During January 2018, The Economist contacted me to discuss an article they were researching on the fitness industry. Their initial angle for the article was to discuss the good-intentioned New Year resolution for people to get fit and how clubs and studios are the grateful beneficiaries of this surge in demand. However, after sending some notes, the emphasis for the article shifted to something which I think is more insightful and that is the industry’s bifurcation.
These are my comments that I sent over to provide some perspective for the article:
It is important to recognise that low-cost gyms are not a new feature of the UK fitness industry landscape. Since 2006, they have been quietly building momentum and then more publicly with the London IPO of The Gym Group in November 2015 when it had 66 gyms open across the UK.
The impact of the low-cost gym operators has been to efficiently erode the incumbent mid-market operators whose strategic response to the threat was limited and late. Now the UK fitness industry is bifurcating along two distinct pathways. I define these as ‘self-service’ and ‘supported’. Low-cost gyms are the masters of ‘self-service’ providing consumers with a deliberately limited high-value experience at a remarkable monthly price-point. Brands such as SoulCycle in the US, 1Rebel and Psycle in the UK, by contrast, are designed to provide a more ‘supported’ experience purposely engaged in helping people reach a desired health and wellbeing aspiration. This ‘boutique-style’ and expert-led experience can presently command an eight-times price multiple compared to a low-cost gym if someone was attending two weekly classes over the course of a year.
I believe that fitness operators can sustainably operate long-term along either but not both of these strategic pathways. The future winners in the fitness industry are those brands that consumers recognise as passionate specialists.
January gym joining
January has historically been one of the most popular months for joining a gym and in 2017, Monday and Tuesdays were the peak joining days in a study conducted by the Harlands Group, a membership collections business. So Tuesday January 2nd 2018 would have been a very busy day for gyms.
Many people underestimate the commitment required to fulfil New Year’s resolutions and this includes the challenge of exercise adherence. One large study of UK 353,000 gym members (Dr Paul Bedford) found that 88% were continuing with their membership three months after joining. Median membership longevity among this group was just over 12 months.
If exercise commitment is likely to be a challenge in 2018, then a savvy consumer should be paying by the session or month-to-month until an enjoyable habit forms. Later a longer-term membership contract can then be considered. However, the newer fitness brands are moving away from contracts as they recognise that more people expect flexibility.
Read the full Economist article, ‘As gyms hit peak season, the market does the splits‘.