In 2011, the factory became a multi-billion-dollar overseas brand. Did “laziness” lead to the multi-billion-dollar sales?

▶ Video account attention cross-border navigation

Jack Ma once said: "The world is created by lazy people." In other words, laziness is both human nature and the ladder of progress. Therefore, a new economic model called lazy economy came into being.

The lazy economy is now in full swing, spawning countless wealth-making opportunities such as online shopping and door-to-door services. The smart home appliance track has been a hot topic in recent years, and many leading brands have emerged in different segments, such as the long-standing best-seller of sweeping robots - Ecovacs.

Consumers' "laziness" and the impact of the epidemic have brought Ecovacs to the top of the industry.

Ecovacs was founded in 1998. Its predecessor was a foundry that mainly engaged in the OEM business of traditional vacuum cleaners. As its scale expanded, Ecovacs's service objects jumped from unknown small brands to top sellers such as Electrolux and Philips. After 11 years of OEM career, Ecovacs finally launched its first sweeping robot product in 2009, officially starting the battle of transformation.

Years of deep experience and first-mover advantage ahead of competitors have helped Ecovacs to continuously erode market share. In 2020, the stay-at-home economy derived from the epidemic has boosted the smart home track, and Ecovacs has also taken advantage of the growth, with its market value soaring from less than 10 billion to over 140 billion yuan, becoming the number one stock in the sweeping robot industry.

However, after the peak, the good times are bound to fall. Once the highly inflated market value bubble burst, it was out of control. The stock price has been falling from the historical high of 251.61 yuan on July 15 last year. As of the close of October 31, Ecovacs' stock price was only 58.3 yuan, falling from a market value of hundreds of billions to more than 30 billion today.

All of this is inseparable from the deep-seated performance risks of Ecovacs.

According to the third-quarter financial report recently released by Ecovacs, its Q3 revenue was 3.302 billion yuan, a year-on-year increase of 14.44%; the net profit attributable to shareholders of the listed company was 245 million yuan, a year-on-year decrease of 48.94%.

  ▲ The picture comes from Ecovacs’ financial report

In the first three quarters of this year, Ecovacs' total revenue totaled 10.125 billion yuan, up 22.81% from the same period last year; the net profit attributable to shareholders of the listed company was 1.122 billion yuan, down 15.65% from the same period last year.

But judging from the revenue data, the strong performance of sales of 10 billion in three quarters is enough to demonstrate the foundation of this old cleaning brand. However, corresponding to the high revenue growth is the gradual decline in profitability, and the net profit is almost halved compared with last year.

Ecovacs explained that due to the influence of macro factors, the consumption growth momentum weakened, the market input-output declined, and the net profit fell significantly. However, Ecovacs' performance anxiety is not only due to the slowdown in consumer demand.

In fact, although Ecovacs has a long history in the cleaning robot market, it has failed to build a solid brand moat. Faced with the successive attacks from up-and-coming companies, Ecovacs is now in a difficult situation.

It should be noted that for the smart home industry, technology-driven is the underlying logic. However, Ecovacs, which took off too fast, has been infected with the drawbacks of focusing on marketing and neglecting research and development. From 2019 to 2021, its R&D expenses accounted for 5.22%, 4.67%, 4.2%, and 5.16% respectively, but sales expenses increased significantly, accumulating about 7.649 billion yuan in three years, equivalent to 6.57 times the R&D investment.

This "nouveau riche mentality" that lacks patience for deep cultivation and competitive barriers also caused Ecovacs' dream of becoming a leading company to collapse. Not only did it lose the favor of capital, but it also became a wave that was washed ashore by the wave behind it.

Compared with Ecovacs, whose stock price has been fluctuating downward, the value of fast fashion unicorn SHEIN has continued to soar, even exceeding US$100 billion at the beginning of this year, which is equivalent to the combined market value of H&M and Zara.

Data from Sensor Tower shows that in the second quarter of 2022, SHEIN was downloaded 6.8 million times in the United States, a 13% increase from the previous quarter, successfully surpassing Amazon to become the most downloaded shopping app in the United States.

On the other hand, in the fashion field, SHEINS ranked first in the world with a 3.4% visit share, while H&M and Zara ranked third and fourth respectively.

SHEIN, which is now making great strides in the global market, is also highly expected by capital and the market. According to the Wall Street Journal, SHEIN's revenue this year is expected to reach US$24 billion. According to people familiar with the matter, SHEIN's GMV is expected to increase by 50% to US$30 billion in 2022.

In fact, judging from SHEIN's performance this year, it is very likely to achieve this goal.

In the first half of 2022, SHEIN's sales exceeded US$16 billion, a year-on-year increase of more than 50%. In recent years, SHEIN's performance has grown exponentially. In 2020, GMV exceeded US$10 billion for the first time, with a growth rate of 250%, and in 2021 it exceeded US$20 billion.

Although SHEIN's performance growth rate this year has slowed down significantly, it is still very impressive compared with its competitors. For example, ZARA achieved revenue of 8.9 billion US dollars in the first half of the year, with a year-on-year growth of only about 7%.

Although inflation, repeated epidemics and other macro-adverse factors have had a negative impact on the market in 2022, SHEIN's performance has remained steady and upward. In the face of external pressure, SHEIN has also set two core goals: increasing average transaction value (ATV) and optimizing profit margins.

It is reported that as of the first half of this year, SHEIN's ATV in the global market was US$75, while in the past three years it was US$50, US$60 and US$70 respectively. It can be seen that SHEIN, which relies on a low-price strategy, is trying to tap into more profit margins to maintain healthy performance development.

Now that the peak season in the second half of the year is approaching, with major promotions such as Black Friday and Cyber ​​Monday stimulating consumption, SHEIN may be able to achieve its annual sales target of US$30 billion one year ahead of schedule. Whether Ecovacs can seize the opportunity of the peak season and achieve a turnaround in net profit still has a lot of room for imagination.