In this paper, we focus on 1) what is the business model of the industry and whether it is possible to move from product strategy to price strategy in the future? How much room does the industry have to reduce costs? 2) What is the value distribution of players in the industrial chain? How will the competition pattern change in the future? 3) How to view the industry space?
What is the business model of the industry?
With the development of the double dish floor washer industry, the penetration rate increases with the improvement of the product’s ability to solve the pain points of consumers. We believe that the floor washing machine is still in the stage dominated by product strategy, and there is still room for further improvement of product power. The automation ability is an important part of the subsequent improvement of product power. However, objectively speaking, the slope of the iterative curve of the subsequent products of the floor washer may slow down, which may move from the product strategy to the price strategy, but this does not mean a fierce price war.
We expect that the follow-up cost reduction space of the floor washer is about 30%. Generally speaking, the space is not large. 1) There are many parts and components, and the BOM cost and mold opening cost are relatively rigid; 2) The automation level of assembly link is difficult to improve, and the labor cost is relatively rigid; 3) At present, the yield of the industry is generally low, and the repair raises the after-sales cost.
How will the competition pattern evolve in the future?
From the perspective of industrial chain, 1) the existing OEM capacity is relatively tight; 2) Brands occupy the highest point of value distribution in the industrial chain; 3) The channel is relatively open source and still needs to occupy the minds of consumers through marketing.
China: we expect that the share of Tianke will decline but remain stable at 40%, and the share of high price belt may be more stable. We can use the industry pattern of wall breaking machine and vacuum cleaner as a reference for the study and judgment of the pattern of floor washing machine. The follow-up industry will transition from product strategy to price strategy. Due to the small slope of the cost reduction curve, the competition will return to channel efficiency and profit transfer of the brand side. Therefore, we might as well be optimistic about Tianke’s share. Abroad: domestic brands such as Tianke are expected to seize the share through product strength and cost performance advantages, and lead product iteration at the same time.
We expect that the subsequent price reduction space of the floor washer will be about 40%, and the terminal price will be reduced to about 2000 yuan / set. 1) 30% of the industry’s cost reduction space; 2) The yield increased and the after-sales cost decreased; 3) Consumer education has gradually matured and marketing expenses have decreased.
How to view the industry space?
For hard ground, floor washer = vacuum cleaner + electric mop, competing with floor sweeper. Short term multi play home entry marketing will promote large-scale products, and the product price belt will be further widened.
In the long run, the target customers of the floor washer are clear, focusing on children and pet families with deep cleaning needs. We judge that the potential scale of global floor washing machines is 36.72 million units / year, more than 10 times the sales scale in 2021, with broad growth space. China has 25.75 million units / year, which is still the main market of floor washing machines, with 10.96 million units / year abroad, including about 3.85 million units / year in North America, about 3.34 million units / year in Europe and about 3.77 million units / year in Japan and South Korea.
Investment suggestion: the floor washer has become the third track in the field of clean electrical appliances in China. The sales volume has a scarce high growth rate and there is still several times of space. It is essentially a more intelligent, integrated and localized vacuum cleaner. It is suggested to pay attention to the investment opportunities of Ecovacs Robotics Co.Ltd(603486) , Beijing Roborock Technology Co.Ltd(688169) and Jinhua Chunguang Technology Co.Ltd(603657) in the industrial chain from top to bottom.
Risk tips: new products are not as expected, industry competition intensifies, sea freight continues to rise, assumptions and calculation errors.
