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A strategic look at the emergence of the
low-cost gym sector
FIA Seminar October 2010
Ray Algar
www.oxygen-blog.blogspot.com
My perspective
neutral
towards the
sector
MY DEFINITION OF A LOW-COST GYM
MINIMUM OF 50% LOWER
THAN INDUSTRY
PRICE
HEAVY TECHNOLOGY AND WEB USE
GYM-ONLY PROPOSITION
ABILITY TO OPERATE CLUB WITH A SINGLE
PERSON
SCOPE TO OPERATE 24
HOURS
MARKET
DRIVERS
SIMPLICITY
AFFORDABILITY
CONSUMER SENTIMENT
TOWARDS CLUBS
SPORADICATTENDANCE
CONSUMERS ARECHANGING
SUPPORTING INFRA-
STRUCTURE
MARKET
DRIVERS
SIMPLICITY
AFFORDABILITY
CONSUMER SENTIMENT
TOWARDS CLUBS
SPORADICATTENDANCE
CONSUMERS ARECHANGING
SUPPORTING INFRA-
STRUCTURE
I CareI CareI CareI Care
Consumers now have
considerable experience
of low-cost services
13
“Fly for the price
of a pair of jeans”
14
“Spend a little, live a lot”
“More of our shoppers
are using us for their
whole shop instead of
top-up shopping”
Group MD Aldi UK & Ireland
16
17
“Look good, pay less”
Think of a sector…you will
find low-cost
300 million units
annually by
2013
“Quality up, cost down
… way down”
MARKET
DRIVERS
SIMPLICITY
AFFORDABILITY
CONSUMER SENTIMENT
TOWARDS CLUBS
SPORADICATTENDANCE
CONSUMERS ARECHANGING
SUPPORTING INFRA-
STRUCTURE
MARKET
DRIVERS
SIMPLICITY
AFFORDABILITY
CONSUMER SENTIMENT
TOWARDS CLUBS
SPORADICATTENDANCE
CONSUMERS ARECHANGING
SUPPORTING INFRA-
STRUCTURE
“I can join online – no pushy
sales staff to deal with!”
MARKET
DRIVERS
SIMPLICITY
AFFORDABILITY
CONSUMER SENTIMENT
TOWARDS CLUBS
SPORADICATTENDANCE
CONSUMERS ARECHANGING
SUPPORTING INFRA-
STRUCTURE
MARKET
DRIVERS
SIMPLICITY
AFFORDABILITY
CONSUMER SENTIMENT
TOWARDS CLUBS
SPORADICATTENDANCE
CONSUMERS ARECHANGING
SUPPORTING INFRA-
STRUCTURE
40
Word of mouth
on steroids
Word of mouth
on steroids
MARKET
DRIVERS
SIMPLICITY
AFFORDABILITY
CONSUMER SENTIMENT
TOWARDS CLUBS
SPORADICATTENDANCE
CONSUMERS ARECHANGING
INFRA-STRUCTURE
“Why am I paying
for a club I
occasionally use ?”
“Why am I paying
£50 just to use
a treadmill?”
What do low-cost gym
consumers say?
“It is almost free”
“I have never been to a
gym that is £15 before. I
thought I would walk in
and find a lot of
broken equipment”
54
55
56
57
58
61
McFit Financials 2007
Euros
(millions)
% turnover
Turnover 86
Staff costs 3.4 3%
EBITDA 28 32%
Interest charge 0.1 -
Net assets 34
Clubs 88
“Perhaps the biggest
threat we face is that
someone from outside
our sector, with a huge
war chest of cash and
proven customer-centric
business model, will
build 1,000 shiny new
facilities, and offers
budget-busting
membership deals”
Fred Turok, Chairman, FIA
(statement from 2007)
Customer
intimacy
Operational
excellence
Product
leadership
budgetgymresearch.ning.com
oxygen-blog.blogspot.com
Google: “Ray Algar”