The Future of Fitness
It is evident that COVID-19 will have a lasting impact on the future of work.
How this impact will take shape is naturally on a lot of people’s minds, given the mass acceleration of companies’ technological capabilities necessary to power remote work. Recent media demonstrates how pervasive and wide-ranging this interest is, with coverage spanning think pieces on already apparent business impacts to studies on the benefits and social concerns of remote working to tips to digitally transform faster. Many wonder if it will be possible — or even beneficial — to put the “digital genie” back in the bottle and resume pre-COVID work norms once the health emergency is over.
With a few weeks of social distancing and stay-at-home mandates under (most of) our belts, one aspect of this transformation is clear: the companies powering remote work, especially workplace and communication software, have emerged as early winners in this new landscape. Zoom, who went public only last April, saw its daily active users jump from 10 million to over 200 million in the last three months, and is now worth more than the top four airlines combined. Slack added 9,000 new customers in the first quarter, up from about 5,000 in each of the previous quarters, and average daily messages sent per user is up 20%. Microsoft Teams reached 44 million daily active users in mid-March, up from 20 million in November. Slack, Zoom and Microsoft Teams are investing heavily to solidify this market leadership, recently spending a combined 45 million in advertising. However, these leaders are also working to tackle the vast issues that accompany this accelerated growth: Zoom is providing its tools for free to any K-12 schools affected in Japan, Italy and the U.S. and Slack has offered free upgrades to any team working on Coronavirus research.
The impact on another disrupted pillar of our day-to-day lives — health and fitness — seems even less conclusive. The industry, which has undergone significant expansion and evolution over the past decade, went digital seemingly overnight. Similar to the work sphere, several players have better capitalized on new digital opportunities and emerged as leaders in the new health and fitness space. However, while work’s transformation appears to be a speeding up of the inevitable, the long-term impact on the fitness space appears to be more opaque.
To better understand what may be in store for the fitness world as it goes digital, let’s take a closer look at how the industry has grown and evolved in recent years. In leading not-for-profit trade association International Health, Racquet & Sportsclub Association (IHRSA)’s most recent global report (2019), it found that global health club revenue was $94 billion, comprised of over 210,000 clubs serving 183 million members. Within the U.S., the biggest growth sector has been boutique fitness: specialized fitness studios with loyal members and pricey classes, such as Barry’s Bootcamp, SoulCycle, Orange Theory, Flywheel Sports, Pure Barre, [solidcore] among others.
However, these studios were already ripe for disruption prior to COVID-19; in late 2019 it was widely acknowledged that growth was stalling for some of the biggest players in the market. Around the same time, analysts began to speculate that boutiques would be hit hardest in a recession given their price premium. One factor issue was fickle customers — without monthly or annual gym fees, it is easy for customers to disappear, particularly after their reduced price intro class package runs out. Fitness app ClassPass was created to fulfill consumers’ desire for choice, providing access to different studios in urban cities, often at reduced prices for off-peak sessions. Another threat was the rise of high-tech home fitness concepts, such as Peloton and Mirror, that offered the convenience that boutique customers crave and competed on long-term value. Prior to COVID-19, tensions between at-home offerings and studios had been heating up. Top cycling studios SoulCycle and Flywheel Sports released their own at-home bikes, with Flywheel’s attempt thwarted by a patent dispute with Peloton.
Online-only and digital-first companies have benefited from the swift industry shifts stemming from COVID-19. MIRROR, a full-length interactive fitness mirror, has seen a double in sales in recent weeks, and fitness streaming service Obé has seen a membership uptick of 300% between February and March. However, gyms and boutique studios have met this shift with creativity and flexibility, shifting to online workouts, with a large contingency offering free classes, including Peloton, SoulCycle, Nike Training Club, Planet Fitness, CorePower Yoga, Barry’s Bootcamp and Rumble, among others. In light of this pause in revenue, studios are leveraging their own apps, YouTube and Instagram, and thinking of creative ways to engage consumers and monetize digital offerings without paywalls. Studios are also considering potential changes to class capacity and schedules to accommodate potential long-term social distancing. At this point, it appears that the jury is out on the place of digital offerings in the fitness world long-term. I predict that the outcome will look quite different based on how long physical studios are closed.
