Half-year revenue exceeded 5 billion, and many top-selling products ranked among Amazon's BSR!

When it comes to home renovation and house repair, Europeans and Americans have always adhered to the principle of doing it themselves instead of hiring workers. This has given rise to a large number of DIY demands and also driven the growth of related categories such as power tools. Power tools will be one of Amazon's fastest-growing categories in 2022.

Many Chinese sellers have become famous overseas with this category. This article mainly analyzes the potential of power tools in the European and American markets through the actual cases of two big sellers, Chervon Co., Ltd., the "first Chinese power tool stock", and Techtronic Industries, the world's electric drill king.

Many products ranked on Amazon BSR, Chervon Holdings sold 5 billion in half a year

Quanfeng Holdings Co., Ltd. (hereinafter referred to as "Quanfeng Holdings"), known as the "No. 1 Power Tool Stock in China", is a major brand in the Amazon tool category headquartered in Nanjing. It was listed on the Main Board of the Hong Kong Stock Exchange in 2021. It is mainly engaged in the research and development, production and sales of power tools and outdoor power equipment (OPE) and related industry products, focusing on innovation in the field of lithium battery system technology innovation. North America (accounting for nearly 70% of the business) and Europe (nearly 30%) are the company's main markets.

In terms of segmentation, the company has the high-end Ego brand in the outdoor power equipment market, and its products mainly include snow blowers, lawn mowers, hair dryers, grass trimmers, etc.; the company's power tool business has four brands, FLEX , SKIL, Dayou and Xiaoqiang , and its products mainly include electric drills, angle grinders, etc.

In recent years, the company's revenue has been growing rapidly, from US$690 million in 2018 to US$1.76 billion in 2021, with a compound annual growth rate of 36.5%. This is due to the rapid rise of the company's own brand (OBM) and original equipment manufacturing (ODM) businesses, especially driven by the own brand business with Ego as the core. The OBM business of Chervon Holdings is developing in full swing, with a gross profit margin much higher than that of ODM.

On Amazon, Ego (high-end market) and SKIL (mass market ) under Chervon Holdings are both BSR-level brands with many hot-selling products that are highly praised by consumers. For example, SKIL power tools have more than 5,000 ratings, with a score of 4.6 and a selling price of $38.09.

In terms of ODM business, Chervon Holdings cooperates with large supermarkets including Lowe's, Walmart, Kingfisher, etc. to sell products to major markets in North America and Europe, thereby accumulating users and sales channels, laying the foundation for the entry of independent brands and even increasing their popularity.

In the 2023 semi-annual report, Chervon Holdings' revenue was US$739 million (approximately RMB 5 billion) and its net profit was US$49.547 million, even though both the company's revenue and profit declined. Among them, OPE products for high-income groups grew strongly, contributing the most revenue to the company in the first half of this year, with sales revenue of US$445 million and power tool sales revenue of US$286 million.

OPE has developed strongly in the power tool market. Chervon Holdings ranks second among the top ten players in the global OPE market, with a market share of 11.4%. In China, Daye Co., Ltd., which focuses on fuel-powered lawn mowers, and Greebo, which focuses on new energy gardening equipment, can be said to be relatively strong domestic power tool export companies, but their market share is far less than Chervon Holdings.

And in the industry, there is another leader.

With 40 years of experience in power tools , Techtronic Industries has firmly established itself as the industry leader

Techtronic Industries was founded in 1985 and listed on the Hong Kong Stock Exchange in 1990. After 2003, except for a decrease in revenue due to exchange rate issues, the company has maintained steady revenue growth for 18 consecutive years. In 2021, global sales exceeded US$13.203 billion and net profit reached US$1.099 billion. Even during the epidemic, the company has continued to expand its production bases to Vietnam, Mexico, the United States and other places.

Initially, the company started out as an OEM for power tools, and through multiple mergers and acquisitions, it transformed its business from OEM-ODM-OBM. Currently, the company focuses on the North American and European markets, and its main products cover a wide range of categories, including power tools, accessories, hand tools, outdoor gardening tools, and floor care products, including electric drills, chain saws, lawn mowers, upright vacuum cleaners, canister vacuum cleaners, etc.

It owns many well-known brands, and the brands focusing on power tool business mainly include: the century-old electric drill brand Milwaukee, the world's first DIY tool brand Ryobi , AEG, Homelite, Empire, etc.; floor cleaning and care brands Hoover , Oreck, Vax, Dirt Devil and other 13 major brands.

However, the company's revenue mainly relies on the three major brands of Milwaukee, Ryobi and Hoover. With the growth of power tool sales represented by the Milwaukee brand, the power tool business continues to be the company's main source of income, accounting for 93% of total sales in 2022.

In terms of performance scale, Techtronic Industries is much larger than Chervon Holdings, with revenue of US$6.879 billion and earnings before interest and taxes of US$560 million in the first half of 2023.

Searching for the three major brands on Amazon, each brand has multiple products ranked on Amazon's BSR, or Overall Pick. Take a carpet cleaner as an example, it has more than 70,000 ratings and sales of 10K+ in the past month, which is enough to show the popularity of this product.

The sales of power tools alone reached $6.45 billion, contributing 93.8% of the company's revenue. This category has accounted for more than 80% of the revenue for five consecutive years. The sales of floor finishing and cleaning products were $429 million, accounting for 6.2% of the revenue. At present, the company is also expanding its product matrix through acquisitions of brands, etc., to achieve comprehensive coverage of the three dimensions of global market, multi-level customer base, industrial and consumer levels.

Many sellers talk about the prospects of the tool industry, which is actually very broad. At present, the global tool industry market size is close to US$100 billion, including hand tools ( US$20 billion+), power tools (US$40 billion+) and OPE garden tools (US$30 billion+), etc., and it will continue to grow steadily in the future. As a result, it has spawned leading category sellers such as Quanfeng Co., Ltd. and Chuangke Industrial Co., Ltd.

There is a reason why the tool industry is booming in Europe and North America. Both regions have abundant land resources and most families have private lawns or yards. Due to legal requirements for lawn mowing and Europeans and Americans' love of gardening, they usually buy related products such as lawn mowers, snow blowers, micro-tillers, grass combs, etc. to mow their own yards.

As the world's largest power tool production base, China accounts for nearly 70% of the world's production capacity. With its industrial base advantages, mature management capabilities and manufacturing technologies, many power tool companies have shined abroad. For example, the familiar Techtronic Industries, Chervon Holdings, and Greebo have all set up factories. In addition to OEM, they also drive the sales of their own brands on the C-end.

Revenue

Chervon Holdings

Techtronic Industries