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Find here the China paradigm episode 21. Tom Xiong is the founder of Move Shanghai and his own podcast. Move Shanghai is a fitness app in China and is a platform that allows users to purchase packages of workout experiences. They can use their packages across hundreds of different fitness and health venues in Shanghai including swimming pools, gyms, yoga studios, dance classes, and tennis to name but a few of the hundreds of different activities users can choose from.

Their target market is people who want to be fit and healthy but are not loyal to fitness and quit their gym resolutions very quickly after making them. Move Shanghai’s fitness app in China makes it easier for these users to stay engaged with their goals because they can move from place to place and try out hundreds of different fitness experiences to find the ones that appeal most to them.

What is the size of the Move Shanghai fitness app in China, what stage of development are you at?

Tom Xiong: We are still at an early stage, it took us a while to get product market fit but we are growing very quickly. We have about 20,000 members, about 150 fitness venues and we are adding about 20 to 50 new venues a month. Our team is about 10 people.

What is the business model for your fitness app in China?

Tom Xiong: Similar to Spotify, I have an arrangement with the gym/ fitness studio owners and I can get a discounted price because I will be purchasing a lot of them and then I sell these experiences to users who can buy a monthly subscription which gives them access to the available experiences for that month if they want they can purchase an unlimited package which gives them unlimited access.

But I work on an after-pay model, so at the end of the month the gym or fitness venue calculates how many Move Shanghai members they had that month and I will send them the money based on the previously agreed price between myself and that venue.

The price of the package gets more expensive based on how many venues are available to the users rather than how many sessions they can access in a month. This is because the people we are targeting are not die hard fitness fanatics and are unlikely to use their package on a daily basis. For the paid fitness market in China, about 80% of the market are those who are new or not very loyal to maintaining fitness habits.

The reason we didn’t use a profit-sharing model is because the paid fitness market in Shanghai is very immature. The price of a fitness experience in Shanghai can vary massively from one district to another.

What packages do you offer on your fitness app in China?

Tom Xiong: We offer 2 main packages, Basic and Universal which cost 999 RMB and 1,499 RMB respectively. And pay a flat fee (88 RMB) per use package. Each of the 2 main packages enables the user to try 10 different locations per month, however, there are more venues available in the Universal package.

When you are driving traffic towards venues, how do you deal with the issue of new staff coming in and not knowing about your fitness app in China and its users?

Tom Xiong: Well before we partner with any venue we do some analysis on them and of course we try to on-board the staff and we have a dashboard they use to see who is coming and at what time they are coming and we integrate our booking system with their booking systems and reception software.

You focus now more on a fitness WeChat mini-program rather than iOS or android, why is that?

Tom Xiong: Initially, we just used an iOS app because we felt that’s what most of our users had and we wanted to control our spending. And we built a mobile-friendly website that allowed Android users to access us. However, we haven’t updated our iOS in more than 6 months and we decided not to launch our android app because we wanted to focus solely on a fitness WeChat mini-program. We still have a lot of product development to do and are moving all of our users onto the fitness WeChat mini-program because we can do more updates with fewer employees. So with iOS, we released an update every month but with a fitness WeChat mini-program, we can release several updates every week with fewer people working on it.

WeChat mini-programs work well for us because we offer a simple list of available experiences. I think it’s easier to make a beautiful experience in iOS but our fitness WeChat mini-program is highly functional.

How did you raise money to develop your fitness app in China?

Tom Xiong: At the start, we raised angel funding of a few million RMB, to date we have raised just under 10 million RMB. We turned cash flow positive after about 2 years and we haven’t raised any funding since then and we are not really looking to. The reason is that we are a paid service so we make money every month and we don’t have to rely on a magical IPO payday to make a bank.

We are growing organically and growing quite quickly. We are trying now to develop the 2c side of the business because as soon as we have users we know how to monetize them and we know what to show them. We just need to start getting millions of users in rather than getting 10s of thousands of users in. We turned down a few VC deals around a year and a half ago.

What’s your strategy in terms of customer acquisition for a fitness app in China?

Tom Xiong: What we see is that is that it’s very hard to sell fitness on its own. What we have found is that when we do co-marketing, co-sales, co-branding with everything from F&B to Yoga clubs it’s easier to get people to continue committing to their fitness goals. Recently we did some co-branding with a famous clothing brand. Because I work with over 150 fitness venues I can negotiate with a very large famous clothing brand.

What are the major drivers for customer acquisition for a fitness app in China?

Tom Xiong: There are 2. The first is creating a space for people to learn about fitness easily. And the second is to make the user feel they are not risking anything and to make them feel 100% comfortable before they go to a class, making them feel that Move Shanghai is a new experience that they want to try out that might be fun and if it’s not fun they can always try something else out.

Do you work with any corporate partners?

Tom Xiong: No, because our price is a premium price and not all the employees of an average corporate sized company can afford our price. Because these corporates will want to pay us a flat fee for all their employees and that is too low for us right now. However, we will host events at these corporate companies and this raises our brand awareness.

How did your past experience lead you into developing a fitness app in China?

Tom Xiong: I was born in China. When I was 6, I moved to Sweden. As a teenager, I started coding and I built a few internet companies in Sweden and then after selling my last one I moved to New York to do some intrapreneurship with a company. After that, I decided I wanted to come to China and I didn’t know what I wanted to do at the time but I wanted to come and live and work in Shanghai. Throughout this time I’ve been doing a lot of consultation and advisory work with multinational brands, advising them on their China strategy.

What’s your opinion on the Chinese diaspora coming back to live and work in China?

Tom Xiong: There are about a million young Chinese people who were born in China but educated overseas returning to china each year. I think it is on a parallel with Silicon Valley and I did a podcast on this recently. The 996 debacles really damaged China’s tech reputation.

How do you keep up to date with issues in China?

Tom Xiong: That the main reason I started doing my own podcast. Through that, I get to talk with lots of interesting people who are experts, which informs my decisions making better than just reading articles.