Who Is the King of China’s Cleaning Appliance Industry?

In 1994, Ni Zugen resigned from Chunhua Motor Factory and founded the predecessor of Kingclean Electrical Appliances, Suzhou Kingclean Electrical Appliances, whose English name is Kingclean, which means King of Cleaning. In the next few years, Kingclean became an OEM giant in the vacuum cleaner industry. In 2015, Kingclean Electrical Appliances was successfully listed, and its reputation as King of Cleaning was well-deserved.

Qian Dongqi, one of the earliest foreign trade practitioners in China's vacuum cleaner industry, began to establish his own vacuum cleaner factory, Taiyikai Electric (Suzhou) Co., Ltd. (TEK) in 1998. Around 2006, Ecovacs entered the robot vacuum industry. After experiencing a series of difficult product development and e-commerce outbreaks, Ecovacs was successfully listed in 2018.

In 2014, Chang Jing resigned from Baidu and started a new round of entrepreneurship. After choosing the robot vacuum industry and getting financing from Xiaomi, he went through many pitfalls along the way to make the first-generation product. Roborock finally reached annual sales of 3 billion with several products. It is currently lined up on the Science and Technology Innovation Board, and if nothing else goes wrong, it should be launched soon.

These 3 industry leaders also represent several directions of the industry:

Kingclean Electrical Appliances is a representative of traditional vacuum cleaner manufacturers and has always been the leader in the vacuum cleaner industry.

Ecovacs robots benefited from the explosion of the robot vacuum industry and are currently the representatives of the robot vacuum industry.

Roborock is a representative company of Xiaomi's extremely cost-effective strategy, and it has also benefited from this strategy, with single product sales exceeding 1 billion yuan.

In the long run, who among these three companies will be the "King of Cleaning"?

Let’s take a look at the reports of these three companies respectively:

1.Sales:

Kingclean Electrical Appliances’ sales in 2018 were RMB 5.864 billion, an increase of 2.7% over last year

Ecovacs' sales in 2018 were 5.694 billion, an increase of 25.11% over last year.

Roborock's sales in 2018 were 3 billion, which doubled from 1 billion in 2017.

In terms of sales, Kingclean Electrical Appliances' sales in 2018 were 5.8 billion, currently the highest among the three. If you conduct an in-depth analysis, you can find that Kingclean's growth rate in 2018 was only 2%. And of Kingclean's 5.8 billion sales, OEM accounted for 4 More than 0 billion, and its own brand is more than 1 billion. From the analysis of OEM customers in the vacuum cleaner industry, Kingclean is currently the largest in the OEM business. At present, it is unlikely to continue to have major growth, so it is expected that Kingclean's business growth in 2019 will not be too large.

Ecovacs's sales in 2018 were 5.6 billion, an increase of 25.11% over last year. Assuming Ecovacs's 20% growth in 2019, Ecovacs's sales in 2019 will reach 6.7 billion, surpassing Kingclean. At present, Ecovacs's OEM business accounts for a relatively small proportion, and free brands account for the majority.

Roborock's sales in 2018 were 3 billion. Assuming a natural growth of 20%, it would be 3.8 billion in 2019. Roborock released a new wireless handheld vacuum cleaner in 2018 with a unit price of 1,299. Assuming sales of 200,000-300,000 units a year, this portion would be close to 300 million. It is reasonable to estimate that Roborock's sales in 2019 will be around 4 billion.

2.Profit rate:

Kingclean Electrical Appliances' comprehensive gross profit margin is 25.16%.

From a regional perspective, the OEM sector outside China has a profit margin of 17.73%. The private label sector within China has a profit margin of 40%.

Ecovacs' comprehensive gross profit margin is 37.83%, of which robot vacuum is 47.57% and small household appliances are 17.78%. Ecovacs robot vacuum is basically its own brand, and most small household appliances are OEM (a small part of TEK's own brand).

Roborock's comprehensive gross profit margin is 28.82%, of which Xiaomi model is 16.76% and other channels are 40.88%

From the perspective of profit margin, Ecovacs>Roborock>Kingclean, Kingclean's large number of OEM business drags down the overall profit margin. Ecovacs's income is closely related to the development of robot vacuum at home and abroad, and its sales and profits have increased significantly. One reason why Roborock's profit margin is lower than Ecovacs is the low gross profit of the Xiaomi model. How to balance this in the future is also the key to Roborock's next development.

3.External competitive environment:

Kingclean Electrical Appliances:

Kingclean Electrical Appliances is also facing relatively large competition in 2019. Several major customers are facing fierce competition from competitors in the industry. The main competitors are TEK, Midea, Aipu and Chunju. At the same time, due to North American tariff issues, it is necessary to build factories in Southeast Asia, which has increased the uncertainty of the external environment. Kingclean's leading advantage in the OEM business has slowly been caught up by other companies.

In the domestic market, the sales of the Magic Cleansing series that Kingclean has been insisting on are not very good. The special shape of the Magic Cleansing has not become a mainstream product over time. On the contrary, as more and more companies enter the market, the Magic Cleansing series has a tendency to be marginalized.

Ecovacs:

Ecovacs has a huge lead in the domestic robot vacuum industry. Except for Roborock, other companies cannot pose a threat to it. In addition to brand recognition, Ecovacs' robot vacuum technology is also ahead of other companies.

Ecovacs' own-brand business in foreign markets is also selling very well. At the same time, it has launched a new Tineco brand (Tineco), preparing to copy the successful experience of the Ecovacs brand. The current problem is that the brand competition in cordless vacuum cleaners is too fierce, and the Tineco/TEK brand has not yet been able to stand out in the domestic market. However, the Tineco brand cordless vacuum cleaners have made a good start on Amazon in the United States.

Roborock:

Roborock is currently the best in domestic sales. It has achieved sales of 3 billion with 3 products. It is really the ultimate single product/hot product strategy. But what cannot be ignored is the characteristics of the external environment when the robot vacuum was launched at that time. When Roborock launched the 1699 laser robot vacuum, the average price on the market was 3-4000, so Roborock was able to sweep the market and pose a great threat to Ecovacs.

But now the prices of competitors such as Ecovacs have basically been adjusted to be 1-200 more expensive than Roborock. The difference is no longer too big, and Roborock is no longer cost-effective.

In addition, Roborock has launched a new wireless handheld vacuum cleaner, priced at 1,299. This price was not a very good price in April 2019. If the product can be launched at this price at the end of 2017 or early 2018, there is a high possibility of replicating the success of the robot vacuum. The pursuit of ultimate performance also affected the launch of Roborock to a certain extent.

At present, the competitive advantage of Roborock's robot vacuum robot is still obvious, and handheld vacuum cleaners are facing encirclement and suppression by many brands. In foreign markets, many foreigners reverse purchase robot vacuums. Subsequent overseas markets may also be an important point for Roborock's explosion.

4.Talent reserve:

The characteristics of these three companies are:

Kingclean: The number of people who come out of Kingclean to open factories should be the largest in the industry. Everyone also jokingly calls Kingclean the "Whampoa Military Academy". Because Kingclean is leading in R&D and manufacturing, Kingclean's R&D department is also the department that Ni Zugen pays most attention to. The industry also prefers people who come out of Kingclean, who can work hard and can try any job.

Ecovacs: The position distribution of Ecovacs is relatively thin, corresponding to different positions. Since Qian always comes from a sales background, he is more sensitive to the market. Therefore, Ecovacs closely follows the latest hot spots and technologies in the industry in product development. It does not stick to various styles and gives priority to the market.

Roborock: Roborock is a unique presence in the manufacturing industry. Their company recruits a large number of people from Huawei, IBM, Tencent and other companies, and less from traditional vacuum cleaner manufacturing companies. This creates a company culture that is more like a technology company than a manufacturing company.

5.Risks and Threats

Kingclean:

The risk of OEM comes from the relationship with large customers. At the same time, Kingclean’s technical advantage in the lithium battery era is not as great as before.

The biggest problem of self-branding is the positioning of Kingclean series products. Unrealistically high pricing (3-4000) and deviating from the market shape have led to the shrinkage of sales of the Kingclean series. If there are no strong products and more reasonable pricing in the past two years, Kingclean's domestic market will soon be cannibalized by other brands.

Ecovacs:

The biggest risk Ecovacs faces is the pursuit of Xiaomi series, but it is also because of Xiaomi's pursuit that Ecovacs has reconsidered its positioning and adjusted its product line. At present, Ecovacs's lead in robot vacuums is still relatively obvious. The shortcoming may be the newly launched Tineco brand in cordless vacuum cleaners. The cordless vacuum cleaner industry has a larger market, but competition is also fierce.

Roborock:

Roborock started from the ultimate pursuit of products, but it may also miss important time windows due to excessive pursuit of extreme details. Whether the new products developed subsequently can be as amazing as robot vacuum will be Roborock's biggest test.

Based on the above, I am optimistic that Ecovacs will become the new leader in cleaning appliances within 2-3 years. If the time dimension is extended to 4-5 years, Roborock will also be a strong competitor.