Speaking at Wild Digital 2016, a conference organised by Catcha Group, on Wednesday, founder and chief executive officer Joel Neoh said that KFit’s decision was based on insights gathered from over six cities about the fitness sharing platform.
While the company had always thought of itself as a fitness platform, its consumer focus groups were enquiring if the platform was going to offer beauty and well-being services.
“While we were thinking that we were designing a business that will shake up the fitness industry, consumers actually wanted foot massages,” he described the epiphany six months ago.
“Whether you call it pivoting, or innovating on top of (an existing product) or expanding categories, I think it’s about starting with the customers first and working backwards,” Neoh said.
When investors asked KFit what is the risk of branching out into more categories, Neoh responded that it was more a case of “what is the risk of not doing it; of not being relevant to our customers”.
In a separate correspondence with DEALSTREETASIA, Neoh shared more in-depth views of the largest Southeast Asian market that is Indonesia. Edited excerpts as follows:
What are your views on the fitness/health/beauty industry in Indonesia? And how do you view other consumer-facing industries in that market?
We believe there is tremendous opportunity in Indonesia for O2O local commerce.
Consumer-facing industries are poised for growth with increasing consumer spend and mobile penetration. eMarketer expects 102 million internet users in 2016, which is 40 per cent of the population. Mobile internet users are expected to hit 84 million in 2016.
SingPost expects the number of online shoppers in Indonesia to hit 8.7 million this year. Yet, online sales are estimated to account for less than 1 per cent of entire retail.
KFit’s expansion strategy into Indonesia is clearly different from how it expanded into Hong Kong, Australia, Taiwan, Korea and other markets in Southeast Asia (SEA). What was the motivation to take the M&A route?
We are familiar with Groupon and felt that there is an opportunity for us to build upon its strong foundations as a market leader.
This is acquisition is also in line with our goal of expanding into different categories beyond fitness.
It gives us a strong entry into SEA’s biggest consumer market and provides us with a strong platform for multi-category expansion in SEA.
(Neoh added in his presentation at Wild Digital that KFit had been looking at Indonesia for six months now and saw that the similarity of Groupon Indonesia’s platform to KFit’s is very relevant in Indonesia. “It’s no harm having a million subscribers that we can derive from another company, and the 50,000 virtual relationships, to expedite our business in Indonesia,” he said.)
What categories are you interested in and how will Groupon Indonesia as a subsidiary, help in that regard?
Expanding into more categories beyond fitness has been a part of our roadmap from the start. We want to become a leading O2O local commerce platform in SEA and Groupon Indonesia will provide a good platform for us to build upon.
The Groupon Indonesia transaction will only be completed in Q3 this year. What are the preliminary targets KFit has set for growing in Indonesia?
While we cannot share any business numbers, we will be focusing on mobile.
StatCounter estimates that mobile contributed to 70 per cent of Indonesia’s web traffic in 2015. A vast majority of Groupon’s transactions happen on desktop, while over 90 per cent of KFit usage happens on mobile.
Groupon’s existing presence in Indonesia will complement our strength and experience in creating a mobile-first platform. The aim is to gain a strong foothold in local commerce on mobile by offering seamless convenience from purchase to redemption.
On the acquisition deal via which Groupon Inc becomes a shareholder in KFit, was it financed solely with equity? How big a shareholder is Groupon Inc in the company?
Unfortunately, we cannot comment on this.