The Double 11 shopping festival of 2024 officially kicked off on October 14th, with home cleaning appliances such as robotic vacuum cleaners and floor washers being among the most fiercely competitive categories among major manufacturers.

Data from Aowei Yun Network shows that in the first half of 2024, the sales of cleaning appliances in China increased by 9.8% year-on-year to 16.5 billion yuan, with sales volume increasing by 13.6% year-on-year to 12.41 million units. Among them, robotic vacuum cleaner products led the cleaning appliance industry, with both sales and sales volume achieving double-digit growth, increasing by 18.8% and 11.9% year-on-year, respectively.

It cannot be ignored that as the market size continues to expand, as an industry with low barriers to entry, the functional homogenization of cleaning appliance products in the market is becoming increasingly serious.

Although artificial intelligence (AI) technology represented by large models is leading a new round of technological revolution and industrial transformation, looking back at the product iteration process of the cleaning appliance industry in recent years, there have been few revolutionary technologies or functions, and the so-called technological innovation is nothing more than optimization on the existing basis.

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Some analyses believe that at this stage, the market is shifting from "disruptive innovation" to "incremental innovation". All brand manufacturers can only optimize and improve in minor aspects such as edge sweeping, hair entanglement, climbing slopes, and cloth cleaning. Even with iteration, there are no new highlights, and instead, the entire industry may be in a new level of price competition.

Under this background, the impact on Ecovacs (603486. SH), known as the "big brother of robotic vacuum cleaners", is particularly significant, and the pressure is considerable as latecomers continue to catch up.

The threat of Roborock's robotic vacuum cleaners to Ecovacs and the pursuit of Tianke's floor washers by Zhuimi, or from some statistical data, it is difficult for Ecovacs to claim to be the first.

Moreover, recent doubts about the safety of Ecovacs products and false advertising have added to its troubles before Double 11.

Safety vulnerabilities? False advertising?Recently, according to ABC NEWS, "within a few days, robotic vacuum cleaners in several US cities were hacked by attackers who physically controlled them and used their built-in speakers to loudly shout obscene language."

The message indicates that all affected robotic vacuum cleaners are the Ecovacs Deebot X2 from China. Users discovered strangers accessing the real-time cameras of the robotic vacuum cleaners and using remote control features through the Ecovacs app.

In a statement to ABC NEWS, Ecovacs stated that they conducted a thorough internal investigation at the end of May 2024 and found no evidence that any usernames and passwords were obtained by unauthorized third parties through any Ecovacs system vulnerabilities. However, they discovered a credential stuffing incident where a third party attempted to access Ecovacs customer accounts using email addresses and passwords.

Although denying the aforementioned incident, Ecovacs also stated that they will conduct an Over-the-air (OTA) firmware update for the X2 series in the second week of November to further enhance security.

It is worth noting that an article on TechCrunch in the United States a few months ago showed that malicious hackers could take over vacuum cleaners and lawn mowers produced by Ecovacs, using the devices' cameras and microphones to monitor their owners.

After analyzing 11 Ecovacs products, the two researchers found that hackers could remotely and secretly turn on microphones and cameras via Bluetooth, seeing a dog on a sofa in someone's home through the camera of a hacked Ecovacs device.

A security researcher said, "Their security measures are really poor." They also stated that even if a user account is deleted, the data stored on the robot remains on the Ecovacs cloud server, which also raises privacy concerns among some consumers regarding indoor maps and captured images.

In the first half of 2024, Ecovacs' revenue from overseas markets accounted for 40.78%, and if there are security issues, it will inevitably affect performance.

Similarly, security issues will also cause domestic consumers to have doubts. Previously, consumers on platforms such as Xiaohongshu have reported that Ecovacs "often starts suddenly at irregular times, and the voice assistant talks incessantly to an unknown recipient."

Currently, Ecovacs has not responded to the domestic market regarding the aforementioned hacking incidents, but other incidents continue to emerge.In September 2024, Ecovacs, a leading manufacturer of robotic cleaning devices, faced a lawsuit from its competitor, Sugiyama Robotics, over alleged false advertising. Ecovacs had recently launched its newest floor washing robot, the "Deebot X8 Pro Plus," which was promoted with claims such as "the world's first constant pressure live water floor washing robot." Sugiyama Robotics argued that it had released products with "live water floor washing" and "constant pressure live water cleaning" features well before Ecovacs, rendering Ecovacs' claim of being the "world's first" as baseless. In response to Sugiyama's accusations, Ecovacs countered by stating that it already held relevant patents and, in turn, sued Sugiyama Robotics for "suspected commercial defamation."

Both parties stood their ground without showing any signs of weakness. Such incidents are not uncommon in the home appliance industry. For instance, Zhuim Technology has sued Stone Technology for infringement multiple times, Tianke has sued Zhuim for infringing on design patents, and Gree Electric has sued Mijia for infringing on fan patents, among others.

Focusing solely on Sugiyama Robotics' confrontation with Ecovacs, it seems less about the contention for a "world's first" claim and more about the brands' efforts to assert their technological prowess in an industry facing innovation challenges.

However, Ecovacs downplayed Sugiyama Robotics' lawsuit as a "small brand fishing for trouble," which reflects a certain level of confidence and arrogance based on its market share advantage.

The "stronger always stronger" law fails

But just as no flower blooms forever, Ecovacs' recent market performance may significantly diminish this arrogance from the strong.

Looking back at Ecovacs' development history, the company was originally known as Tek Electronics, which started with traditional vacuum cleaner ODM/OEM contract manufacturing. It wasn't until 2006 that the company established its own brand "Ecovacs" and subsequently introduced a range of products such as the floor washing robot Deebot, automatic window cleaning robot Winbot, mobile air purifying robot Airbot, and robot butler Jinbot, with the floor washing robot being the flagship product of the Ecovacs brand.

In 2018, Ecovacs went public on the Shanghai Stock Exchange, earning the title of "the first stock of floor washing robots." In the same year, Ecovacs upgraded its original "TEK Tek Electronics" series of cleaning appliances to the "TINECO Tianke" smart home appliance brand.

Since then, Ecovacs has formed a dual-brand growth pattern driven by "Ecovacs + Tianke." As its own brand business expanded, Ecovacs began to compete directly with its former contract manufacturing clients. Starting from 2019, Ecovacs began to strategically reduce its contract manufacturing business to focus on the development of its own brand.At that time, the stay-at-home economy exploded, and the robotic vacuum cleaner industry was given a high valuation premium by the capital market. Since March 2020, Ecovacs' stock price has increased by more than 1200% in less than 15 months, with its market value soaring from a scale of tens of billions to nearly 150 billion yuan, catching up with home appliance giants such as Midea, Gree, and Haier Smart Home. As a result, Ecovacs was also dubbed "the broom of the stock market."

However, the cruelty of reality lies in the fact that the higher you fly, the harder you fall.

As of October 14, Ecovacs closed at 47.40 yuan, with a market value of 27 billion yuan. The stock price has fallen nearly 80% from its historical high, and the market value has evaporated by more than 110 billion yuan. In comparison, its strongest competitor, Roborock Technology (688169. SH), had a market value of 48.5 billion yuan on the same day, completing the overtaking.

In addition to the industry gradually calming down after experiencing an "aggressive period," Ecovacs' own development difficulties are also one of the reasons. Looking at the performance in recent years, Ecovacs has not demonstrated the value that matches the "broom of the stock market."

From 2020 to 2023, Ecovacs' revenue scale increased from 7.234 billion yuan to 15.502 billion yuan, with revenue growth rates of 36.17%, 80.90%, 17.11%, and 1.16% respectively, showing a clear slowdown. In 2024, negative growth occurred, with operating income in the first half of the year decreasing by 2.35% year-on-year to 6.976 billion yuan.

Ecovacs' deceleration is closely related to the poor sales of its main brand. Looking at the business structure, more than 95% of Ecovacs' revenue comes from the "Ecovacs brand service robots" and "Tineco brand smart home appliances" two major business segments, with their revenue proportions being comparable.

From 2020 to 2023, the sales growth rate of Ecovacs brand service robots was 7.17%, 14.76%, -12.50%, and -8.90% respectively. During the same period, the revenue growth rate of the Ecovacs brand service robot segment was 17.79%, 58.58%, 15.34%, and -1.49% respectively.

It can be seen that since 2022, the sales volume of Ecovacs brand service robot products began to show negative growth, and the sales growth rate of this segment is generally weaker than the segment's revenue growth rate. There is a truth behind this: for a long time, the revenue growth of the Ecovacs brand service robot segment has relied on price increases.

Price increases have directly restricted the entry of robotic vacuum cleaners into more households to a certain extent, leading to more difficult product sales and the industry entering a strange circle of falling volume and rising revenue. In the first half of 2024, the revenue growth rate of the Ecovacs brand service robot segment further decreased to -3.07%.

While the Ecovacs brand service robot business is mired in decline, another major brand under the company, Tineco, is also facing growth challenges.In 2023, the revenue growth rate of the Tineco brand's intelligent home appliances segment dropped from 34.5% in 2022 to 5.24%, amounting to 7.271 billion yuan. In the first half of 2024, the revenue growth rate further declined to 2.42%.

It is noteworthy that as the robotic vacuum cleaner market entered a phase of "trading price for volume," Ecovacs' sales expenses also surged, increasing from 21.58% of revenue in 2020 to 34.17% in 2023. The total sales expenses for the two years from 2022 to 2023 reached 9.92 billion yuan.

Considering the sharp decline in revenue growth over these two years, the substantial sales expenses did not promote performance growth but instead eroded profits.

From 2021 to 2023, Ecovacs' net profit attributable to the parent company was 2.01 billion yuan, 1.698 billion yuan, and 0.612 billion yuan, respectively, with year-on-year growth rates of 213.51%, -15.51%, and -63.96%.

"The leading robotic vacuum cleaner" has been surpassed online

Compared to its own growth bottleneck, what should worry Ecovacs more is the pursuit from competitors such as Roborock, Yunji, and Trifo.

Data from Aowei Yun Network shows that in the Chinese robotic vacuum cleaner market, based on data from the first nine months of 2024, although Ecovacs still ranks first in the offline market, it has decreased by 24.32 percentage points year-on-year to 54.21%, and the offline market share has further declined from 56.34% in the first eight months.

Ecovacs' market share in the online market is also continuously declining. Roborock has surpassed Ecovacs, with a market share of 25.23%, ranking first. In the same period, Ecovacs' online market share was 23.99%, a year-on-year decrease of 10.74%, and the status of "the leading robotic vacuum cleaner" is shaky.

As the strongest competitor to Ecovacs at present, although Roborock's overall revenue scale is still not comparable to Ecovacs, it has shown far better growth capabilities than Ecovacs, especially in profitability.

Faced with multiple challenges, Ecovacs has gradually begun to adjust its business strategy and supplement products at different price points.Since 2024, the Ecovacs brand has successively launched a variety of products to cover different price segments. For mid-range products, they introduced the Deebot T30 series, and for high-end products, they introduced the X2 Combo, X2S, and X5 Pro series.

Even though Ecovacs continues to update its product lineup, its investment in research and development (R&D) is somewhat lacking compared to its sales expenses, with the R&D expense ratio consistently hovering around 5%.

Although Ecovacs has gradually transitioned to self-production and self-marketing, consumer feedback on repairs directly points out the company's lax quality control. On the Black Cat Complaints platform, there are numerous complaints related to "Ecovacs," mainly involving frequent malfunctions and poor repair effectiveness. Comments like "It broke after a year of use," "I've repaired it four times in total," and "Problems arose as soon as the warranty expired" are common.

In fact, product quality has become Ecovacs' "Achilles' heel." From 2021 to 2023, Ecovacs' after-sales service and repair costs were 153 million yuan, 217 million yuan, and 519 million yuan, respectively, showing a year-by-year increasing trend.

The last point is actually a concern for the entire industry. Nowadays, when searching for the keyword "robotic vacuum cleaner," terms like "intelligence tax," "artificial stupidity," and "smart obstacle" still appear as related phrases.

Browsing various social media platforms, many complaints about robotic vacuum cleaners revolve around the machines frequently getting lost, getting stuck and needing manual rescue, getting stuck on obstacles, losing their maps, and being noisy. Netizens sarcastically comment, "I wanted to free my hands, but it ended up being more tiring," and "I bought a vacuum cleaner that's like a demanding parent."

At the same time, in the trend of increasingly rational consumption, consumers are often deterred by robotic vacuum cleaners that show little intelligence and are becoming more expensive. According to data from Aowei Yun Network, from 2020 to 2023, the average price of robotic vacuum cleaners has been rising year by year, from 1687 yuan to 3717 yuan.

Taking a few leading brands as examples, the official accessory specification of the X2S, which is marked as "China's cumulative sales NO.1 for robotic vacuum cleaners" in the Ecovacs flagship store, has a daily price of 4799 yuan. The P10S Pro, the best-selling model from Roborock Technology, has a daily price of 3498 yuan (with a Double 11 price of 2699 yuan) for its official accessory specification. The S30 ProUltra from Dreame Technology has a daily price of 3499 yuan.In 2022, the secretary of Ecovacs once stated that the robotic vacuum cleaner is the only home appliance category in the past 3 to 5 years that not only has not entered a price war but has become more expensive as it sells.

At present, the category of cleaning electrical appliances is at a critical stage of transitioning from the early market to the mass market. It is time for brands such as Ecovacs to consider what kind of products they need and can offer to make consumers willing to pay.