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THE FUTURE OF FITNESS
Competitive industries are evolvingfaster than we do - Gyms are facingcompletely new types of competitionsuch as low cost, boutique, bootcamp- style fitness groups and in-house solutions
THE WORLD IS CHANGING…ARE YOU?
THE MIDDLE-MARKET SQUEEZEA
VER
AG
E M
ON
THLY
M
EMB
ERSH
IP F
EE
PremiumBoutique
MID-MARKET
LOW COST
$20 per month
$25 - $99 per month
$100+ per month
SOME CLUBS ATTEMPT TO REPOSITION TO PREMIUM SERVICE
SOME CLOSE,SOME SELL
SOME CONVERT TO LOW-COST CLUBS
ILLUSTRATIVE MARKET STRUCTURE AT 2017
MARKET POSITION
2010 2017YEAR
LOW COST IS A SIGN OF MATURITY IN ANY INDUSTRY
3 MYTHSOF LOW COST COMPETITOR
Growing membership is tough
#1. They can’t survive at those prices
#2. Low cost gyms are growing the market
#3. Low cost members graduate to full service clubs
4 MISCONCEPTIONSOF LOW COST BUSINESS MODELS
1. Low cost is not low margin
2. Low cost is not low quality
3. Low cost is not cheap imitation
4. Low cost is not unbranded
Source: Kachaner, Lindgardt, & David, 2011
THE BOTTOM LINE IS…
… the budget model is radically different to a mid-marketfitness facility that would drop price and cut back on services.
It is an all-embracing organizational philosophy.
WE DO NOT BECOME LOW COST WE ARE BORN LOW COST
TO CREATE A NEW AND EXCITING CONSUMER PROPOSITION THAT FUNDAMENTALLY ‘DISRUPTS’ THE RULES UPON WHICH THE INDUSTRY WAS FIRST BUILT
6 CHARACTERISTICS
DEFINITION OF
LOW-COST GYM
SCOPE TO OPERATE 24 HOURS
SELF-SERVICE OPERATING PHILOSOPHY
CAPABILITY TO OPERATE ENTIRE CLUB WITH SINGLE PERSON
MINIMUM 50% LOWER THAN THE AVERAGE INDUSTRY PRICE POINT
HEAVY TECHNOLOGY AND WEB USE
GYM-LED PROPOSITION
And structured both their customer offering and business systems to meet those needs…
SUCCESSFUL LOW-COST GYMS HAVE IDENTIFIED UNMET NEEDS WITHIN THE POPULATION OF POTENTIAL MEMBERS
BLUE OCEAN STRATEGY
Strategiesdestined for
failure
Low Standard High
Low
Stan
dar
dH
igh
Pe
rce
ive
dV
alu
e
Relative Price
Low Price
Hybrid
Differentiation
FocusedDifferentiation
No Frills
VIABLE STRATEGY OPTIONS
BOUTIQUE GYMS:MIRACLE OR MIRAGE?
CHARACTERISTICS OF BOUTIQUE CLUBSDistinctive brand
and clear consumer propositionAuthentic, refined
studio environments
Social “experience” based exclusivelyaround GX or Team Training
Premium and flexible pricing
MICRO-GYMS ARE GAINING MASSIVE MOMEMTUM
QUICKLY, DEPSITE THEIR HIGH PRICES….
CROSSFIT
12 000 clubs -> +de $150 per month
ORANGE THEORY
$23 per class / $159 per month
SOULCYCLE
$34 per class
PURE BARRE
$295 per month
C E L E B R I T I Z E Y O U R I N S T R U C T O R S
“ P E O P L E A R E Y O U R B R A N D ”
B I O S
O F F E RS O C I A L M E D I A
T R A I N I N G A C R O S S M A I N
P L A T F O R M S
T A L E N T P A C K A G E S F O R S T A R
I N S T R U C T O R S
Micro-gyms are extremely popular withthe new generation of customers…
They are moving awayfrom typical multi-purpose fitness
centers… Especially men.
B O U T I Q U E G Y M S G E T T O T H E P O I N TB O U T I Q U E G Y M S M A K E T H I N G S S I M P L E
H O W E V E R T H E Y W O R K W I T H T H E L E A D E R O F T H E I N D U S T R Y L I K E T R X A N D L E S M I L L S
SOUL CYCLE IS DELIVERINGHUGE RETURNS
SoulCycle Union Square (NYC) example
Facility size
Avg. classes per week
No. bikes per class
Avg. price per class
Implied annual revenue
Estimated utilization
2800sq ft
87
57
$30*
65%**
$5.03m
We estimate a top end Soul Cycle does$2-3m EBITDA on a
$0.5-1m initial investment
* SoulCycle charge is 34$ a single class in NYC or offer various packages ranging from $165 for 5 classes to $850 for 30 classes. This figure does not include additional revenue from shoe hire, apparel sales etc.
** This figure is likely conservative - for example, in the week 13-19 August 2013 the Union Square studio averaged 70% utilization.
Boutiques are much smaller and therefore much cheaper to establishthan full service clubs
Compelling experience enablesboutiques to charge high prices and achieve high utilization even on a pay-per-use model
THE 5 SECRETS OF BOUTIQUE GYMS
1. Fast addiction
2. Quick results
3. Instant pleasure
4. Immediate integration
5. No intimidation
THE STUDIO FITNESSOWNER’S DILEMMA
60% of studio ownersdon’t take a salary
average EBITDA of
<US$70KTHEY HAVE BOUGHT THEMSELVESA VERY BAD JOB
THE MIDDLE TIER CONTINUES TO HAVE THE LARGEST (AND MOST PROFITABLE) NON-FRANCHISE BUSINESSES IN THE INDUSTRY
Economies of scale produce lower operating costs per member
Significant resources allow mid-tier gyms to avoid the errors of the avant gardeand adapt effectively
Most of those who join low-end clubs have never been a member of a gym before
The real cost differential between low-cost and mid-tier (about US$150 per year)
About 1 in 5 members of low-cost gyms move up to the mid-tier each year while less than 3% move from the mid-tier down to low costs providers
They’ll pay less for lessservice because at least then
they’re not being‘overcharged’
UNSATISFIED MEMBERS CAN GO ONE OF THREE WAYS…
They drop out of ourindustry altogether
BUDGET GYM
YOURCLUB
MICRO-GYM/PREMIUM OFFER
They’ll pay more in the hope that thisclub might actually provide something
that delivers on its promise
3%
3%
6%
11%
14%
26%
26%
0% 5% 10% 15% 20% 25% 30%
ILLUSTRATES THE MAIN REASON FOR LEAVING
Results
Support
Enjoyment
Facilities
Cost
Attendance
Location
AVERAGE ATTENDANCE IS ONLY 0.9 VISIT PER WEEK PER MEMBER...
Unsure
More than a year
7-12 MONTH
4-6 MONTH
0-3 MONTH
Membership Duration 0% 5% 10% 15% 20% 25% 35%30%
5%
16%
18%
28%
33%
HOW LONG DID PREVIOUS MEMBERSKEEP THEIR MEMBERSHIP?
PEOPLE NEED GOOD RELATIONSHIPSTO BE HAPPY
WE ARE IN A GREAT PLACE TO BE THE ONES FILLING UP THESE NEEDS
PROPOSE AND PROMOTE
• Social and assisted – GX, Team Training, Personal Training, Functionnal Training
• Weights/HIIT
• Yoga / Pilates
• Dance classes
BE MUCH QUICKER TO INNOVATE
Position yourself as a pioneer for fitness…
WHAT DO PEOPLE WANT?
Club within the club
Manage each part of your offer as a stand-alone one
- Authenticity
- Surf on Trends:
RUN MICRO-BUSINESSES INSIDE YOUR BUSINESS
> Group Exercice
> Virtual / Immersive
> Functional Training
> High Intensity Interval Training
> Boxing
> Yoga/Pilates
Growing club attendance and average attendance per member per week should be your #1 KPIs.
CHANGE FOCUS FROM SELLING TO ACHIEVING ULTIMATE MEMBER ENGAGEMENT AND ATTENDANCE
#Trends: Group Exercise
#Trends: Virtual
LIVE CLASS ATTENDANCE [march 2016]
ProgrammeNumber of
classesAttendance
Averageattendance
CXWORX 89 3,285 37
BODYPUMP 79 2,941 37
GRIT STRENGTH
78 2,262 29
GRIT CARDIO 60 1,243 21
BODYATTACK 28 837 30
RPM 57 717 13
YOGA 25 646 26
BODYBALANCE 27 635 24
SPRINT 52 573 11
THE TRIP 10 355 36
BODYSTEP ATHL.
18 302 17
BODYCOMBAT 17 282 17
GRIT PLYO 15 218 15
SH’BAM 5 158 32
BODYVIVE 13 148 11
SENIORS 3 33 11
VIRTUAL CLASS ATTENDANCE [march 2016]
ProgrammeNumber of
classesAttendance
Averageattendance
RPM 236 1,278 5
BODYPUMP 78 918 12
BODYCOMBAT 70 371 5
CXWORX 45 359 8
BODYBALANCE 39 327 8
SH’BAM 20 126 6
LES MILLS NEWMARKET – AUCKLAND NZ
Virtual classes represent20% of total group exercise attendance.
#Trends: Functionnal Training
#Trends: Boxing
#Trends: HIIT
REVIEW AND RETHINK YOUR VALUE PROPOSITION
Less conservative, more provocative, funny and disruptive marketing campaign
A safe and conservative approach won’t work!
COMMUNICATE DIFFERENTLY
A NewValueCurve
Increase
CreateEliminate
Reduce
THE 4-ACTION FRAMEWORKEliminate
Reduce
Increase
Create
MAKING THE DIFFERENCE TO HAVE THE PREFERENCE
BE DIFFERENT!
7 Action Steps
1.Research your marketYour members / Your competitors members
2.Draw your value curve against that of your competitors
3.Choose your strategy: red or blue ocean
4.Search for value innovations – your competitors are!
5.Be different
6.ERIC: Eliminate, Reduce, Increase & Create
7.Compete!
Place your business on the Strategic clock
