Its January and time to register my kids to winter sessions for their evening and weekend activities: piano, Scouts, judo and badminton. Most of these registrations are still paper-based requiring me to go in person, fill in a form and write a check. On a cold Monday evening, I had to line-up for piano and badminton registrations. Fortunately Scouts are now online. I won’t need to queue to sign-up my kids to winter camp.
As a parent, I wish all registrations were done online. Administrators surely wish it were as well and avoid running after checks, or spending their evenings handling paper forms. That’s the mission of Amilia — to bring activity-based e-commerce to community organizations. Its been 5 years since I’ve joined and we now have over 1,000 organizations using Amilia. Accomplishing that mission has been fun and more than ever continues to be exciting and rewarding.
Have you ever wondered why Amazon doesn’t sell classes? After all, Amazon owns 50% of e-commerce retail and a whopping 5% of all retail in the US which totaled 5,700B in 2017. Following the acquisition of Whole Foods, it has shown its not afraid to expand. But what about the 600B world-wide fitness/mind-body market? What about all those activity-based checkouts? What about all those online registrations?
I haven’t had the opportunity to ask Amazon this question directly. However having spent many years in the business, I can give it a shot based on my own experience.
First, what is activity-based e-commerce?
Back to my family. Every year, my wife and I register our kids to different activities. The registration process usually goes something like this:
- We discover an activity to purchase
- We fill in a form
- We provide payment (cash, check or credit card)
- The administrator prints roster of participants
- Our child attends the classes/events
- Teacher/coach takes attendance
- Teacher/coach provides assessment of skills at the last event
Rinse and repeat.
In 2018 we had to go through this process 6 times for 2 kids. Considering there are 80 million children in the US and Canada and on average 3 registrations per child, that’s 240 million yearly checkouts up for grabs. We can easily double that number to 500 million+ counting registrations for adults, seniors, employees, etc. And that’s only in English (and a bit of French) speaking North America.
Now there are software systems that do handle activity-based checkouts. Amilia is of course one of those. However the majority of checkouts are still pen and paper or improvised online forms with PayPal. Some systems don’t have the concept of a cart. You need to register one class at a time. Think of the lost opportunities to up-sell.
Take for example the judo club my son goes to. Every September I need to go in person, fill in a form and cut a check. I also have to purchase a new belt and a judogi as a separate transaction (they take cash only for that).
As a parent, it would be more efficient if I could do that in one single transaction online. I wouldn’t have to fill in the form the second year — my son’s information would already be in the system.
For an e-commerce platform, think of the opportunity that checkout brings. Sell the class and merchandise at once. Knowing the historical information of my son, it could even suggest the judogi size and belt. Other accessories with that?
Going to the judo club every Saturdays, I have an emotional bond with my judo club. Give me the choice of buying my son’s blue belt from them over anywhere else; I choose my judo club. I want to support my judo club. They just don’t have easy access to e-commerce and online marketing tools to leverage those opportunities. They do however own that checkout and the abandonment rate is pretty damn low.
On Amilia, average cart size is 170$ and cart abandonment rate is only 15%. Contrast that against product-based e-commerce where average cart size is 80$ and abandonment rates are over 70%. Activity-based e-commerce is really, really sticky.
In e-commerce the one that holds the checkout has the power. Amazon understood this. Today there are over 2 million sellers on Amazon. Shopify has as well. It provides a SaaS solution to 600,000 merchants.
Yet, there is no Amazon or Shopify for the world of fitness/mind-body. Let me elaborate the major reasons why that is.
Discovery: Activities Are Local — No One Has a Complete Catalog
Unlike physical products, activities are service-based and local. You can’t produce them in China and sell them online to people across the country. Activities are provided by local organizations: non-for profits, park & rec agencies, towns, sport centers, individuals, franchises, etc. Each of these organizations are independent businesses with their own offering. We can find directories of the local town’s activities often in the form of printed brochures, and sometimes as online catalogs. They are rarely up to date as classes and schedules change all the time. Updating that information becomes a chore for administrators.
Some local directories do exist. They remain however concentrated in a vertical and are regional. Kidz Central Station in New York city is a good example of a directory focused on children activities in the Big Apple. It covers only a segment of the population. What about teens, adults and seniors?
There are no standards on the web to present or publish activities. None at least that have been adopted by organizations and software applications. Discovery of activities in ones community remains a human task of sifting through google search results and via word of mouth.
No single company has the catalog of programs in all communities. Through a partnership with Mind Body, Google Maps has ventured into cataloging yoga schedules and even allowing drop-in and class registration. However it has not become mainstream.
The only way for a directory of activities to be used and trusted is for it to be complete and up to date. That requires the majority of organizations in a community to be disciplined in publishing and updating their catalogs in a single source. A single platform to search and discover activities of all sorts in one’s region. Many have tried to create these however classes and schedules become stale and outdated.
Organizations simply don’t have an incentive to prioritize maintenance of the directory data over other tasks. The directory is not their primary catalog. Its one channel among others. Their printed flier and sometimes their website remain the true source. Word of mouth remains their best and often only marketing.
Technology: Low Adoption Rate
Registrations have traditionally been paper based forms. Larger organizations like sport centers, large sport clubs, park & rec agencies and community centers have moved to electronic forms and online payments. Most even have dedicated online registrations software like Amilia. The majority of smaller clubs and associations are still paper based. Think of your local karate club or arts & craft studio — they still ask you to fill in a paper form.
A number of reasons explain why they haven’t adopted software:
- Low volume
If you take a few dozen registrations a year, you don’t have enough volume to justify adopting a software platform. Paper forms and Excel may suffice.
- Owner/employee tech savviness
Not everyone is comfortable operating software. Administrators may be used to working with paper. Moving over their processes to software does require some technology know how.
- Scare of change
Admins (i.e. program managers) used to handling 80% of in-person registrations are afraid of losing control. Organizations that have adopted Amilia do 80% of their registrations online, without the help of an admin. For management that is a cost saver. For the admin, relinquishing control to self serve and automation is scary. Rightly so.
- Cost of change
Adopting software is a major shift in your processes. You need to be ready to change how you do things to take on the feature set offered by the software system. It takes a lot of coordination with existing, and often part-time, staff. Its an investment in time. Change management is crucial.
- Cost of software
Software systems are typically priced at a monthly fixed fee and a variable service fee on transactions. For example 99$/month plus 1%. The combination of fixed and variable helps to overcome revenue discrepancies due to seasonality. The organization must be able and willing to pay the fixed recurring amount, even outside of registration periods. Organizations that are seasonal (i.e. a ski school) are not always ready to incur costs when they are not in operation.
- Cost of online payments
Online payments are typically done via credit card and incur fees ranging anywhere from 3% to 5%. Owners or the board may not be willing to increase their price to offer the convenience of online payments.
Sport & leisure is very seasonal. Software adoption, just like any process change, must be planned in advance and implemented in the off season. These opportunities happen only a few times a year.
Complex Business Rules: Not Like Selling a Book
Registering to an activity is different than purchasing a book from Amazon. Think of a swim class for your 8-year old son. There are requirements for him to attend: gender, age, level, medical conditions, prior swim experience, etc. In addition, a registration is a form-based transaction. Lots of information must be captured in order to take the registration. For example emergency contacts, profile picture for access card, etc.
Price may differ as well: second child 50%, coupon code, non-resident fee, etc. The system must be able to handle complex discounts and fees.
What if the class does not fill up? It may get cancelled in which case it will be necessary to communicate with parents. What if the class is full? People expect a waiting list.
In product-based e-commerce an account identifies the person making the purchase. In activity-based e-commerce an account represents a family. Family accounts become the foundation.
As you see, it goes further than form filling and payment. The software must allow the administrator to set up constraints, offer discounts and communicate with parents. The software needs systems for: e-commerce, accounting and a family-centric CRM.
The software must also allow the administrators to set up their programs catalog. Think of where and when the activities happen. How to avoid conflicts in locations and times? Who will be giving the classes? The software needs to manage program catalogs, facilities, staff and scheduling.
Often, their is limited capacity. Think of swim lessons and popular day camps. There is much more demand than their are spots available. Tennis camp in Montreal is a good example. Spots are very limited. Parents would fight over those spots. Shotgun registrations and priority-registrations are strategies organizations have put in place to even the odds. The software must implement those business rules, and above all, support the load of parents constantly refreshing their browser page seconds prior to the registration launch.
Registrations is only half the battle. There is the selling and then the running of classes and events. If you want a sticky product, the software needs to handle class rosters, attendance, memberships, installments, access management, class switches, refunds, skills tracking, etc.
In the end the better software solution is able to replicate and automate back-office processes, and at the same time of offer an e-commerce mobile-responsive interface. Mom and dad expect to be able to register their kids on their iPad from the comfort of their beds 10PM at night.
Small organizations don’t have staff on hand at that time to take a call and help a parent register outside of business hours. Business rules and constraints must be pre-programmed and flawlessly run. Its a complex business.
It takes quite an investment to build software to replicate those business rules and at the same time, offer ease of use to parents. Knowledge of the business domain is paramount.
Market Opportunity and Hard Reality
The market is there with 600B of sales per year. The technology and business model are there too. Competitors do exist but none has yet captured the market. There are hundreds of millions of activity-based checkouts up for grabs.
Contenders will have to face market realities that are not always easy:
- Slow sales cycle
Given the seasonality, sales cycles can last months and for bigger clients over a year.
- Small accounts
Organizations are typically very small, with revenues below 200K a year. With an average IT spend of about 7%, registration and back-office software revenue must share that with other IT costs. In our experience you can expect that to range between 1 to 2% of revenues, or about 2 to 4K yearly.
- Complex sale
The organization that buy your solution will adopt processes and business rules that you support. It may not be a perfect fit. You will need to assess existing process, propose workarounds where gaps are found and demonstrate a good fit.
- Recurring revenue
Pricing can both be recurring and revenue-based. This is a good thing. Activity-based registration is a great fit for SaaS models. Organizations are willing to pay a low monthly recurring fee to access the platform. In addition, they are willing to pay a service fee on revenue that goes through the platform. For example 0.5 to 2%.
- Low churn
This is a great thing. Provided your software is a good fit, and works well, there is very little reason for the organization to look elsewhere. The cost of the software is often lower than the cost of change.
- B2B2C business
The software is sold to businesses, yet its success depends on consumers. Features must be developed for both.
Patience is the name of the game. This is contrary to the fast pace of startup culture. At the same time, software does age. It is important to keep innovating and improving features in the back-office and in the consumer facing e-commerce side as well. Ultimately though, what is so attractive is the low churn and pricing model. A happy customer can become a life long customer. Provided of course that you enter a true partnership with them.