Multiple brands have launched “thousand yuan machines”, and this year the domestic floor scrubber market will “trade price for quantity”, with only a few brands making money and the number of players starting to decrease.
On May 12th, Mother’s Day is approaching, and a reporter from First Financial News noticed that the popular cleaning appliance category of floor scrubbers has started a price war. Multiple brands have launched “thousand yuan machines” for floor scrubbers, and some brands have even lowered the price of floor scrubbers to below 600 yuan. AVC predicts that this year, the domestic floor scrubber market will “trade price for quantity”.
On some e-commerce malls, the overall price level of floor scrubbers is lower than last year, with mainstream prices ranging from over 1000 yuan to over 2000 yuan. There are also many models priced at over 900 yuan, close to a thousand yuan, as well as products priced between 500 and 600 yuan. Of course, there are also a few models competing in the high-end market of over 3000 yuan.
“At present, most of the floor scrubber brands are not profitable. This year, the domestic floor scrubber industry is accelerating its” reshuffle “. A senior industry insider told reporters that it is expected that the sales of floor scrubbers in China will continue to increase in 2024, but the number of players will decrease.”.
The online average price decreased by nearly 20% in the first quarter
The price war in the domestic floor scrubber market will escalate in 2024. According to data from Aowei Cloud Network, in the first quarter of 2024, the average online market price of Chinese floor scrubbers was 2092 yuan, a year-on-year decrease of 19.5%, while the average offline market price was 3084 yuan, a year-on-year decrease of 7.3%; The sales revenue of the Chinese floor scrubber market was 2.78 billion yuan, a year-on-year increase of 23.4%; Sales reached 1.244 million units, a year-on-year increase of 50.1%.
The price war of floor scrubbers is mainly reflected in three aspects: first, some old products of mainstream brands have fallen below a thousand yuan; The second is to increase the quantity (referring to functional enhancements) of newly released products without increasing the price; The third reason is that the price of iterative products is lower than that of current sales.
At present, the sales revenue of products under 2000 yuan in the online floor scrubber market has exceeded 40%. From 19% in the first quarter of 2023 to 38% in the fourth quarter of 2023, it further increased to 44% in the first quarter of 2024.
The overall downward shift of the low, medium, and high price line. Ovi defines the top 20% and bottom 20% of sales as high-end and low-end, respectively. In the first quarter of this year, the upper limit line for the low-end of domestic floor scrubbers has been lowered to 1600 yuan, and the lower limit line for high-end has also been lowered to only 2989 yuan.
“The reasons behind the price war are the increasing homogenization of products, reduced traffic, and the need for enterprises to survive.” An analyst from Aowei Cloud Network told a reporter from First Financial that in the first quarter of this year, the main selling points of the iterated products of the floor scrubber were mainly focused on providing solutions such as lying flat, preventing hair entanglement, preventing odor, and cleaning low and corner spaces.
The above-mentioned senior industry insiders believe that the decrease in floor scrubber prices is also related to the industry development cycle. In 2020, there were only 7 domestic floor scrubber brands, but as of now, there have been a total of 250 floor scrubber brands in China. The floor scrubber involves water and electricity, making it difficult to create molds in the early days. Now the cost of molds has decreased. In addition, the maturity of technology and the increase in scale have also led to a decrease in costs. In the early days, the hardware cost of the entire floor scrubber was close to a thousand yuan. Now, the factory price of some small factories in Suzhou is only 500 yuan.
“On the other hand, the differentiation of various products is becoming less and less,” said the senior industry insider. In the current macroeconomic environment, consumer confidence needs to be strengthened, and manufacturers are stimulating demand by lowering prices. Moreover, the gross profit margin of floor scrubbers is still relatively high now, and there is more cost spent on marketing, and there is also room for price reduction.
With the intensification of price competition, the number of domestic floor scrubber brands has decreased for the first time this year. The number of online floor scrubbers on sale in China increased from 145 in the fourth quarter of 2022 to 150 and 166 in the first and second quarters of 2023, respectively. In the third and fourth quarters of 2023, the number remained at 166 and 167, and decreased to 143 by the first quarter of 2024.
The overall year-on-year growth rate of sales in the domestic floor scrubber market has also shown a slowing trend, from 348% in 2021 to 72.5% in 2022, further slowing down to 22.4% in 2023, and 23.4% in the first quarter of 2024.
The test of balancing quantity and profit
“2024 will become a key transformation node for the floor scrubber industry.” Analysts from Aowei Cloud Network predict that the prices of the floor scrubber industry will continue to decline in 2024, accelerating the reshuffle and product upgrading of the industry. How to balance quantity and profit also tests the listed and quasi listed companies of clean appliances.
As the parent company of Tianke, a leading domestic floor scrubber enterprise, Ecovacs (603486. SH) increased revenue but not profits in the first quarter of last year and this year. According to its 2023 annual report, the revenue of Tianke brand’s smart home appliances was 7.27 billion yuan last year, a year-on-year increase of 5.24%, accounting for 46.9% of the overall revenue. The gross profit margin of its smart home appliances reached 52.79%, but decreased by 6.64 percentage points year-on-year. Faced with a decline in industry average prices, Tianke controlled costs last year and launched products such as high-temperature and rapid drying.
Regarding the current price war for floor scrubbers, Tianke officials did not respond positively to reporters, but they stated that the floor scrubber market still has huge development potential, and floor scrubber products will continue to be upgraded and iterated, such as automatic water supply and drainage, 180 ° lying flat cleaning, etc.
“The current price decline in the floor scrubber industry is not entirely caused by price wars,” said a person related to Chasing and Seeking in an interview with reporters. The real outbreak of the floor scrubber industry was in the past two to three years. In the early stages of the outbreak, the technology research and development investment and market education investment costs of various manufacturers will be relatively high. However, with the improvement of awareness, technological maturity, economic scale, and product design process in the floor scrubber industry, the industry will develop more efficiently, costs will decrease, and the average product price will gradually fall and stabilize.
“The penetration rate of the floor scrubber market is still relatively low, and there is still a lot of potential consumer demand space. With the gradual maturity of floor scrubber products and technology, the market will continue to expand, far from the time to compete with the existing market through price competition,” said the person mentioned above.
But there are also radicals in the market. According to Li Junwei, Vice President of Delma (301332. SZ), based on industry data, both sales and revenue of floor scrubbers have increased year-on-year this year, but the sales unit price has indeed decreased slightly. In fact, since last year, the unit price of floor scrubbers has been decreasing, indicating intensified competition and deepening popularity. Floor scrubbers are a relatively new category in China, and a downward price range will help promote their popularity.
Delma launched a floor scrubber priced at 999 yuan last year, seizing the market for products priced under 1000 yuan. According to its financial report, Delta’s performance was under pressure last year, with revenue and net profit attributable to shareholders both decreasing year-on-year. In the first quarter of this year, its revenue growth rate was higher than the profit growth rate.
In addition, small kitchen appliance companies such as Supor (002032. SZ) are actively expanding new businesses such as floor scrubbers as the industry’s growth rate slows down. The reporter noticed that Subor has also launched a “thousand yuan machine” priced at 999 yuan this year, with some models priced below 600 yuan.
The above-mentioned industry insiders predict that the average price of domestic floor scrubbers will continue to decline in the upcoming e-commerce promotion. This year, the floor scrubber products have increased in quantity but not in price, making it more difficult to ship high-end products priced above 3000 yuan. He believes, “Currently, most floor scrubber brands are not profitable. Although their gross profit margin is high, their marketing costs are high, and the return rate of live streaming e-commerce is also high. The floor scrubber industry is’ shuffling ‘, and the number of players will decrease.”
Under the price war, analysts from Aowei Cloud suggest that floor scrubber companies should address user pain points based on the actual needs of consumers such as water stains, noise, sewage tank treatment, and self-cleaning roller brushes. In addition, opportunities can be found to segment the market and target audience, manage the supply chain effectively, and reduce return rates.
According to Aowei Cloud Network, the size of the Chinese floor scrubber market is expected to reach 13.98 billion yuan in 2024, a year-on-year increase of 14.6%, and the growth rate will further slow down; The sales volume will reach 6.496 million units, a year-on-year increase of 28.8%, and the sales growth rate will be faster than the revenue growth rate; The average price will drop to 2153 yuan, a year-on-year decrease of 11%.