Vorwerk’s acquisition of Neato Robotics adds spark to exponentially growing robotic appliance market, says IHS Markit

 

Germany-based home appliances manufacturer Vorwerk recently acquired Neato Robotics, a Silicon Valley maker of domestic robots.

Vorwerk is known for its premium products in the household appliances market and Neato Robotics is known for its innovation and technological know-how, mainly in robotic vacuum cleaners.

Vorwerk first invested in Neato Robotics in 2010. Both companies are eager to maximize the exponential growth of the robotic appliance market, individually and collectively, with ‘cross-over’ benefits. 

With this acquisition, Vorwerk Group confirms its focus on the domestic robotic appliance market, also referred to as the domestic service robot market.

With Neato Robotics being more of a global player, this acquisition allows Vorwerk to instantly gain share of the robotic vacuum market across regions, according to IHS Markit.

Combining forces to grow market share

IHS analysts say this acquisition seems to be constructed such that these two companies can continue to work independently, running their individual distribution channels in parallel while taking maximum advantage of each other’s strengths in order to gain more share of this growing market.

Overall, the acquisition appears to be a collaborative, non-cannibalizing acquisition.

On one hand, Vorwerk is expected to benefit by gaining access to Neato Robotics’ technological know-how, now as its parent company.

On the other hand, Neato Robotics receives financial backing from Vorwerk, which is much needed to expand its reach and enhance its product portfolio – possibly beyond robotic vacuum cleaners to other related categories.

The acquisition timing could prove beneficial for Neato Robotics in the fiercely crowded US market, where it is up against iRobot, a dominant player currently facing financial challenges, and SharkNinja, which recently entered the US market with aggressive plans and a partnership with leading China-based robotic appliance maker EcoVacs.

The two companies’ product offerings appear to be of non-conflicting nature as their respective products are priced differently. Vorwerk is currently a single model company, having only one premium robotic vacuum offering.

Meanwhile, Neato Robotics has several robotic vacuum models. Taken together, this suggests a lower possibility of cannibalization between their brands and businesses.

New synergies open door to more aggressive global marketing

With the expected synergies, the two companies might become more aggressive in their marketing efforts, expanding into new territories and market segments independently as well as collectively.

Vorwerk indirectly could indirectly increase its distribution channel footprint in the important US market, where Neato Robotics has a strong presence.

Furthermore, Vorwerk could spread it wings in European markets outside Germany where Neato Robotics has an established presence – such as in the UK, France, Italy, Spain and few Nordic markets.

The companies could strengthen their distribution networks in important Japanese and Chinese markets, where Vorwerk has a presence in other consumer segments, but it will require better collaboration and coordination in order to churn out innovations that drive business growth.

It will be interesting to see how the companies – both individually and collectively – work to capture large, fast-growing and highly competitive markets in China and Japan, where competitors have fiercely loyal customer bases.

Dinesh Kithany, senior principal analyst, smart home appliances at IHS Markit: “IHS Markit expects both Vorwerk Group and Neato Robotics are, independently and collectively, to gain from this acquisition.

“However, they will require better collaboration and coordination in order to churn out innovations that drive business growth.

“For its part, Neato Robotics stands to gain much needed additional financial muscle for technological enhancements, to expand its expertise, and to showcase its capabilities in the robotic technology market.”

The robots have arrived

Robotic appliances are increasingly popular with consumers, who have become less skeptical about the overall capabilities and cleaning performance of robotic appliances.

There are many drivers of the growth recently seen in the robotic appliance market, including:

• Changes in household and consumer profile
• Changes in consumer lifestyle and needs
• Tech-savviness of consumers
• Introduction of connectivity technology
• Better suction power
• More efficient battery life
• Adoption of latest navigation technologies
• Added features such as cameras (for mapping as well as security purposes)
• Improved design and the use of premium materials and finish

IHS says aggressive advertising and promotions and consumer education have also helped revitalize this market.

The presence of robot and drone companies at key consumer events and trade shows like CES and IFA is becoming commonplace.

Moreover, the introduction of the latest voice-assistant technologies into robotic appliances is adding incentive for tech-savvy consumers and early adopters of robotic vacuums and other home products.

“However, the market is young, and IHS Markit expects to see more consolidation in the coming years, especially among Asian companies,” says Kithany. “The robots have arrived, and they are here to stay.”

According to the IHS Markit Home Appliance Intelligence Service, the global domestic service robot market is expected to grow from 7 million units in 2016 to more than 15 million units in 2021.