merely spending money on advertising. To control raw material costs, Ecovacs even invested 1.2 billion yuan in establishing a lithium battery factory.

Competitors Eyeing Dominance in the Vacuum and Hard Floor Washer Markets

In 2022, Ecovacs aimed to dominate the robot vacuum and hard floor washer markets. However, its competitors clearly had different plans.

In January 2022, Roborock unveiled the S7 MaxV Ultra at the CES exhibition in the United States. This model featured similar functional modules to Ecovacs' X1, indicating a direct challenge to Ecovacs' market position.

February 2022: Bissell Files a Section 337 Complaint Against Tineco

On February 2, 2022, the American company Bissell filed an application with the United States International Trade Commission (ITC) in its headquarters city of Grand Rapids, Michigan. The filing requested a Section 337 investigation against Tineco, seeking to ban the import and sale of Tineco-branded hard floor washers into the U.S. market. Hard floor washers are a core product for Tineco, making this battle crucial.

2022: Ecovacs at a Crossroads

In 2022, Ecovacs found itself at a critical juncture in its history.