Recently, during the 618 promotion on Chinese e-commerce platforms, Dreame Technology (追觅科技, hereinafter referred to as Dreame) achieved sales of over 100 million yuan within 14 minutes, ranking first in four e-commerce platform lists. In the Southeast Asia e-commerce mid-year 66 promotion, Dreame topped the small household appliance sales on Lazada. A month ago, during the French Days promotion launched on local French e-commerce platforms, Dreame's L10s Ultra robot vacuum also achieved the highest sales on the French e-commerce platform Boulanger.
Numerous "Top Ones" have propelled Dreame to become the most eye-catching tech company in the intelligent cleaning industry. Founded in 2017 and headquartered in Suzhou, Jiangsu, Dreame focuses on intelligent cleaning as its core business, with four major product categories: robot vacuum and mop, cordless stick vacuum, wet and dry vacuum, and hair dryer.
In an interview with the media, Dreame's founder, Yu Hao, stated, "Being first is a habit, and once you have a habit, it becomes addictive." He proposed that Dreame's goals are to "achieve the industry's top technology by 2023, the highest market share by 2024, and the highest profit by 2025."
As an emerging category in home appliances, intelligent cleaning devices experienced explosive growth in the past two years, but this year, the growth rate has slowed down. With more and more capital entering the market and players rushing to join, the industry has become crowded and is gradually returning to rationality.
Industry insiders told EqualOcean that there is currently no moat in the intelligent cleaning industry, and the ones who will succeed in the future are the "hexagonal warriors" who have achieved the best sales, supply chain, and R&D efficiency. This means that to achieve Dreame's "three firsts" goals, not only does it need strong technological capabilities, but it also requires stronger overall competitiveness, able to lead the industry in finding new growth engines through innovation.
So, does Dreame deserve its ambition?
Sharing Industry Dividends
The industry Dreame is in - intelligent cleaning, represented by robotic vacuum cleaners, currently has a much smaller market size than white goods, but has a large incremental space. Here are several specific features:
Relatively strong demand. Referring to the rise of household appliances, products that become necessities either significantly save labor time or greatly enhance the user experience, such as washing machines, air conditioners, and refrigerators. On the basis of the rigid demand for "freeing hands," intelligent cleaning products further dig deep into consumer pain points and capture the needs of segmented groups. GFK data shows that from 2012 to 2022, the market size of cleaning appliances in China increased from 2.9 billion yuan to 34.8 billion yuan, with an average annual compound growth rate outperforming the overall household appliance market. In the first half of 2022, the global robotic vacuum cleaner market was approximately 15.8 billion yuan, with the Chinese market reaching 5.7 billion yuan, a year-on-year increase of 16.2%. However, compared to the white goods market of hundreds of billions yuan , the smart cleaning industry obviously has a much smaller market share. In this regard, investors generally believe that there is a high potential for penetration rate improvement in this industry.
Low market penetration rate, with high growth potential. iRobot announced that in 2021, the penetration rate of robotic vacuum cleaners in major countries (such as the United States, Germany, and Japan) was below 15%, with an expected compound growth rate of over 20% in major countries from 2022 to 2026. Compared to overseas markets, the domestic market started later, with a penetration rate far lower than that of Europe and America. Kaiyuan Securities Co., Ltd.(开源证券) estimated that the domestic penetration rate of robotic vacuums in 2022 will be only 5%.
Stable competitive landscape with decreasing technological barriers. Currently, Dreame's main competitors are industry leaders such as Ecovacs(科沃斯) and Roborock(石头科技), which were early entrants in the market, emerging startups like Narwal(云鲸智能), and traditional comprehensive home appliance giants such as Midea(美的) and Haier(海尔). In overseas markets, there are top brands like iRobot and Shark(鲨客) competing for market share. According to data from All View Cloud Data Technology (奥维云网), the CR5 of robotic vacuum cleaners in both domestic and overseas markets has exceeded 90%, showing a significant concentration effect among the leading brands. However, as more players enter the market and product functionalities are iterated faster, the abilities of products such as cleaning, obstacle avoidance, and navigation that consumers are concerned about tend to become homogeneous. Without the emergence of innovative variables, the original technological barriers are gradually disappearing. Dreame will face more potential entrants and the threat of substitutes.
In recent years, the industry's gross profit margin has been relatively high, far higher than that of the white goods industry. In 2022, the gross profit margin of Ecovacs service robots was 44.89%, and Roborock's gross profit margin was 49.26%. In the same period, the gross profit margins of Haier Smart Home(海尔智家), Midea Group(美的集团), and Gree Electric(格力电器) were 31.3%, 24.24%, and 26.04%, respectively. The main reason, according to industry insiders, is the accelerated technological iteration of robotic vacuum cleaners in recent years, resulting in higher average selling prices and, in turn, driving up product gross profit margins.
Operating in a fast-growing industry, Dreame has seized the early development dividends. From the B2B business to overseas markets, and then back to the domestic market, Dreame achieved revenues of approximately 5 billion, 20 billion, 40 billion, and 60 billion yuan from 2019 to 2022, with an average annual compound growth rate of about 64%.
Hard to Have a Good Business in a Good Industry
In the long run, it is difficult to say whether Dreame's business is a good one.
Essentially, the development of intelligent cleaning industry relies on technological iteration and product innovation. Historically, the robot vacuum cleaner industry has experienced three rapid growth periods, driven by the application of laser navigation in 2010, the maturation of global planning technology with visual navigation in 2015, and the expansion of base station functions in 2020. Once a new feature introduced by a company is validated by the market, it often becomes a standard feature in other companies' products.
The intelligent cleaning industry has entered a stage of homogenization and incremental innovation, where Dreame needs to constantly iterate its products in order to keep up with the market pace. Since the launch of its first robotic vacuum cleaner in 2020, Dreame has released a total of 8 robotic vacuum cleaners in the past two years. They release new products approximately every three months, which is significantly faster than the industry's once or twice a year product release frequency.
The approach mentioned above makes it difficult for Dreame to find the time to create groundbreaking, revolutionary products that can lead the market's development. At the same time, it further dilutes Dreame's profits. Although the average unit price of products in the current market is generally high, the trend of slowing growth and the divergence between volume and price has become apparent as the industry returns to rationality. Relying on high prices to maintain high growth is unsustainable.
Data from All View Cloud Data Technology shows that the online sales revenue of the domestic robotic vacuum cleaner industry in 2022 (accumulated until September) reached 6.271 billion yuan, a year-on-year increase of 2.43%, with revenue growth slowing down. Among these, the average product price was 3,093 yuan, a year-on-year increase of 931 yuan, but sales volume reached 2.0274 million units, a year-on-year decrease of 28.4%. In the long run, product prices will gradually decline. This year's 618 promotion data also confirmed this point, with the average price of robotic vacuum cleaners slightly decreasing by 4.2%.Moreover, the rapid product update speed means that each of Dreame's products has a relatively short consumption cycle, which may lead to pressure on its inventory turnover.
EqualOcean also observed that, unlike other companies in the intelligent cleaning sector that stabilize their footing with one product before developing other categories, Dreame has been focusing on multiple product categories from the very beginning and has already stepped out of the home cleaning domain. It has established an innovative robotics research institute, embarking on a new journey towards generalized robotics. This is likely inextricably linked to Dreame’s team composition.
Technology Player with Great Ideal
"Technology" is a keyword in Dreame's development process. Dreame's founder and CEO, Yu Hao, graduated from Tsinghua University with a major in aerospace engineering. He firmly believes that "core technology is the foundation of everything" and has set a grand and long-term blueprint for the company's development. In Zhuimi's brand manual, it is written that the company's mission is "to use technology to promote the progress of human society and civilization." Their vision is to be a "constantly exploring and growing world-class technology company, becoming the largest technology ecosystem globally."
At present, Zhuimi has established research and development, marketing, manufacturing, supply, and functional platforms, with over 2,000 employees distributed in Suzhou, Beijing, Shanghai, Shenzhen, and other locations. In terms of team composition, Dreame has chosen a strong research and development path. The "Sky Workshop" founded by Yu Hao at Tsinghua University contributed core members to Dreame's initial team. Currently, over 70% of the team members are technical research and development personnel. On Dreame's official recruitment page, more than 35 research and development positions have been opened in the past three months.
Indeed, in the context of intelligent terminal industry technology companies vying to break through technological barriers and iteratively innovate products, Dreame's focus on research and development can only achieve a relative advantage in incremental innovation. It may be difficult to escape the competitive pressure of homogenization in a short period.
Dreame has made strategic arrangements for overseas markets in terms of marketing. They have set up a Market Intelligence (MI) team and regional sales teams to conduct user research and market information search, as well as employing localized staff for overseas markets. This might help Dreame to better understand and adapt to the needs of different markets, and potentially differentiate their products and services from competitors.
With the increase in the number of team members, the management pressure has also surged. Although Dreame has strong R&D characteristics and updates on the market side, its functional departments have not yet been able to explore the most efficient operation logic for the company. Whether the technical strength of founder Yu Hao can make up for the lack of organizational ability, or whether Dreame can have a strong management team with clear division of labor and balanced allocation, will have a crucial impact on the development of Dreame.
In addition, Dreame is also pursuing highlights for the brand's continuous growth. In May 2023, it collaborated with The Fair(新世相) to release its first brand promotional video, "Aircraft Makers Turn to Sweeping." Utilizing the background of the founder, Yu Hao, who invented quadrotor developers and tricopter aircraft in his early years, the video combines aircraft technology with Dreame's own products to promote the idea of using high-end technology to achieve the happiness in the home. This act can be seen as an attempt by the brand to seek a differentiated narrative and is also a response to the company development path from a values perspective.This path means that Dreame will start from the positioning of a robot company and use technology to change the world. Whether Dreame's grand vision can leave an impression in the hearts of employees and brand audiences remains to be seen with more concrete actions.
It is worth noting that in October 2021, Dreame raised 3.6 billion yuan with a valuation of 170 billion to 180 billion yuan. Based on the 4 billion yuan in revenue in 2021, Dreame's P/S ratio is 4.25. 2021 was also a highlight year for the robotic vacuum cleaner industry. Ecovacs' market value exceeded 100 billion yuan, and the stock price of Roborock also broke through 1,000 yuan/share, becoming the "sweeping broom," the second stock in the A-share market with a stock price exceeding 1,000 yuan. Today, the extreme attraction of the robotic vacuum cleaner industry has faded, and the market value of both companies has dropped by nearly 70%. It is uncertain whether investors in the C round will be able to make money when Dreame goes public in the future.
Back to the first question, can Dreame live up to its "ambition"? The positive answer is yet to be given, and probably not to be given. As the industry returns to rationality, the company faces three major challenges: the pressure from industry leaders, the absence of revolutionary technological innovations, and the high-risk strategic planning under its grand vision.