Summary of Key Points
Over the past year, Zhumai has aggressively expanded through a “horse-racing” strategy, launching more than 200 business units (BUs) across various sectors such as vacuum cleaners, automobiles, and milk tea. However, these diversification efforts have not met expectations. Since June this year, the company has reoriented its strategy, focusing on four core areas: smart homes, outdoor spaces, intelligent transportation, and embodied intelligence. As a result, non-core businesses have seen layoffs, production lines shut down, and supplier payments have been delayed. Nevertheless, its core cleaning appliance business remains stable. This shift from rapid expansion to strategic contraction is triggering a chain reaction throughout the supply chain.
I. From “Flourishing Everywhere” to “Focusing on the Core”: Why the Hasty Brake?
Zhumai’s previous expansion was akin to “sprinkling pepper everywhere”—more than 200 BUs were competing simultaneously. For example, there were two separate teams working on window cleaners, and three BUs were developing car projects, each receiving funding from the group and government grants. The cost of this reckless growth was the waste of resources: multiple teams in the same sector were working on similar tasks, leading to overlapping research and development efforts, with funds and manpower being dispersed.
Things have changed in the industry this year: the smart cleaning appliance market has shifted from a growth opportunity to a competitive one where companies are fighting for existing market shares. According to IDC data, Zhumai ranks third globally in the cleaning robot market (with a 10.5% market share). However, founder Yu Hao’s goal of achieving revenues of over 40 billion yuan and a net profit of 3 billion yuan by 2025 is nearly twice that of the top two companies in the industry, which is clearly unrealistic. As industry profits decline, the group has had to tighten its budget and concentrate resources on profitable core businesses.
II. Layoffs and Production Line Shutdowns: The Pain of Cutting Non-Core Business
The strategic contraction has had a direct impact on non-core businesses:
- Layoffs: After three waves of layoffs, only a few people remain in the window cleaner BU. Even efforts by employees to “make the numbers look better” (with weekly revenue deviations of up to 35%) are futile; all funding decisions for the BUs are now centralized at the group level, with even minor expenses requiring approval from headquarters.
- Production Line Shutdowns: MOVA, once a strong sub-brand with five production lines capable of producing 10,000 units per day, has largely ceased production, with more than half of its 1,000 employees laid off. The remaining staff are waiting for improvements.
These adjustments were not sudden; the group announced its plans to scale back in June, and non-core businesses had no choice but to cut costs through layoffs and production halts.
III. Suppliers in a Financial Crisis: The Vicious Cycle of Delinquent Payments → Supply Cuts → Production Stops
Suppliers have become victims of the contraction:
- Delinquent Payments: Chen Jia, a supplier of major appliances, was owed 980,000 yuan and only received 30,000 yuan after two months of follow-up; a small supplier from Henan waited three months for a 50,000 yuan deposit. Zhang Xun, a supplier of electronic components, faced even greater difficulties—4 million yuan in unpaid debts and 20 million yuan in custom inventory (which could only be sold to Zhumai) trapped him in a financial predicament, forcing him to stop supplying.
- International Consequences: Shipping at the Rotterdam port in the Netherlands has been delayed due to concerns about payment collection, leading to inventory buildup.
Fortunately, suppliers of core business components (such as those for cleaning appliances with stable orders) are less affected, as their payments are more predictable. However, suppliers of non-core businesses (like major appliances and sub-brands) are in a much worse situation.
IV. Adjustment is Inevitable, but the Pain Must Be Alleviated: What Are Zhumai’s Challenges?
Industry experts agree that cutting non-core businesses is the right move, as the cleaning appliance market now relies on technology and efficiency. Diversifying into unrelated areas like milk tea and automobiles is unfeasible. However, Zhumai’s problems include:
- Inadequate Communication During Layoffs: This has led to employee dissatisfaction.
- Poor Handling of Supplier Delinquent Payments: This has undermined supplier confidence in the supply chain, potentially causing further production disruptions.
- Rough Integration of Sub-brands: Powerful sub-brands like MOVA were eliminated, potentially wasting previous investments.
Although Zhumai emphasizes the stability of its core business (even releasing videos showing production line operations), if these issues are not addressed properly, they could damage the brand’s reputation and supply chain relationships. After all, a ship moving at high speed must navigate sharp turns; whether it can maintain stability depends on how well the changes are managed.
For Zhumai, this adjustment is like “removing dead flesh to heal the wound”—cutting off unprofitable businesses and redirecting resources to profitable areas. However, whether it can overcome the consequences of its expansion will depend on its ability to balance contraction with stability. For consumers, as long as core products (such as vacuum cleaners) are still available and repairable, there’s no need for immediate concern. For suppliers and employees, however, the tough times will likely continue for a while.