Can fitness brands survive in the era of rising competition?

Can fitness brands survive in the era of rising competition?

The fitness industry that once predominantly served affluent households has evolved into something far more open and democratic. Simplifying and stripping-back the fitness experience have proven to be the dominant trends. More recently, however, a new breed of fitness operators has emerged, offering standalone and specialized boutique fitness studios. What does this bifurcation mean for the sector? Find out in the latest market report by EuropeActive.

It is interesting how the narrative of an industry ebbs and flows.

Ten years ago media outlets were brimming with news of how health club brands, such as LA fitness and Fitness First, were bringing their conveniently located, affordably priced clubs to more British consumers.

BC Partners, a European private equity firm, had acquired Fitness First for an approximate enterprise value of €1.2 billion and its new owners were excited about building on its base of 1.1 million members through its ‘value for money’ clubs.

"World's fastest growing

fitness clubs are embracing

a self-service strategic

pathway."

Soon after this deal, low-cost gyms began emerging, offering a narrower, ‘stripped-back’ fitness experience at monthly fees that were more than 50% lower than the national average price.

An industry that once predominantly served affluent households was evolving into something far more open and democratic. In order to provide remarkably low monthly fees, gyms were super-sized, migrated to a self-service, 24-hour operating model and powered by abundant technology to drive down costs. They captivated the interest of consumers and journalists, who found them refreshingly simple to understand.

A bifurcating industry

Many of the world’s fastest growing fitness club brands are embracing a ‘self-service’ strategic pathway.

A leading example is American based Planet Fitness, which has expanded to more than 1,000 gyms across the US, Canada and the Dominican Republic by providing contract-free memberships from just $10 per month. The company completed an IPO in August 2015 when it reported more than seven million members across its franchise network, equivalent to the population of Bulgaria.

"Brands like these are

the gym industry’s

version of Lidl

and Aldi"

Brands like Planet Fitness are the gym industry’s version of Lidl and Aldi. The ‘engine’ of the Planet Fitness business and core consumer offer is access to an abundance of best-in-class cardio and strength training machines operating in a typical property size of 1,858 square metres. Simplicity is the brand’s mantra – an antidote for an industry that was becoming bloated with facilities and complicated terms of business.

 

Germany’s equivalent of Planet Fitness is McFit and it has just a single price for all 169 of its gyms – €19.90 per month. The Gym Group which listed on the London Stock Exchange at the end of 2015 has easy to remember opening hours at its 72 UK gyms  – 24. You can see the pattern emerging.

The emergence of boutique fitness

More recently, a new breed of specialised fitness operators has emerged which believes in an opposing future which could be defined as a strategic ‘supported’ pathway.

This includes the emergence of standalone boutique fitness studios, which are beginning to appear on UK high streets, inspired by the success of American brands, such as SoulCycle and Flywheel Sports.

"The future of 

these brands

concerns me"

SoulCycle’s core fitness experience is a 45-minute indoor cycling class that costs $34 at one its New York studios. Created by two female fitness industry outsiders, the brand has built a formidable following and is preparing a $100 million IPO during 2016.

These studios operate in just 186 – 464 square metres of space but can generate as much as $4 million in gross revenue. Here the experience is intimate, small-scale and laser-focused on a single activity.

Charismatic instructors with ‘rock-star’ status ensure participants have the ride of their lives ensuring sign-up to the next class which is critical as there is no membership model here.

The ‘squeezed middle’

The result of this market bifurcation is that more generic fitness brands are finding members disengaging as people search for something more remarkable.

The future of these brands concerns me as I sense a lack of urgency to redefine and renew their brands now that their ‘temporary monopoly’ has ended.

I discuss this topic in my new report that looks at how the fitness industry is changing in three of the world’s largest markets – the US, UK and Germany.

The "Health club industry mid-market report - investigating how brands are repositioning in an era of rising competition” is available to EuropeActive members as a free download from the EuropeActive Knowledge Centre.


Ray Algar, is managing director of Oxygen Consulting (www.oxygen-consulting.co.uk), a Brighton, UK, based company that provides compelling strategic business insight for organisations connected to the global health and fitness industry. His previous industry reports include:

 •    2015 UK Boutique Fitness Studio Report

•    2014 Review of the UK Health and Fitness Industry and an Outlook for 2015

•    2014 Fitness Sector Social Good Report

•    2013 Review of the UK Health and Fitness Industry and an Outlook for 2014

•    2012 UK Low-cost Gym Sector Report

•    2011 Global Low-cost Gym Sector Report

•    2011 European Health Club Industry Web and Social Media Report

•    2010 UK Low-cost Gym Sector Report

In July 2013, he launched Gymtopia (www.Gymtopia.org), a digital platform that shares stories and insights about how the global health and fitness industry is creating positive social impact through its philanthropic activities. European fitness operators and suppliers can submit their charitable projects, free of charge.