The unprofitable world of robot vacuums.
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You're listening to Roundtable with myself, He Yang. I'm joined by Steve Hatherly and Yu Shun in the studio. Coming up...

Robot vacuum cleaners were meant to make life easier for everyone. And it's not just the tax savvy who are buying them. It's busy parents and pet owners too. Despite steady sales, profits are dropping. So why aren't these robots cleaning up the market? And

Have you ever wondered why movie theater seats are always red? Grab your popcorn and get ready to dive into the surprisingly fascinating world of theater seat design, red hot and ready for action. Our podcast listeners can find us at Roundtable China on Apple Podcast. Now let's talk about robots cleaning rooms.

Robot vacuum cleaners cruise around your house using sensors and mapping technology to navigate, dodge furniture, and suck up dirt, all while you relax on the couch. They promise a life of spotless floors with no effort from you.

But the robot vacuum industry is facing a curious trend. Reasonably good sales, but declining profits. What's going wrong? So help us break down the mystery behind the numbers. Yeah, maybe to us it's kind of an interesting phenomenon, but maybe to these people.

Manufacturers is not interesting to them, specifically according to their financial reports. A vacuum cleaner brand, Ecovacs, net profit in Q3 2024 plummeted by nearly 70% year-on-year, and Roborocks is also plummeting.

Another domestic brand, its net profit for the same period decreased by 43%. But these robot vacuum cleaners are still selling well in China. We can see looking at Q3 revenue, the fluctuations of these two companies aren't significant. Ecovacs reached 3.25 billion yuan with a slight year-on-year decrease of 4%, while Roborock reached 3%.

about 2.6 billion yuan with a 12% increase, which means people are still buying, but the growth rate or their profit is slowing down. It's counterintuitive, isn't it? Because I think with many industries and with many companies and their products, if you see growth

then you're going to see better finances and more money in your bank account. But this is, yeah, again, it's counterintuitive. It doesn't seem to make sense on the surface. And it makes sense when you dive deeper into the reasons why. So basically, we see that this is a hugely competitive, intensified competition is associated with this industry and with many different sectors in China when competition is fierce.

Sometimes you see the companies engage in price wars, excessive new product releases and aggressive marketing. And these are all things that are happening in this particular slice of the robot industry as well.

I don't know why, but I do enjoy looking at advertisements for robot vacuum cleaners. I've never bought one before, but I just like watching the videos and it's kind of a weird little hobby of mine. So when I've gone onto the shopping apps here in China, and if you search robot vacuum cleaner,

you can keep scrolling and scrolling and scrolling and scrolling and scrolling. And that's to your point, Hu-Yang, about how much competition is out there and how many competitors there are, how many companies there are selling this product. Yeah, I think what you say included two points. One thing is that the intense market competition with

all of these brands, they're having kind of a balanced market share, you know, in the first half of 2024, the online market shares of the top five brands, Ecovacs, Dreamy, Roborock, Narwhal, and Xiaomi were

about 30, 20, 18, 14, and 9.1% respectively. So there are so many brands that are coming up and getting into this area. And another point is that, as you said, you like watching these kind of advertisement and they're, yes, of course they do. And they spent a lot on advertisement. You know, these emerging brands nowadays often use social media to promote themselves. As we can see, every time they launch a new product, you

It feels like the whole world is using their robotic vacuums. When I was seeing these videos on video platforms, and that's because they've collaborated with so many influencers and celebrities for promotion and this.

of course will need a significant amount of spending on advertising and marketing. Yeah, I don't have information on how much celebrities get paid to do advertisements like that, but I'm guessing it's not free. I'm guessing it comes at a healthy price for the companies. And that's true across various industries, I'm sure. Globally though,

Robot vacuum cleaners are doing quite well, and China plays a pretty big role here as well. The global robot vacuum cleaner market is still growing very strongly, almost 28%, a little above 27% from 2021 to 2028. That's the projection. And China is a dominating force there. They're a really important player in the global market. They're the largest manufacturing hub

for robot vacuum cleaners. And one of the brands you mentioned already, Ecovacs, that's one of the big ones, right? It is. And these manufacturers, they're known for offering technologically advanced products at very competitive prices, and this is helping their global market penetration.

Yes. And here domestically, we're seeing also, you know, with escalating costs, pursuing greater market share often meant that a lot of these companies felt they're compelled to come up with new models and

All of that takes money, and also for the leading manufacturers of the pack, such as Ecovacs and Roborock, they experienced significant rises in research and development and sales expenses in the first three quarters of this year. So we're really digging deep into the balance sheets of these companies. And, of course, inventory buildup is another problem. We see that...

you know, when you've got all this inventory waiting in the storage room and

Getting them to sell better and make a profit can become an issue. But also, I'd like you guys to go a little bit back in history, and that's really just prior to 2019. Apparently, 2019 and 2020 were the two big years when... The golden days? Yeah, but actually, I've been hearing about robo-vacuum cleaners for almost a decade, but for the technology and...

product to mature and to for the greater market to accept it. Apparently, it was 2019 and 2020. And it was 6 million units that were shipped out it domestically. So

That, I suppose, was the heyday. But what are the factors that contributed to the initial success of these robo-cleaners? Yeah, there were a few different reasons. I think one of them was a demand for automation at the time, right? I mean, we have to think back. We have to go back in time, you know, five, six years, right?

And think about what it was like then. Now we're seeing these technologies are everywhere and we're kind of getting used to them. Maybe they're not so wow anymore. But at the time, there was a huge demand for automation in the household. And the modern household, the smart household was becoming like,

a big catchphrase thing. So when these robot vacuum cleaners came out, I was blown away. I think everyone was blown away. So that demand for that cool new tech, I think, was one of the factors. Yeah, and also, I think, you know, these kind of robotic vacuum machines are one of the

most obvious reflection of you are having a smart home. And back then, as you said, people are trying to... Like brag about it to your friends. Yes, you know, when they're decorating their home, they're trying to think about that. And this kind of smart home integration is something that they would like to do. The rise of smart home technology and the increasing interconnectedness of devices have contributed to the appeal of robot vacuums. You know, features like...

You can use a phone to control everything at home, no matter it's your curtain, your robot, or everything, like your lights. So you can just use these things and back at that kind of stage,

of time, people are just buying a lot and of course the advertisements are there. And as I said, I think China was going to that kind of area that back then we are not that used to that home appliances like vacuum machine or robot robotic vacuum machines or just dishwashers and clothes dryers. But

Now, I think more and more people are accepting the idea of having these kind of home appliances. You bring up a really good comparison with the dishwasher. That's been around for decades in Western households, and it's pretty much in the default setting now, right? For the Western household? Yeah, I would say so. Like all the kitchens would come with a dishwasher. But in China, it's really not...

adopted that we haven't adopted it that quickly and I don't think it's going to happen either because like with these home appliances they really have to answer to the needs of the people who live in that house. Yeah 100%. And

Well, from my own quite typical Chinese family experience, we don't have maybe that many dishes to wash. Or maybe it's my family size quite small, a nuclear family. So putting...

Using up so much water and to fill up a whole big dishwasher is actually quite a challenge for my household. I mean, we talked about... So we don't use it. We talked about this one. We talked about dryers as well, right? Yeah, if you missed that episode of Roundtable, go back and check that one out. We were saying that times are changing a little bit now in China. Dryers are becoming a little bit more popular, a little bit more commonly found in people's homes. But traditionally...

you would never have found one, right? - Right. - So that's one of the reasons too. I think one thing that we didn't talk about as well is that there were advancements in robotics

at that time, back when robot vacuum cleaners were becoming a big thing. Navigation sensor technology, that's what they use now and then to find their way around your home. But that's also part of the reason, I think, for the decline in profitability for these companies is that because people have gotten used to and now are increasingly demanding more intelligent vacuums, more intelligent robots,

then some products might struggle with limitations like poor cleaning of debris in certain parts of the house or navigation issues. But we as consumers, that wow factor of, oh, there's a robot that can do this, that's gone. Now we have quickly become more demanding of these products.

And we want the best of the best. I think that's such a great point. And actually, a lot of the early batch users, they complained about how useless some of these robo cleaners turned out to be. And will those people come back for more? They will not. And

So also to sort of excite or engage with more people who might want to buy this, well, you kind of need to come with really good products that can persuade everybody. And there are a wide range of robot vacuum cleaners as well. I feel like a little bit of an expert because of all the videos I've watched. Yeah.

But some of them do the basics, you know. But then other ones, they're self-cleaning. They have these little water tanks and you connect it to your plumbing in your house. I mean, the amount of money that you can spend on a robot vacuum cleaner is very, very wide-ranging, right? But from a consumer's perspective,

point of view from a consumer side. They have to be aware of that as well. I think that not all robot vacuum cleaners are the same. So that might be a challenge for companies too, is consumer awareness of getting what they're paying for. Not everyone is created equal.

That is correct. And also, as we saw, there are different phases that these vacuum machines were developing. Maybe from the start, they were just trying to mop up the floor, and then they have their dodging system, the mapping system, and then, as you said, they have the whole water circulating system that they can self-clean everything.

And all of these need R&D, right? As we can see, these companies are spending so much money on R&D expense. R&D spending rose from...

In this company, Ecovacs, they're spending like from 549 million yuan in 2021 to 744 million yuan in 2022. And then it is still increasing. In the first three quarters of this year alone, R&D expenditure reached 1.3 billion yuan. That's even surpassing the total of the previous three years combined.

which means they are spending a lot, not only in developing, also marketing and promoting everything, and that is the reasons that they are not benefiting from even the better selves. - We've become so spoiled, haven't we, human beings?

I mean, we're complaining about, oh, this robot vacuum cleaner sucks. What? It's a robot that's cleaning your floor for you. What are you talking about? It's amazing. But that's where we are in technology right now. I remember when 5G came out, I was super excited. And within two weeks, I was already wondering when 6G was coming out. We get the new tech, and then we immediately want it to be better and more amazing. And companies, they know that.

That's what consumers are like. We are spoiled. We do want more. And they have to spend a ton of money on research and development to make sure that they can convince us to buy their products. On the one hand, I do agree with you initially. That was very persuasive, Steve. But also, you know, as an average consumer, you're kind of comparing...

Mm-hmm.

because apparently they're not doing a great job anyway. But actually it's like 3,000 yuan at least. Yeah, very not cheap. So that's quite a lot of money. That's like less than 500 US dollars. So if I'm spending that amount of money...

I expect it to do a better job than I do. Yeah, do the job you're being paid to do. Yeah, no, and you're not wrong. You're not wrong. Why would you buy a product? No, and this is the flip side of that coin, and you're absolutely right. Why would you buy a product if it's not going to do the job that you paid for it to do? That doesn't make sense. And again, back to the companies. That's why they're always working so hard to try to make these better and better and better for us. Well, I don't think we're the ones that...

are most worried, but you know, we're in front of the mic and we have a responsibility maybe to some extent here. What do you see as, you know, the future direction of this market? Cause there are kind of at this peculiar situation right now and for the industry to develop, for the customers to be happy. So they would buy more, um,

Yeah, what do you say here then? Maybe product diversification is the thing that they want or need to explore. As you said, maybe in our daily living environment, we don't necessarily need that kind of thing, wandering around to clean our floors every hour. But for some people, like people who have pets,

they urgently need that. - Yes, good point. - All of these furs, they can be invisible and they can be everywhere. I don't know why, but just, you know, and these vacuum cleaners can be so helpful in this case. - Yes, and pet owners are one of the big buyers of these robot vacuum cleaners.

because of what you just said, because of all the invisible pet hair that's around the house. So I think moving into the future, yeah, of course, things like increased smart home integration and then personalization and customization and sustainability is obviously going to be a factor as well. But doing the specific user needs like, for example, pet hair removal, doing those types of things perfectly will be a good thing for these types of companies in the future too. Mm-hmm.

Coming up next, why are movie theater seats red? It's more than just a color choice. We take a look at the unexpected reasons behind it. Stay tuned. Looking for passion? How about fiery debate? Want to hear about current events in China from different perspectives? Then tune in to Roundtable, where East meets West and understanding is the goal. ♪

You're listening to Roundtable with myself, He Yang. I'm joined by Steve Hatherly and Yu Shun in the studio. Have you ever walked into a movie theater, looked around and thought, why are all these seats red? Is it a secret club for tomatoes? Well, fear not, curious minds. The choice of red isn't just some random design quirk or a love letter to catch up enthusiasts. Maybe the story behind those crimson...

cushions is more colorful than you might expect. So why oh why then are these seats red? It's fun to ask that question. Like, why is this this color? Why is that that color? And it's something that I've never thought about before. Sorry, did I interrupt you there? Have you given this some thought before? No, I was trying to say it is interesting enough just by listening to He Yang's intro of this topic that

But anyway, the usual explanation is like red is the color least sensitive to the human eye in the dark. Once the lights are off, red practically disappears and blending into the darkness without distracting viewers from the screen. Question. Black is darker than red. You said red is dark enough that once the lights are off, the red disappears. Black would do an even better job of that, would it not?

then it may be to a situation that, you know, making the space too dark. Otherwise people might struggle to see their way around and risk taking a tunnel. Oh yeah, right. Even, yeah. So when you go into the theater to find your seat, that might be tough. But what about if you were late to the movie and you had to find your black seats in a black theater? That would be mission impossible. And you'll be the movie then. Yeah. You would be the star of that show. Yeah.

That makes sense then, doesn't it? That's a very simple explanation where if you're going to make the space too dark, then it's going to make it almost impossible for people. But wouldn't other colors accomplish this same goal?

Of course, you know, to like different brands or different locations of the cinemas, they will have different colors of these seats, maybe blue and some of them are gray. Yes. But anyway, why red is the most popular option? Actually,

This has something to do with our ancestors and is, I think, the most interesting part of this discussion. You know, from an evolutionary perspective, human vision has always been relatively weak when it comes to perceiving red. Yeah. During the dinosaur era, the ancestors of mammals became nocturnal, which means we're nocturnal.

No, I mean they are active at night to avoid predators. And this adaptation boosted their night vision but came at the cost of color perception. So as a result, many mammals like cows, horses, sheep, dogs, and cats can't distinguish colors well and primarily see the world in shades of black, white, or gray. Oh, you were right. The answer goes way, way back, further than I would have guessed.

Humans, though, you mentioned that those other animals, they can't see different shades, but humans have evolved, right?

the ability to see red, right? But is our vision still relatively poor compared to, I don't know, other vertebrates? - Yeah, so although humans have evolved the ability to see red, our vision is still relatively poor compared to other vertebrates. Humans can see three primary color. Also, I think we learned this from our primary school, red, green, and blue, that is the main three colors.

Thanks to three types of cone cells in our eyes. But compared to other vertebrates, this ability isn't particularly advanced. And also interestingly, our ability to perceive red evolved from green cone cells, some part of our eyes, which is why red-green color blindness is important.

common among humans. Oh, I didn't know. I knew humans experienced colorblindness, but I didn't know there was a common problem among red versus...

Green. Do you have any problems with perceiving colors, different colors? I can't tell the difference between navy blue and black sometimes, but that's not the issue here. That's only because there's too close. But anyway, so that is why some people say that we are seeing or perceiving red as a kind of constructed color. And as a result, red under different lighting conditions or colors.

causing this kind of phenomenon. In bright light, red stands out clearly, making it easy for viewers to find their seats. However, in dim light, the rot cells in our eyes, which are more sensitive to blue-green light, take over. And at this point, red becomes less visible and doesn't distract from the movie. So when the screen lights up in those brighter colors, then we...

red seats disappear from our view. That's so interesting. Or maybe because I just turn up right on time as the lights have dimmed. I've never really noticed that the seats are red until we were preparing for this topic. That is so not me. If I go to a theater and the movie has already started, I will not go in. Not even if it's just the beginning adverts and stuff? Well, okay. Advertisement's okay. But if

the movie's begun then I will absolutely just wait for the next screening it drives me crazy it's a pet peeve of mine so I'm always there I like to watch am I alone in this I like to watch the advertisements before a movie starts um

Yes, I'm alone. You might be alone. These are the trailers. They're fine. But it was just a normal, nothing advertisements. Nobody likes them, but I do. I like to be there early, I guess. Yeah. Well, you're possibly one of the most popular, more popular kind of viewers. To them. Yeah. And also, Red is kind of a...

socially oriented or culture-specific color as well. Because in China, when we think of red, oh, some people even think of patriotism. And also with the spring festival coming up, it's a very much positive color. But in some of the other cultures, red might be seen as maybe associated to blood or to...

enraging someone. Or romance, depending on where you are, right? Yeah, but also it's a safe option for the theater seats now. So you don't bump your head on your way to your seat. Which can also motivate audiences, right? And that brings us to the end of today's roundtable. Thank you so much, Steve Hatherly and Yushun for joining the discussion. I'm He Yang. We will see you next time.