Chinese online fitness giant Keep files for IPO, but will it follow in Peloton’s floundering footsteps?

March 3, 2022 0 Comments

China’s most popular workout app announced it had filed for an IPO in Hong Kong on February 25. However, concerns have been raised over the prospects of the app as its strategy resembles that of US fitness upstart Peloton, which has experienced its fair share of dramatic ups and downs during the pandemic.

The listing application comes after Keep ditched plans for a US IPO last year. The company, which counts SoftBank and Tencent among its investors, had targeted a listing of up to $500 million in the US. But the procedure was then scrapped as Chinese authorities stepped up scrutiny over data security in such overseas listings, as reported by the Financial Times in July 2021.

In the filings with the Hong Kong Stock Exchange (HKEX), the company appointed Goldman Sachs and CICC as IPO sponsors, but did not specify the size or pricing of the share offerings. According to Keep, the proceeds will go towards the development of the brand and more platform content.

According to the prospectus, the Beijing-based company generated 1.16 billion yuan ($183.86 million) in income in the first three quarters of 2021, up 41.3% year over year, with 34.4 million average monthly active users and 3.3 million average monthly paid users. The brand’s lines of consumer goods, which includes activewear, gadgets, and connected workout products such as spin bikes and treadmills, accounted for 57.5% of total revenue, while subscriptions accounted for 30.5%. Amongst the investors, founder and CEO Wang Ning is the company’s largest shareholder with 18.6% stake, followed by GGV Capital with 16.1% and SoftBank with 10.3%.

For comparison, Peloton’s connected fitness products make up 78-80% of their revenue, while subscriptions make up 22%. With 2.33 million connected fitness subscribers, the New York-based company made $4.02 billion in revenue in 2021.

During the stay-at-home economy boom caused by the COVID-19 pandemic, Peloton became a Wall Street darling, with shares trading as high as $171 a share and a market cap hovering around $50 billion in December 2020. Such success thrilled Keep and its investors; hence, in January 2021, the company announced the closing of a $360 million Series F investment round led by existing investors SoftBank and Tencent. The company was valued at $2 billion in the latest round, double its valuation after its last funding round in May 2020.

However, right before the outbreak of COVID in October 2019, Keep was in crisis due to its unsatisfying monetisation capabilities and conducted a large-scale layoff affecting up to 15% of its workforce.

The pandemic though, just as it sent Peloton’s market cap flying sky-high, also offered Keep a chance to turn the ship around. But as Peloton’s latest financial report demonstrates, when the pandemic’s influence on people’s lives fades, so does interest in at-home exercise. This puts Keep in a precarious situation, where it might be heading down a path that someone has already tread, and fallen, on.

Previously, Peloton had aggressively scaled up production to meet the rise in demand during the pandemic, but when gyms reopened and orders fell, its excessive manufacturing capacity and over-filled inventory quickly became liabilities. The company soon reported a $439 million loss in the most recent quarter, with revenue growing only 6% year on year. Its optimistic full-year forecasts for revenue, subscriptions, and profitability were also severely dampened. Shares of Peloton have fallen 80% from their highs, and Wall Street has begun to speculate that the business will soon become a takeover target.

Similarly, thanks to the pandemic, Keep’s revenue in the first three quarters of 2021 was almost double its total revenue of the year of 2019. On the other hand, losses have also increased: its adjusted net losses in 2019 and the first three quarters of 2021 were 366 million yuan and 696 million yuan, respectively. 

The company attributed the increasing losses to increased spending on user acquisition and retention, as well as increased marketing costs. Crucially, when compared to Peloton’s 90%+ user retention rate, Keep’s user retention rate is extremely low. According to an Analysys statistics report from June 2021, Keep’s monthly user retention rate was 20.85%, well below the median 34.56% for similar sports and fitness applications.

The core problem, however, may not be entirely blamed on Keep, considering that the proportion of people interested in fitness in China’s population is substantially smaller than in more developed locations such as Europe and North America. As a result, not only does the Keep app have a poor retention rate, but also a poor retention rate in brick-and-mortar gyms, at 17.33% on average. When entering the post-pandemic era, Keep’s rapid growth has hit the brakes. In the first half of 2020, its MAUs increased by 20% year-on-year, but fell back to 2019 levels in the second half.

Like Peloton, Keep needs to grapple with post-pandemic user growth. While massive demand has been unleashed during the pandemic, what makes things trickier is that it also has to deal with the inferior retention rate and lower spending of the Chinese customer base. According to China Insights Consultancy statistics, the average yearly expenditure of workout fanatics in China in 2021 is 2,596 yuan, which is much less than the equivalent 14,268 yuan in the US for the same period.

Keep has struggled to find a viable business model for a long time. After seeing Peloton’s success by combining spin bikes with its own online courses, the Chinese company has also increased its investment in smart devices and content creation. As such, Keep has expanded its connected products lines, launching spin bikes, treadmills, smart wristbands, smart scales and more. According to the prospectus, at the end of 2021, about 67,000 spin bikes, 180,000 treadmills, 1.2 million smart wristbands, and 825,000 smart scales have been shipped.

Even so, Keep is facing intense competition, with tech behemoths such as Xiaomi and Huawei offering a variety of workout equipment in an attempt to capture the market. But executing well on delivering professional content and building a loyal user community could be the solution for Keep: as it says in the prospectus, it’s investing more in creating high-quality, high-engagement content.

Despite the fact that profitability is still a long way off, there is still hope for Keep. As the Chinese fitness industry expands, players such as Keep will no doubt retain a large chunk of the pie. According to, the overall value of China’s fitness sector was around 154.525 billion yuan ($24.47 billion) in 2017, and it is predicted to reach 211.527 billion yuan ($33.5 billion) in 2022. With the population only growing more and more aware of the benefits of fitness and exercising, Keep better keep it up.

Leave a Reply