In recent years, the market for robotic vacuum cleaners has seen a substantial transformation, particularly influenced by Chinese manufacturersAs these companies expand, they're gaining a significant foothold, especially outside the United States, Latin America, and Canada, where local brands command over 50% of the market shareAmong the frontrunners in this sweeping revolution are Roborock Technology and Ecovacs, two giants whose strategies and performances illustrate the dynamic landscape of home automationRoborock notably surpassed the renowned American company iRobot in terms of shipments in the second quarter, while Ecovacs maintained its position as the third-largest player globally, benefiting from a streamlined product lineup.

The vacuum cleaner industry operates on a colossal scale, exceeding the hundred billion yuan mark

Within this expansive market, two listed Chinese companies are making impressive stridesIn the recent second quarter, Roborock made its debut in high-end brick-and-mortar supermarkets in North America, supported by the strong performances of its V and G series productsThis achievement marked a historic milestone as it was the first time a Chinese company took the lead in the robotic vacuum cleaner segment globallyMeanwhile, Ecovacs capitalized on its growth in Europe to secure the third position in the market.

Interestingly, despite both being recognized as leaders in the global marketplace for robotic vacuum cleaners, the paths taken by Roborock and Ecovacs differ significantlyRoborock, which originated from the Xiaomi ecosystem, launched by focusing on developing and selling mid to low-end products and has since deepened its commitment to this market

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The company has consistently invested heavily in research and development, progressively upgrading its offerings from mid to high-end models, resulting in sustained and stable growth.

Contrastingly, Ecovacs began primarily with high-end products and only ventured into the mid- to low-end market gradually starting in 2022. The challenges posed by a sluggish consumption climate and stiff competition initially led to a decline in sales for certain premium offerings, forcing price reductionsNonetheless, as 2024 unfolds, Ecovacs appears to be regaining momentum with improvements in its product mix resulting in a rising gross profit margin and a restoration of net profit growthAdditionally, Ecovacs was early in diversifying into floor washing machines, which solidified its groundwork for expansion into the North American and European markets

The vacuum-cleaning robot market has shown signs of revitalization

According to data from agencies like GfK and IDC, the global market's scale reached a valuation of $6.6 billion in 2023, which reflects only a marginal growth of 0.8%. However, the domestic situation in China appears more promising, where the market reached retail sales of 13.8 billion yuan, enjoying a year-on-year growth of 5.1%. The sales volume for robotic vacuum cleaners in China also reached 4.12 million units, marking a 0.5% increase, with the mid to high-end segment serving as the primary growth driver.

In the same period, Roborock reported revenues of 8.65 billion yuan, achieving a remarkable 30.55% increase year-on-yearIts net profit attributable to shareholders soared to 2.05 billion yuan, illustrating a staggering 73.32% growthThe upward trend in both revenue and profit vastly outstripped broader market growth rates.

Breaking down the drivers of performance from a volume and pricing standpoint reveals substantial insights

The financial reports indicated that Roborock's global shipments of intelligent robotic vacuum cleaners reached 2.6 million units, showing a growth rate of 15.54%. Concurrently, revenue from vacuum cleaners and their accessories was reported at 8.09 billion yuan, experiencing an increase of 27.41% year-on-yearWhen analyzed, the average price of Roborock's vacuum cleaners stood at 3,116 yuan, which showcases a rise of 290 yuan, or about 10.27%, compared to the previous yearThis interplay between increased sales volume and an uptick in average price significantly bolstered Roborock's overall financial performance, with volume having a marginally more powerful impact than price.

In 2023, Roborock launched several new robotic vacuum models, including various mid to high-end versions like the P20 Pro, P10 Pro, G20S Ultra, and V20. These launches not only contributed to the growth in both sales and prices but also aided the domestic market in achieving sales revenue of 4.41 billion yuan, representing a growth rate of 41.01%, with a gross margin increase of 4.16 percentage points to 49.26%.

Roborock's success extends beyond Chinese borders, as the company has established a presence in various overseas markets, setting up international offices in countries such as the United States, South Korea, Japan, and Germany

It has also launched online brand stores across numerous platforms, including Amazon and Home Depot, thereby boosting its visibility and accessibility.

Most notably, 2023 marked Roborock's entry into Target, a significant achievement positioning it right next to Walmart as the second-largest retail chain in the U.SWith this dual-pronged approach of online and offline marketing in international arenas, Roborock's international revenue reached 4.23 billion yuan, demonstrating a year-on-year growth rate of 42.29%, alongside an impressive gross margin increase to 61.65%.

Looking into the first half of 2024, the global robotic vacuum market has shown promising recovery signs, with retail sales in the domestic market reaching 6.95 billion yuan, up 9.3%, and sales volume hitting 2.03 million units, up by 5.4%.

Data from IDC indicated that the first quarter of 2024 saw the global shipment of intelligent robotic vacuum cleaners amount to 4.55 million units, reflecting an annual growth rate of 11.10%. Among the top ten manufacturers by shipment volume, eight positions were held by Chinese companies, although iRobot still led the ranks in markets including the U.S., Japan, the U.K., and Canada

By the second quarter of 2024, shipments further increased to 5.12 million units, representing a 15.70% year-on-year growth rate.

Roborock maintained its robust growth momentum, reporting revenues of 4.42 billion yuan for the same period, which signifies a year-on-year increase of 30.90%. Its net profit attributable to shareholders reached 1.12 billion yuan, up 51.57% from the previous yearMuch of this success can be attributed to its performance in overseas markets, where well-structured planning and competitive pricing helped boost international sales significantly.

Interestingly, Roborock has also seen remarkable success with their secondary product line, focusing on multi-functional cleaning machinesDuring the same timeframe, innovative models received favorable feedback across the market, enhancing their overall product portfolio.

On the other side of the spectrum, while Roborock was flourishing, Ecovacs faced a moment of reckoning in the global market

The year 2023 saw its revenues stagnate at 15.50 billion yuan, a modest growth rate of 1.16%. In contrast, net profit attributable to shareholders decreased sharply by 63.96% to 612 million yuan.

Ecovacs operates with two distinct product lines: one focuses on high-end smart home appliances under the "Tian Ke" brand while the other centers around the Ecovacs-branded robotic vacuum cleanersAccording to their financial reports, the high-end product line saw consistent revenue growth, reaching 7.66 billion yuan with an increase of 4.77% year-on-yearOn the flip side, sales for Ecovacs-branded robotic vacuum cleaners flatlined, with income calculations indicating a marginal decline of 1.67% to 7.74 billion yuan.

A closer look reveals that the drop in revenue for Ecovacs was primarily due to declining sales volumes in their domestic market for their brand of service robots

According to data from a market research agency, the online retail market share of Ecovacs-branded vacuum cleaners fell to 37.60%, with offline retail dropping to 77.10% in 2023, down from 44.40% and 82.80% respectively in 2022.

Ecovacs’ positioning in the high-end market had indeed garnered impressive profits during moments of industry expansion, but as the sector began to decelerate and low-end products started to gain traction, it faced stiff competitionBrands like Roborock, Xiaomi, and others upwardly migrated from mid to low-end products, increasing the competitive pressure on Ecovacs, who confronted a domestic revenue drop of 11.43% to 8.98 billion yuan alongside a reduction in their gross margin which dipped by 10.81 percentage points to 44.37%.

Despite these challenges at home, Ecovacs displayed resilience in overseas markets

In 2023, it achieved international sales of 6.52 billion yuan, marking a 25.76% uplift with a gross margin of 51.81%, reflecting an increase of 7.16 percentage points compared to the previous year.

As 2024 unfolded, with the introduction of models like the T30 and X5 series, Ecovacs grew its product structure with mid to low-end itemsAlthough overall operational revenues dipped by 2.35% to 6.98 billion yuan, net profit for the period experienced recovery with earnings of 609 million yuan, a 4.26% rise.

Encouragingly, by the second quarter of 2024, improvements in the product portfolio resulted in a gross margin growth of 5.30 percentage points for the Ecovacs brand compared to the previous yearFurther anticipated launches of cost-effective and innovative robotic vacuum models are expected to enhance both revenues and margins as they transition from the restructuring phase.

While domestic circumstances improved for Ecovacs, the company has continued to explore new avenues abroad

In the first half of 2024, Ecovacs made inroads into Switzerland and Italy through channel integration and new partnerships, simultaneously realizing dual growth in key markets like Germany and France through synergistic online and offline strategies, leading to a 42.00% year-on-year increase in their Euro market revenues.

Ecovacs also launched its inaugural wireless window-cleaning product, the W2 OMNI, and iterated its robotic lawn mower lineThe combination of new offerings and a strong presence across Europe resulted in a 11.30% growth in overseas revenues in the first half of 2024.

Focusing on their main brand, the Tian Ke line not only did well in international markets but also targeted the core U.Smarket while expanding strategically within Western and Southern Europe, leading to a remarkable 66.10% year-on-year increase in their Eurozone revenues