Sweeping robot track is getting more and more rolling, and stone technology is changing

In recent years, with the improvement of people’s living standards and the continuous progress of science and technology, consumption upgrading and the “lazy economy” have gradually emerged and integrated with each other, making sweeping robots become the new favorite of consumers at present.
However, due to the repeated impact of the epidemic, the consumer demand in the home appliance market continued to be low, and clean appliances were also affected. According to the data, from January to September 2022, the cumulative online sales of clean appliances fell by 13.8% year on year. In the first half of this year, the sales of sweeping robots reached 5.73 billion yuan, up 9% year on year; The sales volume was 2.01 million units, down 28.3% year on year.
As the dividend fades, the sweeping robot industry has bid farewell to the era of high growth, and the profitability of head players is also declining. On October 31, Stone Technology, one of the industry leaders, released its financial report for the third quarter of 2022. The financial report showed that the revenue of Stone Technology in the third quarter was 1.469 billion yuan, down 0.65% year on year; The net profit attributable to shareholders of listed companies was 238 million yuan, down 34.54% year-on-year.
The revenue decreased slightly, while the net profit decreased significantly year on year, and the performance of Stone Technology was significantly under pressure. In fact, since this year, the sweeping robot track has entered a downturn, and the players have had a hard time.
Increase income without increasing profit
In the first half of this year, Stone Technology experienced its first negative growth in net profit attributable to the parent company since 2017. In August, the 2022 midterm report disclosed by Stone Technology showed that in the first half of this year, the company’s operating revenue was 2.923 billion yuan, up 24.49% year-on-year, and its net profit was 617 million yuan, down 5.4% year-on-year.
In response, Stone Technology said that the company’s profit decline was mainly affected by two factors. First, in order to further expand the domestic and overseas markets, the company increased its advertising and market investment, and the sales expenses in the first three quarters reached 780 million yuan; Second, the income generated by forward foreign exchange lock decreased.
In order to expand the brand influence and quickly occupy the market, Stone Technology continues to increase its investment in marketing. According to the financial report data, in the first three quarters of 2022, the sales expenses of Stone Technology increased significantly to 788 million yuan, up 74% from 453 million yuan last year. In the first half of 2022, Stone Technology spent as much as 310 million yuan on advertising and marketing, an increase of 190 million yuan compared with the same period last year, and advertising expenses increased by 158% year on year.
Earlier this year, Stone Technology said in the face of investor research that in 2021, it will continue to increase the publicity and promotion of its own brand, continue to launch new products and continue to expand its market influence, with a total sales cost of 938 million. In the domestic market, advertising is mainly promoted by Tmall, JD, Youpin and other major e-commerce platforms, as well as by celebrity endorsement, star live broadcast, Tiktok, Little Red Book, Bilibili and other online celebrity promotions.
Although the high marketing expenses have improved the brand awareness to a certain extent, the rising costs have made it one of the pain points of Stone Technology to increase revenue without increasing profits. In addition, under the current environment, upstream costs are also rising. Affected by the rising price of raw materials and intensified competition, the gross profit rate of Stone Technology in the first half of the year was 48.2%, down 2.54% year on year.
Some analysts in the home appliance industry believe that since this year, the shortage and rising prices of upstream raw materials and chips such as copper, aluminum and iron have led to a significant increase in the production cost of sweeping robots, which also objectively led to a decline in the net profit of enterprises. On the other hand, as the iteration of product R&D technology slows down, product homogeneity is serious. The industry relies on advertising to obtain the market, which also leads to more fierce competition.
At one time, as a product of high-tech, the sweeping robot was once popular in the market. However, with the rapid development of technology, the novelty of consumers has disappeared, the demand has gradually returned to rationality, and they are unwilling to pay IQ tax again. According to survey data, in the first half of this year, the online sales volume of traditional sweeping robot business increased by 1.95%, while the sales volume decreased by 29.4% in the same period.
In the middle of the session on October 31, the share price of Stone Technology hit the lowest value of 220 yuan/share since its listing. Compared with 1064.88 yuan/share at the time of high light, Stone Technology has dropped more than 79% and its market value has evaporated more than 79 billion yuan.
It is noteworthy that under the cold winter, capital also began to flee in succession. According to the third quarter report of public funds, 38 funds have reduced their holdings of Stone Technology stocks. At present, 33 funds with heavy positions in Stone Technology have reduced their holdings by 16.49% month-on-month and their market value by 65.04% month-on-month.
Seriously homogenized track becomes more and more rolling
The decline in the performance of Stone Technology is not an exception. Another company, “the first share of sweeping robots”, is also facing the same dilemma.
Two days before Stone Technology released its third quarter report, Cowos also disclosed the third quarter report of 2022. According to the financial report, the revenue of Covos in the third quarter was 3.302 billion yuan, up 14.44% year on year; The net profit attributable to shareholders of listed companies was 245 million yuan, down 48.94% year on year.
The deeper reason is undoubtedly that the market competition has entered a white-hot stage. It is worth noting that the penetration rate of sweeping robots in China is still at a very low level in the world, which also means that the track contains huge space and potential.
With the support of all kinds of capital, not only the two leading companies, Stone Technology and Covos, but also the start-ups such as Cloud Whale and Chase, as well as the Internet brand represented by Mijia and the traditional household appliance enterprises represented by Midea and Haier, have entered and laid out the sweeping robot market in succession. The number of relevant enterprises reached more than 2000 through Skyeye search for the keyword “sweeping robot”.
The continuous influx of players makes the track more and more crowded, and the competition becomes more intense. Especially in terms of product functions, the phenomenon of homogenization is relatively serious and functional innovation is insufficient. The fundamental reason for homogenization is that the technical barriers between enterprises are not high enough, and it is difficult to make differentiated products. The products in each price range are only the difference between top configuration and reduced configuration in function.
In the harsh market environment, price has become an important factor in determining product sales. Control the cost lower through the whole industrial chain, which is bound to be more competitive. It can be predicted that before the bottom technology breaks the bottleneck, the “price war” in the entire sweeping robot market will become increasingly fierce, and the industry will also show obvious polarization. Some enterprises launched high-priced sweepers to attack the high-end market and build competitive advantages, while others launched low-priced sweepers to occupy the market share of the low-end market with the strategy of affordable products. When the price of high-end products hit 6000 or 7000, a large number of white-brand sweepers only cost hundreds of yuan.
It is generally believed in the industry that due to the active layout of the high-end market by the head brand, the old and low-end models are accelerated to be eliminated, the average price of the hot selling self-cleaning products is on the high side, and there is a mismatch between the mainstream price segment and the main consumer groups in the market, resulting in the pressure on the sales of the floor sweeping robot market.
Pain caused by de-milling
In the process of stone science and technology development, the “millet ecological chain” can be said to be indispensable. At the beginning of its establishment, Stone Technology was favored by Lei Jun. In 2015, Xiaomi Group ranked among the investment institutions financed by Stone Technology in Round A; In the subsequent three rounds of financing, Shunwei Capital, founded by Lei Jun, also appeared.
Relying on the powerful brand, channel and supply chain of Xiaomi Group, Stone Technology has developed rapidly and has landed in the capital market since its establishment six years ago. Previously, Chang Jing, CEO of Stone Technology, said publicly that “without the support of the Xiaomi ecological chain, we could not go today.”
However, as an enterprise in the Xiaomi ecological chain, there are also certain disadvantages. Due to the low gross profit rate of the OEM business and the fact that Stone Technology is not willing to hide behind Xiaomi all the time, from 2017, Stone Technology began to deliberately “de-millitize”, successively launched its own brands – Shitou brand and Xiaowa brand, and gradually accelerated the layout of its own brands.
From 2019 to the first half of 2021, Stone Technology’s private brand sales accounted for 65.73%, 70.72% and 98.23% respectively, almost achieving self-reliance. In April of this year, with the help of G10 series products to increase its market share, Stone Technology surpassed Cowos to become the first sweeping robot brand in the market share.
In the past, Stone Technology mainly relied on millet robot as its agent, and its gross profit margin has been below 20%. With the growth of private brand sales, the gross profit rate of Stone Technology has increased from 19.21% in 2016 to 51.32% in 2020.
The courage to tear off millet’s “label” is commendable, but for Stone Technology, the cost of not willing to be a “surrogate factory” is still high, and the future challenges are not small. Especially with the increasing share of Stone Technology’s own brands, it is necessary to increase marketing efforts and channel construction to expand brand influence, and the following problem is that the rapidly rising marketing costs have seriously dragged down the company’s profitability.
Not only is the sales cost increased again this quarter, but from the long-term data, the sales cost of Stone Technology has been rising year by year. In 2020 and 2021, the sales expenses of Stone Technology were 620 million yuan and 938 million yuan respectively, up 75.24% and 67.74% respectively, and the sales expense rates were 13.69% and 16.08% respectively. Among them, online channels are the main battlefields of PK. In order to compete for the share of online channels, Stone Technology is also constantly strengthening the delivery of various channels. According to data, in April this year, the market share of online channels of Stone Technology reached 33.7%, up 16.25% year on year, surpassing Cowos for the first time and becoming the first in the industry.
At the same time, the launch of private brands means that more R&D investment is needed. The founder team of Stone Technology once said that the competitive advantage of the company’s products mainly depends on the accumulation of technology. For example, laser radar, positioning algorithm, motion control module, etc., can be applied to the product to solve the pain points of consumers’ use, and transform technical advantages into experience advantages.
From 2019 to 2021, the R&D expenses of Stone Technology were 193 million yuan, 263 million yuan and 441 million yuan respectively, accounting for 4.59%, 5.80% and 7.55% of the revenue, and the R&D investment increased year by year. In the third quarter of this year, the R&D investment of Stone Technology was 120 million yuan, up 10.85% year on year. In the first three quarters, the company invested 350 million yuan in research and development, up 9.6% year on year.
Compared with the previous, as a millet eco-chain enterprise, Stone Technology does not need to worry too much about sales and research and development. If we say that the pain of order reduction and revenue decline caused by the untiring with Xiaomi was temporary at first, then it will be difficult to recover the sequela of “demilitarization” of Stone Technology due to the increasing cost pressure and the continuous decline of revenue.
What is intriguing is that in February this year, on the day that Stone Technology released its 2021 performance report, a group of shareholders of the company collectively announced the reduction of their holdings, including Tianjin Jinmi Investment Partnership held by Lei Jun. This also means that Xiaomi, who once sympathized with him, may have lost his interest.
End
In general, although the sweeping robot industry is facing a cold spell, the supply and demand are still growing. It is estimated that the market size of China’s sweeping robot will reach 28.1 billion yuan in 2026.
It is not yet known when the industry will recover. However, as a product with scientific and technological content, the performance and cost-effectiveness of the product are the most concerned by consumers.
As we all know, the speed of technological product upgrading is very fast, which puts forward higher requirements for the comprehensive ability of enterprises in all aspects. Stone Technology needs to make more efforts to get out of its fatigue and regain its glory.