Single Purpose Robots Could Be the Unicorns Investors Are Looking For
What does a washing machine, a vacuum, and a lawnmower have in common?
Progression. A constant movement forwards. In the world of business and/or economics, there have been many historical instances where we marked the beginning of a new area of progression; notably, the Industrial Revolution, Apple computers, and now AI.
Now think about the vast number of momentous events that have occurred before, in between, and after. Are the smaller occurrences chaff in the wind? Instances to be forgotten? Or are they the biggest missed opportunities we’ve never seen - overshadowed by the few and far between? Most people would skim the small and focus on the mainstream - it is in our nature to align with the status quo.
I, just like all
subscribers know to do, search for the simple things. Simple yet effective - like the John Waynes of business. We see a problem, we shoot the problem, and we ride into the sunset looking to solve the next problem. If you’re confused - good, so am I - but I wanted to talk about John Wayne and bring up something else complex and possibly confusing: the solution to business expenses.The “What and Why” of Single-Purpose Robots
Recently, inflation has been contributing to the rise in wage expenses, material costs, and overall decrease in companies’ bottom lines. We are currently in an age where people believe the solution is AI. AI for customer service, AI for advertising, AI for growth, AI for everything; however, I believe AI is overshadowing a more profitable opportunity from the past. Single-purpose robots (SPRs). Yes, I did make this up (at least I think I did), but I also think this is going to be a miniature revolution. In the next five to ten years we will see a million articles from the NYT, WSJ, and others about how single-purpose robots are a huge deal, etc.
Single-purpose robots (SPRs) are (just like the name says) a machine that does a specific task for you - keyword: specific. These types of robots are already extremely popular, hidden right under our noses for YEARS. In fact, they have been in the news and are already becoming a huge market.
What do dishwashers, Roombas, washers, and dryers have in common? They are all single-purpose robots (SPRs) - some of the most known and utilized as well. Something people don’t realize is the market size of these SPRs, and you bet your bottom dollar these numbers are about to blow your mind.
The Insane Size of the SPRs Market
Get ready to see a bunch of numbers thrown at you super quickly. In the following, there is a quick analysis of the market size (market cap) of each of the previously mentioned SPRs. I want you to first see the market size of all of these and then think of the opportunity there is in other segments not mentioned.
Let’s first jump into the washing machine market. Washing machines can’t be that large of a market, right? Well, Grandview Research says that the
The U.S. residential washing machine market size was estimated at a value of USD 5,504.0 million in 2022 and is expected to grow at a compound annual growth rate (CAGR) of 6.7% from 2023 to 2030.
That’s right, washing machines alone have a market cap of over $5.5 billion. Intrigued now? You should be, but if you aren’t, maybe the fact that dryers had an estimated market cap of $14.8 billion in 2020, according to Allied Market Research. Oh, and by the way, their size is projected to reach $25.1 billion by 2030, with a CAGR of 4.0% from 2021 to 2030.
As stated in research by Fortune Business Insights, the robotic vacuum market (aka the Roomba market) is also massive;
The global robotic vacuum cleaner market size was USD 9.77 billion in 2020 and is projected to grow from USD 11.97 billion in 2021 to USD 50.65 billion in 2028 at a CAGR of 27.2% in the 2021-2028 period. Based on our analysis, the global market exhibited a stellar growth of 22.5% in 2020. The sudden fall in CAGR is attributable to this market’s demand and growth, returning to pre-pandemic levels once the pandemic is over.
Hopefully, by now you are starting to see the trend here. The total market cap for all of these robotics is massive and currently isn’t showing a huge sign of slowing. We haven’t even gotten into the dishwasher market cap, but they are predicted to be over $40 billion in 2029.
If you haven’t been doing the math, don’t worry it’s right here: the total market cap for the year 2022 was more than $55 billion - and there is room for MASSIVE growth. Before we get into some new markets SPRs could start to take over, I want to first explain how all of these currently massive machines have progressed humanity (and why they haven’t gotten rid of jobs). Dishwashers, washing, and drying machines were all invented to save time on a task that needed to, or could be, done daily. All of these tasks were monotonous, and paying someone to do them for you every time becomes costly. The same logic can be applied to robotic vacuums. Cleaning is something that should (seriously people keep your residence clean) happen daily. Once again, that is a monotonous and time-consuming task that is NOT enjoyable. Paying cleaners is an option but you have to pay weekly or monthly and the costs add up. Alternatively, you could use a robot that cleans for you and gives the house cat a ride.
Quickly, as an aside, I wanted to touch on why SPRs aren’t taking away jobs. I am just going to make a quick list here. Humans have to do all of the following: Design, manufacture, maintenance, deploy, and quality control them. These robots allow for fewer workers per dollar made, but more workers overall. There are multiple arguments for and against, and I do not stand on either side.
Single-purpose robots were made to take away the time-consuming and, therefore, expensive tasks we have to do every day. However, these robots don’t only exist inside the home. SPRs are slowly making their way into companies as a way to save money and lots of it. Famously, Amazon introduced warehouse robots - and you guessed it, they have saved the company billions of dollars. Their robots, similar to those we talked about before, are made to do one thing. They have a specific task that is their sole purpose, in this case - to move goods around inside warehouses. Amazon, while somewhat of a frontrunner in this space may have unintentionally sparked a revolution of SPRs.
SPRs Trickling Into All Businesses
I recently stumbled across this autonomous mower - a residential robotic lawn mower from Husqvarna (pictured below).
These lawn-based robots are expected to reach a market cap of $3.9 billion by 2027 and was previously valued at $1.5 billion in 2021 as stated by Mordor Intelligence. Currently, these types of supplemental to current lawncare. While they haven’t replaced landscaping as a whole, they have added quite a bit of value and time-saving. The place where the robots really start to make a difference is within profit margins. Instead of paying a $ 25-an-hour employee to cut grass for a whole day, you could drop off these robots at 20 lawns and just pick them up as they complete the yard. The amount of work you could complete in the day would multiply and costs would exponentially decrease. One worker could handle 10-20 robots and 10 total lawns in a day instead of 5 total lawns.
While this is incredible, there are so many other avenues this SPR market can take in terms of growth. For example, utilizing drones to map the lawn before running the mower, large-scale mowing, and spraying devices are some of the growth avenues that come to mind. There is an opportunity for large-scale growth in this market, especially with the possibility of getting corporate partnerships.
Lawncare, however, isn’t the only place where SPRs are becoming valuable assets… introducing, waiters.
Another market these special-purpose robots could create is within the restaurant industry. By now, I am sure you’ve heard of or seen the robotic waiters being used in some locations across the world. Driving around and dropping off your tea and crumpets - I have no idea what is being carried by the one pictured above. Either way, I don’t think that these waiters are the next wave - the next wave is for the people who order online for pickup or delivery. They have no want or need to talk with the lady behind the counter to pick up their Chipotle, so don’t make them. Sadly, I am not the first person with this idea. A fast-casual restaurant called Sweet Green has a location called the Infinite Kitchen, which serves up salads made completely by single-purpose robotics. How does this work? See the video below.
Have a Hand in the Cookie Jar
While there are a million more examples of SPRs (vending machines, delivery robots, etc), I think it is clear to say that these types of robotics are being overlooked by the typical investor. I would also like to mention that building a single-purpose robot is much simpler than building a multifunctional robot. There is one direction, one avenue, to focus on. That being said, the growth of these SPR-focused companies is going to compound quickly.
Below my fancy email signature, we have listed interesting stocks that operate in this robotics space.
Best,
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Editor, The Simple Side
No Investment Advice or Brokerage; Disclaimer. For the avoidance of doubt, The Simple Side does not provide investment, tax, or legal advice. As with any asset, the value of any asset class can go up or down and there can be a substantial risk that you lose money buying, selling, holding, or investing in any asset. You should carefully consider whether trading or holding assets is suitable for you in light of your financial condition.
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