Wen | Yang Niwa
Editor | asked
Just finished the Winter Olympics, ushered in the spring blossoms, dormant a winter of fitness industry, opened the best window period.
It was also at this time that the fitness platform Keep submitted a Hong Kong stock prospectus and double-clicked the news of listing.
The epidemic is undoubtedly the catalyst for the fitness market to take off again, and it has also entered a new cycle in the development of the track. Keep, which has been established for seven years, has previously experienced 8 rounds of financing, with an amount of $630 million, and there is no shortage of investors in softbank, Hillhouse, Tencent and other star companies. At present, Keep's going to the capital market is to give investors an answer sheet, and it has become a benchmark case for how the fitness market continues to develop in the eyes of the outside world.
But Keep did not live "smoothly", 3 years of loss of 1.2 billion, profit is still difficult to break through the threshold. More importantly, in order to tell the story of capital, Keep still needs to run at high speed, but whether it is software courses or intelligent hardware, it is still difficult to support a greater imagination, keep is still alive after several rounds of sand and sand, but always live through.
The data shows that in 2020, among the fitness consumers who have paid for fitness services in gyms, fitness consumers aged 18-30 account for more than 50%. The post-90s and post-00s are becoming the main consumers of gyms, of which 12.6% of fitness enthusiasts under the age of 25 spend more than 2,000 yuan per month. Keep has already received a certain degree of recognition, and the next question is how to make users pay willingly.
Sell tools to sell content to sell services
Keep, which entered the fitness market from the daily fitness record APP, has an enviable user growth, even at the moment when the mobile terminal dividend is gradually peaking, its MAU (average monthly active users) in Q3 of 2021 once reached 41.75 million.
As far as keep, as the initial positioning tool, the user is the basic disk, from the data point of view, its MAU change has a strong seasonality, but the annual natural growth rate is 15%-40%, which means that even if there are old users in the winter to reduce exercise, in the spring and autumn there will be new users to come in. This is also the constraint of the fitness track: easy to get started, difficult to retain, how to effectively achieve user retention, maintain the membership population is the key.
Judging from the description of the prospectus, the portrait of its monthly active users in 2021 is like this: 74.1% are under the age of 30, and about 52.2% come to China's first-tier, new first-tier and second-tier cities. This also means that Keep's users have strong spending power, will chase the trend lifestyle and have loyalty and awareness of the brand.
In a way, this gives Keep the possibility of subsequent monetization, as a free-to-play app, its paid subscription membership has risen more than 4 times from 800,000 in 2019 to 3.3 million in 2021. Membership penetration grew from 3.5% in 2019 to 9.5% in 2021, up from the industry's average of 4.8% in 2021. But the process of changing from free to pay is costly, and it is also the "burning money for growth" that Keep has been facing, and it can be seen from the financial report data that its user growth period is high, and the corresponding marketing expenses are also heavily invested.
Simply staying in the tool attribute is bound to be difficult to maintain the enthusiasm of its members to pay, and the most direct entrance to Keep in the formation of repurchase is fitness content. In October 2020, Apple launched Apple Fitness+, providing paid online fitness courses; domestic super orangutans, Leke and other offline fitness chain brands docked coaching resources online and opened online training courses; the fitness vertical content of video platforms such as B Station, Douyin, Kuaishou, and Xiaohongshu showed explosive growth, especially in lightweight fitness content such as yoga and gymnastics. Keep also vigorously promoted the content supply of PUGC and brand agencies at this stage, such as head IP such as Pamela and Saturday Wild, and also introduced live broadcasting.
At the same time, it has begun to continue to expand smart hardware and sports accessories, and since Keep launched the store in the App in 2016, its product pyramid structure has begun to take shape: the top is intelligent hardware, which is also the one that relies on data and the App is the most closely linked. In the field of intelligent hardware, there is no shortage of challengers, fitness mirror new brand Film launched a unit price of three or four thousand fitness mirrors, one night in the whole channel including Tmall sold more than 3,000 units, calculated down GMV nearly ten million. Previously, Lululemon spent $500 million to acquire Mirror, a startup that develops smart mirrors and fitness videos. Fitness smart mirrors, Keep, Leke are also in the layout; the second layer is sports equipment, yoga mats, quick-drying clothes, sun hats and other accessories products; the bottom is the light food series, as a key part of the user's "seven points to eat three points of practice", according to earlier disclosed data, food in the Keep consumer goods business accounted for about 25%.
Eat and wear, which can hold up keep
In its earnings report, Keep summarized its revenue into three major businesses: private label products, membership subscriptions and online paid content, advertising and other services.
The fitness products that support the bulk of revenue include products such as clothing and fitness equipment and light food, and the definition of fitness products can actually be regarded as private brands to a greater extent. In the prospectus, Keep has repeatedly highlighted the rapid growth of DTC channels, such as its own App and Tmall, JD.com, etc. According to the prospectus, in 2019, 2020 and 2021, Keep will buy an average of 185,000 DTC users per month, 300,000 and 365,000.
But "Keep" also points out the accounting method, simply put, if a user purchased in the "Keep" App and also purchased in the Tmall flagship store, it will be double-counted and counted as 2 users. The peak figure for DTC paying subscribers is 430,000. According to the current month's calculations, one person in about 100 MAUs will buy Keep's private label merchandise.
"The gross profit of its own products is actually not high, and it is difficult to make money by relying on this." An industry insider told "E-commerce Online" that the self-owned products of the supermarket channel can achieve the dual advantages of making money and enhancing consumer stickiness because they have the advantages of the supply chain, but if it is only platform thinking, then it is not cost-effective to do its own products in the short term.
From this point of view, fitness products are actually a good grip to maintain user stickiness, but also support the largest sector of revenue, but what really has the ability to make money is actually online courses. Judging from the prospectus, the gross profit margin of brand products is about 30%, online content is about 60%, and the gross profit margin of advertising and other services has increased, approaching 60% in the first three quarters of 2021. But it is clear that the gross profit margin space across the lines of business is not enough to cover marketing and other expenses.
Combined, online content has a larger margin space because of its scale effect and the marginal cost will gradually decrease. That is to say, online content is easier to help "Keep" to make a profit, but the biggest problem facing Keep now is that when users and revenue go up, the gross profit margin of online content is declining, which is not in line with the law of marginal effects.
Much of this comes from the impact of subscription membership fees. Because most of the online courses in keep are free and open to member users, that is to say, the expansion of the membership population has stimulated course sales, but the actual subscription fee has not increased. "E-commerce Online" found that the annual fee for buying Keep members is now 218 yuan, but this price can also be purchased for joint members, which also means that the price of members is actually constantly declining.
Who should I go to?
Now it seems that keep is still difficult to say which sector can be pressed, how to get out of the profit dilemma, not only keep, but also the entire mobile fitness market to consider the problem.
Peloton was once regarded as the American version of Keep, and although Peloton is currently facing the dilemma of selling himself, the comparison between the two may also see the future of keep.
From the perspective of starting from the starting path, Peloton started from selling bicycles for content, and its circled users became high-paying users who could pay $2,000 to buy a bicycle. After the growth, but also more focused on the same kind of users, forming a "small and beautiful" cycle; Keep is from the tool to the content, and then do consumer goods, in a large number of non-paying users to find paid users, and including advertising business model, but also let Keep more seek the growth of user scale, as can be seen from the previous article, from free to paid process, basically Keep out of his own pocket in educating users.
The monthly churn rate of subscribers in "Peloton" has remained below 1%, and the average monthly retention rate of core users of "Keep" (MAU who exercises courses for at least 4 days in a month) is 49%.
That is to say, although at this stage, whether everyone can make money or not, whether the income can be greatly increased depends on software, but hardware may be the core competitiveness. Youaiteng's long video platforms are good examples, high-quality content can form a moat, but it does not have monopoly, and it is difficult to pull the platform to profit.
After all, users who have spent thousands of dollars and thousands of yuan to buy hardware are much more expensive to migrate than users who simply subscribe to content.
If you want to go to fitness products, Decathlon and lululemon may be the benchmark cases that cannot be avoided. Decathlon's 2020 financial report shows that its global sales are 14.4 billion, and the proportion of e-commerce has increased by 140%. Also eating the dividends of online + fitness after the epidemic, Decathlon's profitability has almost impressed its peers in the fitness industry. Decathlon's advantage lies in its unique design, compression of supply chain costs, and experiential stores to divide various sports scenes.
In 2003, Decathlon entered the Chinese market, with more than 40 kinds of its own brands, covering bicycles, ball sports, roller skating, running, aerobic fitness, and even more unique sports equipment such as equestrianism, diving, archery, etc., providing customers with one-stop shopping. Compared with Nike and Adidas, which are also international brands, many similar goods are really surprisingly cheap. 19 yuan a quick-drying T-shirt, 15 yuan a sports backpack, 79 yuan a walking shoe... At Decathlon, these goods are collectively referred to as "blue goods" and have unimaginably low prices.
The core of the multi-brand/category operation + ultra-low-price sales business method is that the company is a cost-oriented design idea at the product design end, that is, pricing first and then designing the product. The design of the product emphasizes practicality and durability, and as far as possible to choose standardized raw materials or modularity, the complexity is well controlled at the source of the design. Procurement and manufacturing links, are set brand, design, procurement, OEM manufacturing, logistics, retail in one, the entire supply chain only manufacturing this part is handed over to the OEM OEM production.
At present, keep to become richer in the category and scene division of fitness products, to obtain higher gross profits, Decathlon is a role model within sight, but how to break through keep's supply chain capabilities, may be a problem it has to face.
The development path of lululemon is also another way of thinking of fitness brands. Starting from such a large item as yoga pants, a private domain operation has been built around the yoga crowd, and then extended to the lifestyle, thus expanding to a larger group of people. From this point of view, Keep actually has such an opportunity, one hand is the middle class love fitness crowd, the other hand is the platform to build a private domain capabilities, but Keep currently lacks a core single product to boost.
From the data of tmall flagship store, the current sales volume Top1 is the jump rope in the store, the unit price is 149 yuan, although the sales are good, but from the coverage of the category itself to the unit price, it is not possible to expand to a larger market.
After knocking on the door of the capital market, how can Keep continue to break the game? From Decathlon and Lululemon, some answers may be found.