What Peloton’s IPO Means for the Fitness Industry

Jake Curreri
Oct 1, 2019 · 4 min read

How digital instructor-led workouts push the boundaries of an active life

Peloton Interactive Inc. executives and employees ring the opening bell Thursday at the Nasdaq MarketSite in New York (Credit)

Origin Story: Peloton

Described as the “Netflix for fitness,” stationary bike startup Peloton has made it possible to get instructor-led workouts without stepping foot in a gym. It’s one animal to deliver digital content and an entirely different beast to curate it. Started in 2012, the company transformed into a fitness sensation with a cult-like following, executing the idea flawlessly. Peloton has experienced exponential growth over the years that has signaled a shift of consumer demand in the fitness industry along with a recent IPO announcement.

Growth Leads to IPO Announcement in 2019

Peloton saw revenue more than double in fiscal 2019, to $719.2 million from $348.6 million, but the company’s losses swelled as well. Peloton reported a net loss of $195.6 million for the period, compared with $47.9 million a year prior. Today, September 29th, 2019, Peloton launched its initial public offering (IPO) at an EOD valuation of ~$8B. They look to expand to Germany in the coming months.

ClassPass Live

The Call for a Digital Shift for Studio Boutiques & Fitness Club Operators

Peloton’s IPO marks a dramatic shift in the fitness industry. Up until this point, the only other fitness provider to have gone public successfully is Planet Fitness, largely a marketing company, valued at the time at $1.58B.

Peloton’s correlation to Netlfix is a proper comparison. Mistaken as a digital content provider, their core product is recommending digital content, provisioned through gamification-style leaderboards and constantly-varied workout regiments.

ClassPass Live has noted this trend with a digital content offering of $10/month to existing ClassPass subscribers and $15/month for standalone users, with yearly pricing at $99/year. The company as a whole is not far off with well over $154 million in total funding.

In order to compete with this market, fitness club operators must begin offering curated digital content on-demand, tying closely to the advancement of the fitness industry.

For modern fitness facilities to survive, they must recognize the shift of fitness centers as cultivators of digital transformation.

A byproduct of digital content for facilities is a success in facility entry and group fitness. Some statistics to consider:

Barriers to Facility Entry

  • Every 2 interactions with a member result in 1 extra visit from a member the following month.
  • Every additional visit reduces the risk of canceling in the following month by 33%.
  • The risk of cancellation is 56% higher among members who use gym equipment only vs. those who exercise in groups.

Barriers to Group Fitness

The reasons for lack of attendance in group fitness is also an issue.

31% refuse class attendance due to scheduling

  • 29% refrain from class due to intimidation factors
  • 17% have concerns with the workout style
  • 12% related to price
  • 10% avoid classes due to other identifiable factors

77% of the above factors are avoidable through data-driven decision-making.

  • Combination of the right schedule, workout type, and instructor mix
  • Stronger member induction programs and offering virtual fitness solutions

Data-driven decision-making is absent — if completely non-existent — from modern fitness operators. This factors into the usage of membership-management software, custom mobile apps, and data dashboards as building blocks for digital content.

SmallWorld’s work with Fitness One to create a mobile app experience

At Smallworld, we’ve implemented engagement material through partnerships in the industry, providing a custom member experience, allowing for strong 3-tier membership options, including a digital-class, on-demand solution. This has proven to allow club owners to focus on the experience they’re providing to members and provides the chance for members to choose how to incorporate fitness into their daily lives.

SmallWorld created an online dashboard for Fitness One
SmallWorld created an online dashboard for Fitness One
Fitness One Dashboard provided by Perfect Gym

Millennial Target Market

28% of club-goers are within the Millennial age bracket (25–33). Boutique studios attract a significantly larger percentage of Millennials than other facility types.

More than one-third of Millennial health club-goers participate in personal training (37%), while nearly two out of five engage in small group training (39%). Millennial health club consumers have the highest personal and small group training utilization rates across generational groups.

There is a generational push for both digital & physical group fitness experiences.

Summary

Peloton proved the importance of curated digital fitness experiences to the at-home and in-studio markets with a ~$8B IPO.

Fitness club operators can expand on the $32.3B operator’s market through owning their personal product digital experience, offering additional tools to their membership base — strongly Millennial — empowering next-generation fitness experience. With a strong digital base and data-driven decision-making, club operators can improve 77% of their experiential attendance. Membership-management software, custom mobile apps, and data dashboards are building blocks for digital content.

The days of equipment-space-as-a-membership for club operators are over.

SmallWorld

We inspire world-changing ideas and craft cutting-edge…

Jake Curreri

Written by

ceo @ smallworldus.com, cto @ fitnessoneclubs.com, lover of functional programming, crafter of elixir, ruby, and react applications.

SmallWorld

We inspire world-changing ideas and craft cutting-edge technologies through the development of meaningful brands, creative strategies, and innovative software.

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