Keep, the top social fitness app founded in 2014 in China, reported to lay off over 300, almost 38% of its employees this October, breaking its booming records.
On July 10, 2018, Keep raised a record $127 million in series D funding. While in June 2019, Keep announced over 200 million registered users, making it the icon of Chinese mobile fitness industry. “I’m willing to be the first user of Keep International version,” said Tim Cook, the CEO of Apple Inc., in a business trip in 2017.
Keep’s big moves in one year raised confusion and anxieties. For the “dilemma”, related parties gave different explanations, indicating threats and trends in Chinese fitness industry.
Keep declared a motive. Since 2018, to catch physical exercise passion trend, Keep developed “Scenario Strategy” and “Consumer Goods Strategy”. That means a high demand on programmers to exploit functions on the app fitting for its products. Examples are Keepland for offline gyms, KeepKit for fitness equipment, KeepUp for sportswear and KeepLite for healthy food. “It’s a one-billion business,” said Ruoming Li, 29, director of Keep’s public relationship department.
“We lay off 10%-15% rather than the rumor said, it’s all for optimizing staff structure and improving management efficiency,” Li added, “we did this every year, but big adjustment on programmers this year near Programmer's Day makes it a hot issue.”
Laid off employees demonstrated another reason. Before downsizing, Keep raised over 1.2 billion yuan within four years, expanding from 12 to 800 staffs. On monetization, Keep attempted in advertisements and e-mall sales, however, both methods were inefficient. This year, Keep cut off services, like closing two of 15 gyms in Beijing.
“They are short of money,” said Ang Li, 29, fitness journalist and former employee in Keep, “they spend money like water, three million yuan could be used in a Wechat advert. Many products like leisurewear are given much discount and bought by staffs.”
Ang Li used to work in Keep’s public relationship department, who fired her in two days this January. “I'm screwed,” said Ang Li. “In the annual meeting, my direct manager said if there was no new funding, we all would be fired. Then they lay off 10 per day. I was told not fit for the position and filled the termination form several hours later.”
While employer and employees stand on opposite interest, experts and medias observe in macrolevel. Keep’s dilemma reflects the status quo of Chinese fitness industry, where opportunities and challenges coexist. While China now has 37,627 gyms, surpassing the US, the penetration rate of the fitness population is only 0.79%, far below the US’ 17.8%, according to a white paper by fitness industry SaaS (software as a service) provider Qingcheng Fit, based in Beijing.
“Chinese fitness industry is in early stage and it’s normal to have transitions,” said Huan Tang, founder of GymSquare, a professional fitness courses platform, and senior fitness journalist in 36Kr, a China-based publishing and data company focused on “new economy”. “Mobile fitness apps like Keep are anyway bringing fitness awareness among people. It needs time to overcome hardships.”
Threats are happening. In 2018, Chinese fitness brands like LEFIT, CODOON, JOYRUN stepped in series C funding while investments fell sharply in 2019, people call the industry is in winter. Except for Keep, many companies struggled. HOSA FITNESS, once the largest Chinese fitness brand, was announced bankrupt this April; Supermonkey, the first pay-per-take fitness mode in China, closed several stores in Chongqing this September; LEFIT, a popular social fitness company, started to buy copyrights from foreign courses like LES MILLS.
“It comes to a period for survival of the fittest, the one values consumer demands will survive,” said Ruoming Li. “Internet provides us an informative environment but made everything overfast, now the market is back to reason. Users have more choices, and games become more competitive.”
Though, government make efforts to cultivate the market. In September 2019, the State Council issued two documents to support national fitness and sports consumption.
As traditional operating system fails, fitness corporations no longer strive in sales but services. “It’s a healthier business model,” said Tang. “Demands and supports are full of the market, opportunities are huge.”
Companies still have much to do. “We are trying to dig out deeper user demands and will provide relevant services,” said Ning Wang, the CEO of Keep, in the strategy conference this April. “Now we focus on consumption directions as ‘Food, Clothing, Necessities and Workouts’.”
Still, Keep has not announced any detailed plans in the future. Other leading corporations have declared no further strategy, either. Everyone is walking on the water and trying not to break it. Chinese fitness market remains hardships to be overcome.