Roborock vs iRobot vs Ecovacs – The Robot Vacuum Wars

The worries never end when you’re a CEO. First, you lose sleep over not having dominant market share in your industry. When you’ve achieved that, you lose even more sleep over who might steal it from you. Maintaining market share is critically important because fending off competitors as a market leader is easier. Should you start falling behind, you have clearly failed to maintain a key competitive advantage, and now you’re playing catch up. That’s the position iRobot (IRBT) finds themselves in as their share of the worldwide robotic vacuum cleaner market has been dwindling since 2016 – from a majority (64%) to a minority (46%).

Bar graph showing market share of the worldwide robotic vacuum cleaner market from 2014 to 2020
Credit: Statista

Of particular interest in the above chart are two companies hailing out of China that appear to be rapidly stealing market share from iRobot – Roborock and Ecovacs. Here’s how their market share growth compares to iRobot’s market share decline.

Bar graph showing robotic market share comparison of iRobot, ECOVACs, Roborock
Credit: Nanalyze

Let’s start by addressing the 500-lb (226.8 kilo) panda in the room.

The Rise of Chinese Innovation

Click for company website

In researching this piece, we came across several “I don’t want to buy a vacuum from a Chinese firm that copied iRobot” comments, so let’s start there. Both Roborock and Ecovacs have engineered vacuums that use LiDAR to navigate instead of computer vision. Given how much we’ve written about LiDAR stocks, we’re dying to know who manufactured those components at a price point so low you can now stick a LiDAR puck on a vacuum. It’s a remarkable feat that’s garnered Roborock “a cult-like following which speaks for itself.” That’s according to a review by RobomateTV, a Kiwi firm that writes witty once-a-week articles about vacuums (who knew?).

Article headline showing Robot vacuums review from RobomateTV
Credit: RobomateTV

In their review, RobomateTV praises very particular features such as the ability for the Roborock to identify carpet while mopping, cross the carpet with its little robot mop tucked under its little robot skirt, and then continue mopping on the other side of the room. When you’re willing to spend $1,300 on a robot mop/vacuum with “a feature-list longer than the current locations-of-interest list,” stuff like this matters. But the biggest takeaway is that there’s a demand for vacuums with an increasing toolset of functionalities.

In addition to their front-mounted cameras, newer Roborock floor cleaning devices use top-mounted LIDAR to map rooms. This now makes it possible for your robot to vacuum at night and dynamically avoid moving obstacles that move around your house or suddenly appear. No more smearing that pile of dog poo around the kitchen floor because your vacuum is now smart enough to avoid it, alert you to the grievance, and chastise your dog in 27 languages. (We may have made that last part up.) Ecovacs uses LiDAR too, which implies that maybe iRobot isn’t innovating at the pace they should be. Perhaps they can start copying Chinese innovations? Sure, iRobot made TIME’s best inventions in 2018, but guess who achieved that feat in 2021? Roborock.

Time magazine feature on Roborock
Credit: TIME Magazine

We know what you’re thinking because we’re thinking the same thing. Just how many high-tech $1,300 vacuums can be sold before the market is saturated? Roborock recently announced they hit the 10-million-unit mark, an impressive feat when you consider iRobot only surpassed the 40-million-unit mark in 2021. But the total opportunity isn’t just about vacuums, it’s much more than that.

The Total Opportunity

iRobot has an interesting business model. They sell their product using retail channels, then once a consumer has a vacuum in their hands, they sell direct to the consumer. In this way, they can begin to capture other smart home markets adjacent to vacuum cleaners which they describe in the below diagram:

Other smart home markets adjacent to vacuum cleaners that iRobot is planning to capture
Credit: iRobot

That all sounds good on paper, but reality has unfolded differently. Just over a year ago, we published a piece titled iRobot Stock is Pure Play for Smart Home Robotics and noted that the company has been “unable to successfully commercialize anything outside of floor-cleaning robots.” Their last attempt was a robotic lawnmower, Terra, which was called off because of the Rona. In that same article, we noted the rise of both Roborock and Ecovacs as firms that were challenging iRobot head on. Now that both of these firms are publicly traded on Chinese markets, they have more access to capital and can do greater damage. While that doesn’t necessarily mean that any of these stocks are a compelling investment opportunity, it does mean better transparency into their progress.

Roborock’s Solid Momentum

It’s no secret we don’t invest in Chinese firms, something we detailed in our piece on A Big Bear Thesis for Ali Baba Stock. (Pats self on back for that amazing call.) While Roborock may be publicly traded on China’s Star Market, it’s not something we would ever consider investing in, and it’s highly likely we couldn’t anyway because we’re foreign investors. But since Roborock is publicly traded, and they publish press releases that aren’t written in Engrish, we’re able to learn more about their progress. For example, look how quickly they’ve been able to grow revenues compared to iRobot.

Bar graph showing iRobot vs Roborock revenues 2017-2021
Credit: Nanalyze

Historically, we’ve focused very heavily on revenue growth as a proxy for market share captured. These days, profitability matters because easy funding seems to be going away. From that perspective, Roborock appears to be on very solid ground as they’re able to grow quickly while generating meaningful profits. Contrast that to iRobot which seems to be flailing a bit lately.

Bar graph showing revenues comparison between iRobot vs Roborock 2017-2021
Credit: Nanalyze

There’s one more thing worth noting about Roborock which relates to how Chinese firms are perceived by the West. Roborock recognizes some of the Motherland’s workplace shortcomings and is working to rectify them.

A Great Place to Work

We’ve often wondered how D&I might be applied in a Chinese firm where usually every employee is Chinese. Is it a good thing that everyone checks the “Asian” box? Who knows, but we had a chance to chat with some Roborock folks who told us their firm isn’t the sort of 996 culture that many Chinese firms have become famous for. They’re more cognizant that employees have a life outside work, and that’s how they hope to keep attracting the best talent. They’re also selling their company as a place women will thrive, something that should be appealing to ladies who might find the average Beijing office a little rough around the edges. And that’s great to hear, because Chinese women are quite the formidable growth weapon, having made their mark by accumulating more than their fair share of the world’s wealth. Did you know that two-thirds of the 130 female billionaires in the world are Chinese? Now you do.

Conclusion

When industry leaders become too comfortable in their own success, competitors will come sniffing around, especially when there is a large potential opportunity at the end of the rainbow. iRobot may have been investing in innovation externally since 2017, but they’ve clearly been focused on the wrong things. With two rapidly growing Chinese firms now commanding a 26% market share of robotic vacuums, it’s time for iRobot to have a serious come-to-Jesus meeting around how they plan to resurrect their business. And with the capital markets drying up, the turnaround plan better not require loads of funding.

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