#54: Double 11 🛒(Is Ralph Lauren a victim?), The fall of gym membership model 🏋🏻♀️(Will's and ClassPass) | Following the Yuan
Following the Xinjiang cotton controversy, Ralph Lauren, Burberry, and Nike have become targets of consumers' discount strategies under Double 11's complex rules.
Hi, are you also reflecting how you can improve your life over the last three months before the year ends? Same here, same here.
I’ve been facing a conundrum recently between managing newsletter and my work outside of it. As I get more project inquiries, partly because of this newsletter, I get more deadlines, and my energy for content is being squeezed. This is not ideal and I’m actively seeking solutions. let me know if you have any suggestions.
Meanwhile, one thing that I can’t miss is the start of Double 11 (Oct. 21 this Monday). For someone who’s not typically excited by shopping festivals, I find myself planning a shopping list to get the platform-wide discount (50 RMB off for every 300 RMB spent). I saved over 1/3 of my total bill, but later I realized how much of a rookie I am when some saved over 1/2.
The complicated rulebook set by Taobao/Tmall is making some users put their maths skills to the test: aside from the platform discount, there’s also usually a category discount, a store discount, plus a few others you can use if meet a certain threshold on spending. What you get in return isn’t a grade but money saved.
What’s expected but still put me off a little is that Taobao’s user interface has been “PDD-fied.” It used to be more subdued and tasteful, but since their middle-class consumers were lured away by PDD with discounted iPhones, Taobao is adopting a more in-your-face marketing strategy like PDD: there are far lot more pop-up windows, prompting users to collect tokens. In response to people’s discount savviness, they list out specific discounts for each order like above. Ok, I have to say it is satisfying to see.
Double 11: How Ralph Lauren becomes the victim of China’s e-commerce loopholes
Compared to JD.com’s advertising controversy (they hired a female comedian to be the face of its Double 11 campaign, whom most of their core male audience dislikes), Taotian, the creator of Double 11, is facing bigger problems this year.
Consumers complained about a suspected system bug, which caused them receiving refunds after placing Double 11 orders, but later on, Alipay automatically deducts money from their accounts again. This appeared on Weibo trending list and news platforms like Sina Tech, as more people posted to find solutions on social media, but the news coverage was later taken down.
Meanwhile, taking advantage of another ‘bug’ — adding ‘add on’ items they don’t actually want to make up to the amount qualified for particular discounts, and immediately return these items — has been an ongoing issue that has gained more traction this year.
From these consumers’ POV, they aren’t doing anything wrong, so they’re happy to share online “the best ways to use ‘add-on’ items this Double 11”. However, from brands/sellers’ POV, it’s a trick with malicious intent (恶意凑单).
On Xiaohongshu and Weibo, the users who are exploiting the system often cite Ralph Lauren, and others than have been involved in public controversies, the perfect targets for helping them get discounts. The American fashion brand banned its suppliers using Xinjiang cotton in 2020. Brands like Burberry and Nike, which made similar moves, are also mentioned as discount helpers. These large foreign brands, with strong customer service capabilities, make users feel less guilty when targeting them. Chinese beauty brand Florasis is also a target, albeit smaller, possibly due to the pricing scandal triggered by top livestreamer Li Jiaqi’s comment.
On the first day of Double 11, users reported that many basic Ralph Lauren items were sold out. However, they speculated that this wasn’t due to popularity, but rather because too many people used them as 'add-on' items — or perhaps the brand intentionally marked them as sold out as a defensive tactic.
Dig deeper: The root cause of the exploitation issue lies in the backlash of the user-centric internet mindset that once drove Chinese e-commerce platforms to offer excuse-free and postage-free refunds. Chinese e-commerce consumers can typically request refunds within seven days of receiving goods (7天无理由退款).
The phenomenon is not new, but it has largely picked up after 2020, following the Xinjiang cotton controversy, and as people’s body feel of the economic slowdown deepens. Much like counterfeiters online and “pig butchers” on dating sites, these gray-area activities are difficult to crack down on. The final platform GMV does not take refunds into account.
While some rational consumers discourage such behavior, others — driven by financial pressure and anti-capitalist sentiment — exploit the system with little concern. The worst case scenario is their account gets blocked by the store, or they get phone calls from the platform trying to investigate, which is hardly a punishment.
How big is this phenomenon? It’s hard to quantify because the online description of is mixed with legit ‘add-on’ activities, and not everyone who exploits posts or comments on social media. I’m not sure if Ralph Lauren is actively defending itself, but the best thing that brands can do can compare refund rates across Double 11 periods, identify patterns, investigate and take proactive actions.
The fall of big players in China’s fitness industry: Will’s and ClassPass
China’s fitness industry remains a hotspot, but the chains and platforms that run on a pre-paid membership model are struggling to benefit.
Physical chain Will’s Group (威尔士) and online membership platform ClassPass have been pivotal in shaping China’s fitness landscape, akin to Starbucks in the coffee world.
Lately, users on social media have reported local Will’s locations (most in Shanghai and surrounding areas) shutting down, with memberships being consolidated into nearby branches. Similarly, ClassPass users smelled trouble when WeChat user groups disbanded, and they hear that studios are not receiving their payments in time. The two companies’ gradual decline has not attracted major media attention, as both remain operational for now.
In 2023, the total number of commercial gyms (including fitness clubs and fitness studios) that closed nationwide reached 8,057, with a closure rate of 9.46%. In 2022, the closure rate was 10.39%. Some big names that recently went under include Fine Yoga (梵音瑜伽), Tera Fitness (一兆韦德), Physical (舒适堡健身) and Space.
Will’s had 500k members in 2017 at its peak, received “significant investment" from L Catterton Asia in 2018, and once pursued IPO ambitions. ClassPass, a global venture that that operated in nearly 30 countries, entered China in 2019 after acquiring the WeChat-compatible GuavaPass.
Dig deeper: It’s not just the downfall of the fitness industry, but it points at the unsustainable issue of pre-paid membership business model.
If these businesses were optimistic about the future pre-Covid, they were likely to spend the cash on expansion. But these days, there are not enough new members to fuel this momentum or even help them sustain existing operations.
At one point, ClassPass seemed like a good hedge against Will’s physical gyms. However, scale became its downfall. Part of it is universal — how studios want to decrease reliance of third-party platforms everywhere — but part of it is the unique challenges brought by China’s vast market. In order to grow, it requires more business developers to sign studios in different cities, but the chain studios itself are going down and struggling amid the economic downturn. How does one sort out that problem?
Perhaps it lies in new, independent businesses like the one in Shanghai below, which made every pain point of a chain gym member their selling point:
"What you get in return isn’t a grade but money saved." that would be so funny if taobao actually did give you a grade!
Wow, its pretty complex and time consuming process to get a discounted deal. During my career as a Communications Technology professor I used to do a lot of consulting in Australia, South Africa and New Zealand, but still had to follow the 'publish or perish' mantra to remain relevant in academia. So I would use many of these projects as a basis for research publications. This seems to be you are doing, but in newsletter form? Thank you for your hands on, fascinating insights.