The largest fitness platform in China sprinted to Hong Kong stocks, selling goods and selling classes with a monthly loss of 77 million?

On| the evening of February 25, Keep, the largest online fitness platform in China, officially submitted a public prospectus to the Hong Kong Stock Exchange.

According to the data, Beijing Calorie Technology Co., Ltd. was established in 2014, aimed at the domestic young people's fitness market at the beginning, and launched the online fitness platform Keep in 2015.

Thanks to the advantages of online low-cost fitness, Keep quickly gathered a large number of loyal users, and with young people seeing fitness as a new fashion, it has gained a firm position as the largest online fitness platform in China. According to the prospectus data, as of 2021, the monthly active users of the platform are 28.939 million, and the peak can reach 41.751 million, and more than 70% of domestic fitness users know Keep.

At the same time, Keep continues to be optimistic about institutions, and the financing process continues. From its inception in 2014 to 2021, Keep has received a total of 8 investments from well-known investment institutions such as Jiyuan Capital, GGV, Tencent Investment, Goldman Sachs Group and even SoftBank Group, with a cumulative amount of nearly 4 billion yuan.

In order to survive and develop in the past two years, Keep has vigorously transformed e-commerce sales, developed intelligent fitness equipment and even researched AI technology. But because of this, the company not only has to face the impact of new models from offline gyms, but also the impact of free fitness content on major video websites and social platforms, and also has to deal with traffic battles from more mature e-commerce and goods.

In a market of 300 million people, how does Keep make money?

In the past 5 years, with the rapid increase in national economic income, everyone's attention to healthy physical and mental health has also increased rapidly.

According to the data of China Insight Consulting, although the current Chinese fitness market is still in its infancy compared with mature markets such as Europe and the United States, the fitness population in China will be 300 million in 2021, the total number of which is the highest in the world, and it is expected that by 2026, the number will reach 420 million people.

In 2020, the "home economy" rescued Keep from the dilemma of bottlenecks in business growth, and the home exercise boom made the platform revenue quickly break through from 663 million yuan to 1.107 billion yuan.

As of the third quarter of 2021, Keep's revenue has reached 1.159 billion yuan, higher than the level of the whole year of 2020.

According to the prospectus, Keep's main business as a fitness platform includes online fitness paid courses and membership services; sales of smart fitness equipment, such as treadmills, bracelets, bicycles, etc.; and supporting sports products, such as clothing, food, etc.

As a social sharing platform, online fitness content, as keep's most important way of revenue, its paid membership rate has increased from 6.4% in 2020 to 9.5% in 2021 under continuous operation, and the monthly paid users in 2021 can reach up to 430,000 people.

As of 2021, Keep APP's membership subscriptions and online paid content revenue alone has reached 380 million yuan, an increase of 32.8% year-on-year, and the unit price ranges from 29 yuan to 648 yuan. In addition, a monthly membership fee of 25 yuan is also one of the important sources of revenue.

Interestingly, the fitness industry has a distinctly off-peak season, people are more willing to engage in exercise in the hot summer weather, both active users and higher willingness to pay, and cold winter weather is not easy to exercise even at home, so enter the off-season.

Keep's user data also showed seasonal fluctuations, with the weather getting colder in the fourth quarter of 2021, and the monthly activity of the platform plummeted by 31%.

Smart fitness equipment and supporting sports products are the business that Keep has focused on promoting in recent years, accounting for more than 55% of the total revenue. According to the prospectus, the company's own brand products from 2019 to the third quarter of 2021, the cumulative revenue was 396 million yuan, 636 million yuan and 638 million yuan respectively, and the performance growth rate exceeded 50% year-on-year.

In Keep's plan for future development, continuous investment in the development of new intelligent fitness equipment, strengthening free brand production and innovation, and developing artificial intelligence to enhance the interaction between users and the platform have become the first parts that have been mentioned.

According to the prospectus data, as of the third quarter of 2021, the company's R&D expenditure has increased by 100.6% to 240 million yuan; of which 533 R&D personnel, accounting for 47.71%.

The core explosive product of the platform is the Keep bracelet, which can track the user's heart rate, blood oxygen and sleep during exercise, and the retail price ranges from 169 yuan to 249 yuan. As of December 31, 2021, the bracelet has sold a total of 1.2 million pieces across the platform.

However, from the perspective of product categories, health foods, namely chicken breast, chocolate, protein bars, bread and other fast-moving snacks, have a higher frequency of orders. Although most of them are OEM products, the price of the APP is generally more than double that of the traditional e-commerce platform, but thanks to the built-in traffic recommendation, the monthly sales of explosive snacks also exceed 20,000 pieces.

However, the prospectus shows that Keep, which has a high market position and attracted the attention of various investors, has faced the operational dilemma of being difficult to make a profit and negative cash flow for a long time from the beginning of its establishment.

1.1 billion in revenue ran out of nearly 700 million losses

According to the prospectus data, Keep's revenue has always risen steadily, but the loss has never been able to "brake". In 2019, 2020 and the third quarter of 2021, Keep lost 366 million yuan, 106 million yuan and 695 million yuan, respectively.

As a fitness punch card artifact, keep APP is not only the advantage of attracting users in the consumption ecology of fitness supplies, but also the fatal disadvantage of its survival operation.

Since the launch of the APP, it has pioneered scientific exercise methods through online classes and user social sharing, so that ordinary consumers can also access professional exercise skills that can only be obtained in expensive offline gyms. But this also causes users to only open the app before and after the workout, and will not stay here for too long, let alone pay for it.

What's more fatal is that comparing the quality of fitness content, in addition to the platform paid courses, it is difficult for users to obtain more exercise experience and analysis through Keep. Many users have seen fitness tutorials and posts in the Little Red Book and B station, and then come to Keep to punch the card.

Changes must be made under the pressure of survival, and in the summer of 2018, Keep also embarked on a path to commercial monetization with great fanfare after raising $127 million in Series D funding.

Soon, more ads, light food, hardware and offline Keepland business were launched in the APP, shouting out slogans to cover users' "eating, wearing, using, and practicing" scenes.

In order to catch old users and attract new users, Keep once spent a lot of money on APP traffic promotion.

According to QuestMobile data, in the summer of 2019, Keep carried out more than 40 million yuan of traffic promotion, which estimated that the annual delivery cost was no less than 200 million yuan. At the same time, Keep also invited popular celebrities to endorse brands and products, increase exposure and drive sales.

Although the cumulative monthly active data of app has increased after spending money, the data shows that the daily active level of APP in 2019 is still maintained within 5 million, and there is no explosive growth.

It must be pointed out that because the company's business is too wide and the speed is too aggressive, on the one hand, the community sharing function has been repeatedly adjusted, advertising, etc., affecting the user's experience; on the other hand, the team with less than a thousand people at that time is even difficult to operate the e-commerce business.

To this day, the Keep e-commerce section is still "quite distinctive": the product evaluation page only shows positive reviews, not bad reviews. After browsing, the New Consumption Daily found that the complaint about the quality of the product occasionally appeared in the comments in the form of "five-star praise".

In addition, the after-sales service of e-commerce business has also been frequently complained about. On the black cat complaint platform, in addition to the high proportion of complaints about "member renewal deductions", there are also many complaints around "customer service prevarication", "delayed delivery", "non-implementation of seven days without reason to return" and other issues.

In 2021, the IPO sprint, Keep's investment in sales and marketing has reached a staggering 818 million yuan. As of the third quarter of 2021, the company's sales and marketing expenses accounted for 70.6% of total revenue, compared with 27.3% and 44.6% in 2020 and 2019, respectively.

In this regard, Keep explains: "We give priority to the designation of strategic paths and the optimization of business models rather than immediately achieving break-even, and the board task we are effectively paving the way for long-term sustainable profitability".

Just a week before the announcement of the prospectus, Keep announced in a high-profile manner that it would expand its business to offline group classes, focusing on low prices, picking up Keepland, which was hindered in 2020, and actively cooperating with traditional gyms to reach more fitness users.

However, as offline competitors, Super Orangutan and Lucke have completed more than 7 financings, and offline stores are located in major cities across the country, with a cumulative number of stores exceeding 500.

As of now, Keepland has only 9 stores in Beijing, and plans to expand to 100 stores in the next year.

Looking back at peloton, the largest fitness company in the United States, it also made its debut with "smart hardware + content + home fitness", and was once known as "Netflix in the fitness industry".

The company was listed in 2019, and the stock price "soared" with the arrival of the epidemic in 2020, but due to the impact of the epidemic abroad and its own losses, it has been unable to "stop the bleeding", and it has recently faced a product crisis, and the stock price has fallen back to the initial level of listing.

Recently, the company's new CEO is making adjustments to the company and said that the focus will be on content in the future.

Many domestic investment institutions also said that they are optimistic about the potential of the domestic fitness market, and due to the serious homogenization of fitness APPS on the market, everyone is more willing to pay attention to the head player, and the APP needs more added value, more effective customer customization programs, and more characteristics, which may be the long-term solution.