In February, garden machinery manufacturer Greenworks（格力博）went public on the Shenzhen Stock Exchange, sparking industry interest in this company, primarily known for its lawnmowers. While lawnmowers might be unfamiliar to most Chinese, they are a household staple for middle-class families with spacious homes in Europe and the United States.
Despite its relatively low profile in the domestic market, Greenworks boasts an annual revenue of over CNY 5 billion, exports more than 4 million units annually, with export earnings exceeding CNY 3 billion. In the distant North American market, it is a well-known top brand in the garden machinery sector. The company's flagship brand, Greenworks, consistently ranks among the "Best Sellers" on the Amazon platform. At the 36th China International Hardware Exhibition this year, Greenworks announced that its brand had climbed into the top three rankings in the new energy garden machinery market.
How did Greenworks go from being an OEM (Original Equipment Manufacturer) to becoming the top-selling brand in the North American garden machinery market, step by step? How did this latecomer brand differentiate itself and reverse the competitive landscape? Against the backdrop of an increasingly congested international market, what challenges does Greenworks face?
Starting as an OEM, Greenworks Embarks on an Early Journey into Private Branding
Greenworks began its journey in the garden machinery manufacturing and sales industry in 2002. In 2007, it started to venture into the field of new energy garden machinery, leveraging over a decade of experience in the garden machinery sector. Their product lineup includes lawnmowers, brush cutters, pressure washers, blowers, hedge trimmers, chainsaws, and more.
Like many Chinese companies, Greenworks initially established itself through OEM business, providing contract manufacturing services for international top-tier brands such as Toro and STIHL. Recognizing the immense potential in the North American residential garden machinery market, Greenworks began to focus on nurturing its own brands. Starting in 2009, they established brands like Greenworks and Powerworks.
In 2010, Greenworks recognized the growth potential of online sales channels and entered platforms like Amazon. After years of brand marketing and channel promotion, Greenworks' lawnmowers and blowers, among other flagship products, made their mark on Amazon's "Best Seller" list.
Moreover, large-scale retailers are vital channels in the North American market. Starting in 2015, Greenworks entered Walmart, officially launching offline retail operations, and maintained collaborations with terminal retailers such as Home Depot, Costco, B&S, HarborFreightTools, TSC, and Stiga.
In 2017, amid the rapid development of China's new energy industry, Greenworks foresaw significant growth potential in new energy and decided to pivot. Through partnerships with the domestic lithium battery industry, they introduced differentiated competitive new energy garden machinery products, including lithium-ion smart lawnmowers.
Furthermore, to strengthen its brand portfolio, Greenworks acquired the century-old German commercial garden tools brand Cramer in 2018. This move allowed them to center their European market presence in Germany, expanding their market share across Europe.
In January 2023, Greenworks officially commenced production at its manufacturing base in Tennessee, USA, forming a strategic layout with China's Changzhou at its core and Vietnam and the USA as its wings. On February 8th, Greenworks officially went public on the Shenzhen Stock Exchange's Growth Enterprise Market（深交所）.
Multi-Platform Expansion and Omni-Channel Operations to Increase Market Share in the United States
The average living space per capita in Europe and America ranks among the highest in the world, often accompanied by private lawns around residential properties. In some portrayals of the middle-class lifestyle in European and American films and TV shows, it is common to see the male host pushing a lawnmower to trim the grass in the yard, while the hostess tends to the flowers in the garden. As the most economically developed regions in the world with a flourishing horticultural culture, the United States and Europe have long been at the forefront of the market demand for garden machinery products.
In 2020, the demand for garden machinery in the United States and Europe accounted for 51.75% and 30.03% of the global total, respectively, ranking first and second in the world. Of the approximately 250 million private gardens worldwide, the United States claims 40%, while Europe accounts for 32%. According to Global Market Insights data, the lawn and garden machinery market is expected to grow at a compound annual growth rate of approximately 6%, increasing from over USD 37 billion in 2022 to over USD 97.5 billion by 2032, with the North American market surpassing USD 38 billion.
From a product segmentation perspective, according to the lawnmower market research report published by Precedence Research, the global lawnmower market was estimated to be worth USD 31.6 billion in 2021. It is forecasted to grow at a compound annual growth rate of 6.52% from 2022 to 2030, reaching USD 55.81 billion in 2030.
According to TraQline statistics, the market share of fuel-powered garden machinery in North America has declined from 57% in 2010 to 35% in 2021, while the market share of new energy garden machinery has rapidly grown from 13% to 36%, indicating it as a major growth direction for the future.
North America, being the world's largest garden machinery market, is also Greenworks' largest source of revenue. Currently, 99% of Greenworks' business income comes from North America. To capture this critical market, Greenworks has been focusing on improving its brand's market share through sales channels.
In the United States, large retail terminals like Walmart, Lowe's, The Home Depot, and Costco have significant market control. Leveraging the high level of consumer trust in these supermarkets, Greenworks has actively established partnerships with them, selling products through both online and offline channels.
At the same time, to increase independence and reduce reliance on third-party channels, Greenworks has made substantial efforts in developing its own independent website. In just a few years, it has achieved remarkable results. Currently, the sales volume on its independent website far surpasses that of e-commerce platforms like Amazon and eBay, with independent platform sales in 2021 nearly ten times those of Amazon, eBay, and similar stores.
Currently, Greenworks has established a comprehensive omni-channel advantage in the North American market, covering both online and offline, proprietary channels, and distribution channels, ensuring a multifaceted reach to consumers while maintaining impressive profit margins.
From R&D to Manufacturing: What Did Greenworks Do?
Distributed R&D and Manufacturing Facilities: Proximity to Markets and Cost Reduction
From its inception, Greenworks ventured into business in European and American countries, making globalization an inherent characteristic of the company. After years of exploration, Greenworks has now established a preliminary framework for global collaborative R&D and internationalized production.
In 2005, Greenworks began establishing localized operating teams with hundreds of members in European and American countries, enabling them to respond promptly to customer demands through close ties with local markets. In the innovation and R&D phase, Greenworks has set up specialized research and development centers in China, the United States, and Sweden, with over 900 R&D and technical professionals.
Regarding manufacturing, Greenworks operates two manufacturing bases in China and Vietnam, with the capacity to produce over 80% of core components, including new energy battery packs, brushless motors, intelligent controllers, and chargers.
The Greenworks Vietnam factory, established in 2019, has gradually enhanced its production capacity and output levels. As of the first quarter of this year, the Vietnam factory's production and sales accounted for approximately 50% of the company's total. Greenworks products manufactured in the Vietnam factory and exported to the United States help circumvent the 25% high tariffs imposed on Chinese exports to the United States, significantly reducing tariff costs.
Carefully Crafting Product Features to Reduce User Switching Costs
On the Product Front, Greenworks Explores User Habits and Builds an Ecosystem Centered on Lithium Battery Packs to Enhance Customer Engagement and Repeat Purchases."
Within the Greenworks product line, Greenworks has innovatively developed multiple battery pack power platforms, including 40V, 60V, and 80V, all of which enable a single battery pack on the same platform to support various outdoor gardening devices, covering a wide range of outdoor gardening scenarios.
The 40V series primarily targets the mass market, ensuring affordability; the 60V series caters to high-end consumers, providing higher-powered gardening tools for professionals; and the 80V series emphasizes "power comparable to traditional gasoline products," targeting users of traditional gasoline-powered gardening machinery who have high demands for battery performance.
In the purchasing scenario, if a consumer spends $5,000 on a Greenworks lawnmower equipped with the 60V battery pack platform, they don't need to repurchase the battery pack when buying other 60V products like blowers or chainsaws. They only need to purchase the bare machine. This approach reduces consumer usage costs by approximately 35%.
Embracing Emerging Technologies to Capture Industry Trend Changes
Greenworks Focuses on Innovation and R&D, Accumulating a Series of Core Technologies in Motor Control, System Control, Battery Packs, Battery Chargers, Smart and IoT Technologies, with a Total of 1,463 Patents Globally, Making It a Benchmark in the Garden Machinery Industry."
Greenworks, headquartered in Jiangsu Changzhou, often referred to as the "Hub of New Energy," has been at the forefront of innovation in the garden machinery sector. As early as 2007, they introduced lithium-ion battery technology to the field. In 2015, Greenworks became the sole Chinese company to enter the commercial lithium-ion zero-turn lawnmower（ZTR lawnmower） industry.
Since 2017, Greenworks has been continuously exploring the application of emerging technologies such as IoT, autonomous driving, and artificial intelligence in garden machinery products. In 2018, Greenworks' commercial lithium-ion zero-turn lawnmower received the Professional Tool Innovation Award from the United States PTIA. Subsequently, Greenworks partnered with U.S. retailers like TSC, U.S. landscaping service provider Brightview, and global agricultural machinery giant John Deere to jointly promote the development of commercial ride-on lithium-ion lawnmowers. Today, Greenworks maintains a market share of approximately 30% in the U.S. commercial market.
Currently, gasoline-powered equipment still dominates the garden machinery sector. However, with the rapid advancement of technologies such as lithium-ion batteries, brushless motors, and intelligent electronic controls, along with increasingly stringent environmental requirements, the garden machinery industry is undergoing a revolutionary shift from gasoline power to new energy sources. Global Market Insights predicts that the compound annual growth rate of the electric garden machinery product market will reach 8% by 2025, offering Greenworks significant growth opportunities in the field of new energy products.
Facing Multiple Operational Challenges, Greenworks Faces a Challenging Future
Since 2022, Greenworks has experienced a significant decline in performance compared to competitors such as Daye（大叶股份）, TechTronic（创科实业）, Chervon（泉峰控股）, and GreatStar（巨星科技）. According to the prospectus released by Greenworks before its IPO, its revenue and net profit attributable to shareholders in 2021 were CNY 5.004 billion and CNY 280 million, respectively, with the latter experiencing a year-on-year decline of 50.72%. After going public, Greenworks has also encountered challenges including a substantial drop in revenue and a competitive disadvantage. These issues are the result of multiple challenges Greenworks has faced in recent years.
Obstacles in Channel and Customer Cooperation Lead to a Steep Decline in Revenue
As mentioned above, a significant operational characteristic of Greenworks is its collaboration with large retailers such as Amazon, Costco, The Home Depot, Harbor Freight Tools, CTC, Bauhaus, as well as renowned garden machinery brands like Toro, STIHL, ECHO, and B&S. These partners consistently contribute to over 70% of Greenworks' annual revenue, highlighting the company's substantial reliance on key customers.
Lowe's, the world's second-largest home improvement retailer, was also Greenworks' largest customer at one point, procuring a significant volume of garden machinery products from Greenworks. According to publicly available data, Lowe's purchased products from Greenworks amounting to CNY 2.132 billion in 2019 and CNY 2.180 billion in 2020, accounting for 57.22% and 50.79% of Greenworks' respective revenue for those periods.
However, in 2021, Greenworks began encountering difficulties in its collaboration with Lowe's. That year, Lowe's procurement from Greenworks amounted to only CNY 1.242 billion, marking a significant 43.04% year-on-year decline. Greenworks' Greenworks 60V products ceased to be sold at Lowe's, and its exclusive manufacturing status for Lowe's private-label 40V Kobalt products was replaced by the competitor Chervon. Furthermore, private-label 80V Kobalt products were adjusted to be sold exclusively online through Lowe's.
In 2022, Greenworks experienced a further reduction in sales to Lowe's, declining by as much as 9.31%. While Greenworks claimed to have absorbed the negative impact of the declining sales to Lowe's, the overall downward trend in revenue has yet to be curbed.
Industry Competitors Abound: Greenworks Faces Enormous Challenges
From 2018 to 2021, Greenworks' sales performance fell short compared to other competitors. While it achieved a compound annual growth rate of 17.2%, Chervon reached 58.3%, TechTronic reached 22.8%, and Daye reached 21.1%. The primary sales regions for these companies are also in Europe and America. Additionally, the emerging players with their innovative technologies and rapid growth momentum are intensifying competition in the garden tools industry.
In terms of gross profit margin, Greenworks also lags behind other players. In 2021, TechTronic, with its economies of scale, saw a steady increase in gross profit margin year by year, reaching 29.8%. Meanwhile, Greenworks' gross profit margin was only 27.5%, marking a 7.6 percentage point year-on-year decline. The main reason is associated with the channel platforms it collaborates with, where the decrease in gross profit margin for large retail channels has led to a decrease in Greenworks' profitability. In 2021, the company's non-GAAP net profit margin was only 4.7%, with a non-GAAP net profit of CNY 240 million, representing a 42% year-on-year decrease.
Furthermore, TechTronic has chosen to establish factories in the United States, and Chervon has set up factories in Vietnam. All of these factors indicate that Greenworks will face even greater pressure in the garden machinery industry in the future.
On the other hand, new entrants in the market often choose to label themselves with smart and technological features, which can be quite appealing to the new generation of users. For example, Zoilmi（追觅） has recently introduced a borderless intelligent lawnmower robot for the European and American markets. This product solves the previous inconvenience of users needing to lay wires before using lawnmower robots and eliminates the need for manually setting up lawn boundaries, offering a plug-and-play experience.
Yarbo, a subsidiary of Hanyang Technology（汉阳科技）, utilizes positioning systems and advanced algorithms to enable its lawnmower to work within virtual boundaries. After some quick and simple settings on the mobile app, the lawnmower autonomously handles the mowing tasks.
AIRSEEKERS（长曜创新） is dedicated to providing smart lawn care solutions for private lawns and has introduced intelligent lawnmower robots with the aim of becoming the core component of the entire smart garden, serving the entire home yard ecosystem.
Meanwhile, the subsidiary of Segway-Ninebot（九号公司）, Willland（未岚大陆）combines satellite positioning and multiple built-in sensors to create an innovative EFLS Fusion Positioning System, enabling one-touch automatic mowing and freeing users from manual labor. Although the market penetration rate for smart lawnmower robots is currently only 4%, its growth prospects are promising and it is expected to gradually replace traditional manual tools in markets like Europe and America.
As a manufacturing-oriented enterprise with a focus on foreign trade, Greenworks' development is inevitably influenced by downstream distribution channels and the market environment. Despite being an early adopter of lithium batteries in the garden machinery industry, Greenworks has, to a certain extent, been surpassed by Chervon.
On February 8, 2023, Greenworks was listed on the Shenzhen Stock Exchange's Growth Enterprise Market. However, its stock price fluctuated and declined after reaching a high of CNY 41.88 on the day following the listing. The opening peak also reflects a lack of market confidence in Greenworks. The future prospects of whether Greenworks can establish competitive advantages amid various challenges, maintain its leading position in the European and American markets, and continue to deepen its branding efforts remain highly uncertain.
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