Focus

▪ The bottleneck encountered by the Internet fitness industry is not a special case. After the initial stage, tools / community products will come to the ramp-up period of pursuing scale, monetization and going to a new level.

▪ The overall business model of the industry is not too special. Players like Codoon and JoyRun are trying to monetize through advertising and e-commerce business.

▪ Keep's aggressive attempt at commercialization has put itself under pressure of multi-line operation, but its GMV growth in 2019 is quite rapid, which has got through some businesses.

Keep, a star start-up company, has recently been pushed to the focus of public opinion because of various real and false information.

Relevant discussions soon spread from Keep to the whole Internet fitness track: as the top company in the industry, does the experience of Keep reveal that the boom of the whole Internet fitness track has stopped?

The challenge that all the companies encounter is similar: the progress of commercialization is still in the early stage, and the growth rate of the basic market has slowed down. At the same time, Bilibili, Douyin, Kuaishou and other large traffic platforms are still diverting users. However, the current capital environment puts forward higher requirements for the enterprises.

Opportunities always come along with challenges. Judging from previous development experience of Internet products, all vertical products will encounter common problems when they enter a larger development stage. And companies that successfully pass the bottleneck period will usher in a larger development space.

Nowadays, Internet fitness players face with both opportunities and challenges. Can they successfully go through the ramp-up period?

Internet fitness industry in adolescence

It has not been a long time since Internet fitness industry came to the public. Its rise is closely related to the boom of entrepreneurship launched by mobile Internet in the past two years.

In 2014, Super Monkey, the first container self-service fitness cabin, landed in Shenzhen, which opened the prelude of Internet Gym. Around 2015, the fitness app represented by Keep aroused the public's enthusiasm for Internet fitness.

At that time, the mobile Internet dividend was still being released. Hot Body, FitTime and other products also joined the fitness app army in a short time; while Codoon, JoyRun and other products focus on running scenes to build sports tools and communities. When the market is in the hottest time, sports companies including Nike joined in and launched two products, Nike + training club and Nike + run club.

In the early stage of industry development, the competition is mainly focused on the product and content level. After fierce competition, the pattern is gradually stable. Keep, Super Monkey and other players become the top strength of their respective subdivision direction. Their exploration now reflects the development status and direction of the industry.

At present, the main participants of the Internet fitness track can be divided into two groups:

▪ Online products include Codoon, JoyRun, 51yund.com, Hot Body, etc;

▪ Offline products include Super Monkey, Lefit, SunPig, Shape, Liking fit, etc.

Online products mainly provide online fitness course teaching, step counting, community and other functions. Offline products focus on Gym scenes, mainly in two ways: self-supported Gym or transformation of traditional Gym. Among them, Keep, based on online app, has expanded its offline business. It launched the fitness space Keepland, which belongs to online and offline at the same time.

Capital has once flooded into the track.

Keep has completed several rounds of financing since its establishment in 2014. The latest round is the D-round of financing disclosed in July 2018, led by Goldman Sachs, followed by Tencent, GGV capital, Morningside capital and BAI (Bertelsmann Asia Investment Fund) old shareholders.

JoyRun also completed C-round financing of RMB 100 million in January 2018. Codoon completed C + round financing of $20 million in February 2018, with investors including Shanda, Shenzhen Capital, CITIC Capital, SoftBank, SIG, etc.

The investment of Capitals is closely related to the following factors:

▪ At the macro level, the Internet fitness meets the increasingly strong health needs of Chinese people, and the market prospect is considerable;

▪ Internet fitness products not only improve and enhance the original sports fitness experience, but also expand the efficiency and scale of the original model (such as traditional Gym) at the commercial level;

▪ At the industry level, there is a threshold for sports and fitness, while Internet fitness products have accumulated brand awareness and user reputation in the corresponding vertical fields based on their own characteristics and advantages. It has gained a number of users with high viscosity;

▪ After several years of market practice, the Internet fitness product team gradually enhances the understanding of sports and fitness.

A large enough market, the products with enough viscosity and team with enough ability together form a big opportunity. However, entering a new development stage, it will face a new industry environment, the greater challenges also come along.

At present, with the disappearance of mobile Internet dividend, the cold winter of capital is coming. Monetization has become a new key word in the market, which replaced the growth. And commercialization ability has become an important indicator to measure the development level of the company. Internet fitness track is also the same. The rise of large traffic platforms has been eroding the users' time, and is constantly cutting down the market and the sinking groups. It has aggravated the difficulty of obtaining vertical increment in the vertical industry, and also distributed the original users of each vertical class.

Changes in the macro environment have had a real impact on the development of the Internet fitness industry. From the above information, it can be seen that the last round of financing for the top players is in 2018, and the capitals are still waiting. To be recognized, the industry must step over the threshold of making large-scale and expanding profits.

In fact, the bottleneck encountered by the Internet fitness industry is not a special case. After completing the initial user and brand accumulation of tools / community products, they will all come to pursuit of scale and monetization. Maternal and child products (such as Babytree), the knowledge question and answer platform (such as Zhihu) and other vertical products all go through similar processes.

Sports and fitness track is the same. Different from other vertical categories, the industry generally believes that the monetization of sports and fitness road is more tortuous. However, it is worth noting that compared with other vertical categories, the demands of sports fitness is more sustainable and stickiness - after all, sports have nothing to do with gender, age and occupation. It means if the Internet fitness industry can successfully go through the ramp-up period, there will be a lot of room for development. The achievements of two top sports brands - Nike and Adidas are enough to illustrate the considerable prospect of sports fitness market.

However, the common problem which all Internet fitness participants are facing in China today is: how can an industry still in adolescence successfully "cross the hill"?

The future imagination of the track

The ramp-up period is the inevitable stage for the industry to move towards a larger scale, with a clear direction: to increase the monetization and scale.

First of all, monetization is consistent with the business model of the Internet industry. At present, the main monetization channels of the Internet fitness track are as follows: advertising, membership, e-commerce and content payment (such as fitness course payment).

Combined with the characteristics of the industry and its own business advantages, there are lots of main players, among which e-commerce is the main profit direction. For example, Codoon launched e-commerce business based on its own vertical traffic and user stickiness. At the same time, its self-developed intelligent hardware products were sold on the platform. JoyRun deeply focused on the running culture, and tried to commercialize it by organizing events and e-commerce.

Compared with Codoon and JoyRun, the exploration direction of Keep is more complicated. In addition to the traditional advertising revenue, Keep has made the following layout:

▪ Launch membership, paid courses, online marathon;

▪ It has developed the business lines of intelligent products, including two business lines of home sports equipment and personal wearable equipment. It launched products such as Keep treadmill, walking machine and intelligent mobile bicycle, intelligent sports bracelet, smart scale, etc;

▪ Launch light food business, provide light food of "full, health and safety", and enrich the form of meal substitute;

▪ Launch other sports consumer goods, such as yoga, training, outdoor, running and other scene products;

▪ Enter offline market, launch offline Gym Keepland.

According to the information disclosed by the official, the above business attempts are all centered on the core strategy of "sports technology brand". However, the multi-point attack obviously makes Keep face greater competitive pressure in a short time. At the same time, the multi-business parallel strategy also exceeds the existing ability of the team. So it resulted in some businesses not receiving the ideal effect, such as users on the network complained that the value of Keep membership is low. Keepland was also closed in the Beijing Damei store due to location problems.

In the context of some new businesses with poor results, Keep optimized its team members, which became one of the triggers of the public opinion crisis.

However, the above attempts are not fruitless. For example, the sports consumer goods business has become the largest revenue source of Keep. According to internal data obtained by Deep echo, Keep platform's GMV growth in 2019 is quite rapid. Although there is a downward trend of climate impact in November, the annual performance far exceeds the level of 2017 and 2018. It can be seen that in some businesses, Keep is still on its way.

It can be seen from the public opinion crisis of Keep in the near future that its attempt has put itself under the pressure of multi-line operation. But on the good side, it has expanded the industry boundary and played a role in exploring the way. It is worth noting that in the current cold capital environment, whether Keep can be transferred to a more correct road after several attempts and implemented in place. In addition, how vertical communities/tools break through the scale of market segments is also an important exploration direction of Keep.

The experience of Keep is a typical reflection of the common problems existing in the Internet fitness track at present:

▪ No one has found a particularly stable way to cash in;

▪ The large traffic platform has the effect of diversion the content producers and users;

▪ The cold winter of capital brings challenges to the cash flow of enterprises.

However, there are still good brands on the Internet fitness track. As mentioned above, the characteristics of a sports fitness track are that it is a natural combination of online and offline, with a high degree of professionalism and a strong community atmosphere. There is a certain threshold, which means that the large traffic platform spends more operating resources to manage this vertical type well. From the current strategy of the large traffic platform, sports fitness is temporarily not the key direction. It's the moat that Internet fitness players dig for themselves, which wins enough time for themselves.

In addition, although it is in the winter of capital, some players have made some achievements in some directions and generated stable cash flow. For example, the sales of Keep's intelligent products and sports consumer goods have developed well from the perspective of GMV changes. After the exploration in 2018 and 2019, the track players have accumulated some experience and lessons. The teams who can survive to this stage are all more competitive, tempered and more powerful.

However, the pain is inevitable in the process of "over the hill". After several attempts, how to quickly adjust the strategy and implement in place will test the determination, will and ability of the team.

Sports and fitness naturally need online and offline combination, only online can not really meet the needs of users, only offline is easy to fall into the traditional pattern. Therefore, how to effectively combine online and offline is the next focus of the industry.

As can be seen from the information released by Keep recently, it has been gradually adjusting its business layout. Specific measures include:

▪ This year, Keep's overall business is based on users' needs of "eating, wearing, using and practicing". Some smart hardware products are also born around family scenes. After this year's multi line business attempt, it will focus more on providing integrated sports services;

▪ In terms of content ecology, this year, Keep not only continuously introduced and cultivated KOL, but also invited a lot of stars and athletes to settle its community. It enjoyed the content sharing with the creators through advertising, course payment, signing authors and other ways. In this way, it can be seen that rich content creation ecology is one of the driving directions of Keep;

▪ After this year's store adjustment, the business of Keepland will be stable in the future.

Among them, the mode of developing hardware and matching content for family scenes is similar to that of the US interactive fitness platform Peloton. Peloton has successfully landed on the NASDAQ. If Keep goes through this mode, it can also expand the business boundary and touch the crowd while solving the problem of combining online and offline, so this attempt is particularly noteworthy.

On the whole, the Internet fitness track is still good start. Although it is in the exploratory period of commercialization, its accumulation in users, content and product side in recent years still has a high value of segmentation in a short time. What’s more, it will usher in a larger development space after spending the ramp-up period.

Opportunities come along with challenges. Next, it depends on which direction the industry players will lead the track into.

This is an article from WeChat official accounts Deep Echo(ID:deep-echo),  written by Zhou Kai, translated by Chris Yuan.