The Future Of Gyms Will Be Our Homes
Fitness applications and connected devices have experienced a huge surge in users and the pandemic might just be the right catalyst to take this trend mainstream
If you know me, you know that I not only take my workouts very seriously but also spend a lot of time researching business models of up-and-coming fitness startups. To support this, I mostly recently led a later-stage investment in Noom, a health and wellness coaching platform.
Now I don’t know if you’ve noticed (of course you have!), but the ‘shelter-in-place’ and social distancing requirements are severely affecting the fitness industry as consumers have been forced to get ‘creative’ with their workouts or opt-in for digital alternatives. This shift is not only driving demand for home-workouts but is catalyzing the opportunity for startups focused on a new era of digital fitness –– connected devices, applications and on-demand and live online-classes.
Let’s face it. This is a behavioral shift, and as we’ve learned from other sectors be it Uber with ride-sharing or AirBnB with home-stays, it takes time for people to alter their behaviors and patterns especially within sectors that haven’t been disrupted in the traditional sense. The pandemic is an educational opportunity for these brands to let people know that home fitness is a viable solution even in the long run, post the lockdown. AND … there’s something to show for it.
For instance, New York-based Obe Fitness grew its memberships by 10X during the pandemic. The S&P Index may have rebounded since its lows in March, but just take a look at some of these fitness companies which have outperformed not just the S&P Index but also traditional physical gym outlets like Planet fitness — PTON (Peloton), NLS (Nautilus), PLNT (Planet Fitness), WW (Weight Watchers International) and GSPC (S&P Index).
When we at Scrum Ventures first started to develop a thesis around sports-tech / fitness-tech, we thought long and hard and decided to look at the trends outside the industry; which kind of companies have been successful in the past. Once you start researching other markets, patterns begin to emerge. For the sake of transparency, we looked at health-tech and consumer-tech, and in the interest of time and without having to do a deep dive on the findings, quickly realized that the most successful startups didn’t just dominate the sectors but began acquiring share in adjacent markets. And that’s how we arrived at our thesis –– startups that transcend the vertical.
We define this further as any startup that has applications in and potential to dominate multiple sectors at the same time.
Now why’s this important in the context of home-fitness you ask? Peloton isn’t just a ‘smart’ bike or treadmill manufacturer, it’s a media company. As beautifully designed and ‘sexy’ the bike is compared to some of its competitors, its USP is the content i.e. the fitness classes with their trainers. Today’s fitness companies are everything from smart tech/data products to media houses to social networking platforms. These are truly transcending the vertical and entering adjacent sectors. Television and DVDs used to package workout classes — remember Jane Fonda’s fitness specials? Facebook groups were places where people met like-minded fitness enthusiasts. Gyms were where you could get access to a trainer and track progress — be it body measuring devices or treadmills and cross-trainers. It’s all available within a mobile app or a connected device. This is disruption and it’s changing the fitness industry as we know it.
WHY I AM BULLISH ON THIS SPACE
Affordable Fitness Bundling
This in my estimation is by far one of the top reasons why the home fitness trend will continue to rise. By definition bundling is a business model where companies sell a package or set of goods or services for a lower price than they would charge if the customer bought all of them separately. Bundling a variety of classes –– yoga, HIIT, Barre, Zumba, Pilates, S&C, shadow boxing, mobility, etc. –– both on-demand and live on an app is a far more attractive offering. What bundling does best is attract customers who like to mix their workouts up which could depend on the mood or soreness of the body etc., at economical rates. Studios featured on ClassPass, for example, generally charge far less for virtual classes than in-person sessions. And some mainstream fitness centers and influencers are giving members digital content or minimal pricing (or free) on social-media platforms like Instagram and YouTube.
Democratizing The Level Playing Field Across The World
Not every city in the country has an Equinox or Barry’s Bootcamp or a Soul Cycle. Millennial everywhere want access to exclusive ‘communities’ and top coaches regardless of where they live. With many companies thinking of going remote forever, people will look to migrate to cities/towns that offer them affordable living. In the future, access and inclusion will be on top of mind as brands look to tap into markets outside of big cities to grow businesses.
Flexibility and Liquidity of Supply
Workout when you want, how long you want and wherever you want to. People today have very different schedules with work, travel (not considering the lockdown period), children, other family members and other things that make a good excuse for not being able to workout. Many fitness apps today have options for shorter workouts as opposed to an hour-long studio class. You can literally take a 30-min break during the day and get in a quick workout, and complement that with a 15-min core workout at a later point in the same day. And unlike gyms, if you miss your favorite trainer’s class, you could always tune in to the recorded session and personalize the experience!
Gig Economy
According to the Bureau of Labor Statistics, there are 1.6 million gig economy workers in America. The gig economy has reshaped the way millions of people work and earn. This can be particularly attractive and lucrative for skilled professionals, in this context, trainers and fitness coaches to maximize their time, and work with a wide range of clients irrespective of geography. On a related note, Americans spend close to $1.8 billion in unused gym memberships each year. That’s 6.3% of Americans that have a membership that they just don’t use for a variety of reasons — work schedules, losing motivation, feeling out of place, no gym buddy, and not seeing results quick enough. There is a massive opportunity to tap into this market and migrate inactive gym members to semi-virtual workout routine which addresses the aforementioned reasons.
CapEx Light
The argument here is that since you’re not paying for a physical space, maintenance, utilities and other costs associated with running a gym, it might be cap ex light. However, with an e-business model you’re paying engineers to build and support the tech infrastructure — therefore, you could make a case for both sides. I’m not really sure of the economics associated with running a boutique studio like an Equinox or Barry’s Bootcamp, but their presence in some of the ‘hotspots’ of major cities is indicative of the high rents these companies have to pay to attract high-paying customers.
Brand Cache – Allbirds, Patagonia, and now Peloton
High-end markets like New York and Silicon Valley are quick to turn startups into brands. Just as you associate Allbirds and Patagonia vest with VCs and Wall Street, fitness brands like Peloton are making their way into rich people’s homes. It’s a thing, and once something becomes ‘a thing’, there’s brand equity!
Data, Data and More Data
People are obsessed with numbers, even the ones who hate math. I see people swearing by their Apple watches or Fitbits or Whoop bands and they want to track even the smallest of steps they take to the bathroom. According to data from the IDC, sales of various wearable fitness devices are up over 163 % compared to previous years. And it’s not just wearable devices, apps are able to track movements through the camera lens, and smart connected devices such as FightCamp, Peloton bikes/treadmills or wall-mounted stations such as Tonal, Mirror, Echelon and Tempo (none of which I have used personally), all focus heavily on gathering data post every workout to provide holistic insights of user progress.
WHY PEOPLE ARE STILL SKEPTICAL ABOUT THIS SPACE
I get it, some of you may tell me that the market for physical gyms is likely to reopen and return over time. And I agree, they eventually will. Although in my opinion, emerging at-home fitness will probably experience step-function growth as consumers continue to use these products in place of, or in conjunction with traditional alternatives post the pandemic lockdowns. Either way, let me highlight a few that come to mind:
- Gyms will reopen and customers will want to go back and sweat it out like they once used to. Anyone who trains with weights and has found it difficult to workout without them is definitely planning to go back at some point, if not immediately after gyms open up.
- Fitness classes today are a communal experience. ClassPass, FitReserve and other community driven studios such as Barry’s Bootcamp, Soul Cycle, F45 and CrossFit attribute the community experience for the success of their business model and popularity. These brands have strong loyal user bases who live and die by them.
- Lack of motivation. Let’s admit it, this is why people sign up for gyms in the first place. Not everybody can motivate themselves to work out. Whether you are part of a fitness class, working out with a trainer or flying solo, simply being in an environment where people train (hard/hardly) is enough to get you into the gym.
- Form-check / in-person guidance: We all appreciate the occasional “Hey Joe, maybe you wanna move your feet a little bit more to align with your shoulders” shoutouts in the gym or a trainer walking by and making changes to our posture, and yes there’s a very good argument to be made here regarding attention. As much as I feel trainers do a great job in group classes, their goal isn’t to provide 1–1 guidance every class. That’s the upsell in most cases. Most trainers in the group classes I have attended usually layout the basics with respect to form and posture either before the workout or during the workout. I’ve also noticed that they do this during online classes. So I wouldn’t say there’s much of a difference here.
While the market for traditional gym-based fitness is likely to return over time, the emerging digital fitness industry is liable to experience rapid growth in the near term and remain relevant even after the pandemic has passed — Pitchbook report
Game Changers In My Opinion
Here are some of the home-fitness products / applications I have used in the last 12 months with moderate to high level of satisfaction (numberings don’t mean ranking)
- Obe Fitness (Raised: N/A | Investors: BDMI & CASSIUS Family)
At $27 / month, this is fitness-bundling at its best. I’ve enjoyed quick 30-min workouts both on-demand and live-sessions, and I can tell you that they are worth signing up for if you’re serious about home-based workouts. At first glance, it seems like they are a women’s fitness platform, but they are not just for women, they have classes for kids and for seniors. Where I feel it falls short is that most classes are a level playing field, meaning it’s not broken down into beginners or experienced, but one can always spice up their workouts by adding heavier weights or more resistance.
2. Trainiac (Raised: $2.2M | Investors: Angels)
Lack of accountability and motivation could result in churn for these startups. Trainiac is addressing that by pairing you up with a trainer who will not only design workouts for you based on your goals, but also constantly follow up post every workout and provide their thoughts/feedback. I really liked three things about this app — 1) the on-boarding process. A thorough questionnaire which learns about your lifestyle, eating habits, exercise routines, injuries/concerns etc. This is followed up with a 15-minute call with your trainer the following day where you may discuss anything that might help them create a customized workout plan for you. 2) Video tutorials for each workout. Even though I’m familiar with most movements, it always helps to watch, learn and emulate by looking at professionals. 3) Accountability. Post workout, I’d leave voice notes and texts on the app providing my trainer data on how I felt during the workout. This would help my trainer design my future workouts as per my progress and needs. I really think they might be onto something here, similar to Noom.
3. Future Fit (Raised: $11.5M | Investors: Kleiner Perkins & Courtside Ventures)
Very similar to Trainiac in terms of the on-boarding process and video tutorials. Where it stands out is on the accountability front. Future Fit combines the best of 1-on-1 coaching with education and data. Consumers can learn more about recovery, nutrition, balanced living etc. through content shared by trainers. While Trainiac focuses on user feedback to design and customize workout plans, Future Fit relies heavily on the data provided by Apple Watch. Now what if you don’t have an Apple Watch? They provide (lend) you one at no extra cost! This is how they track, measure and update progress to show results. While it’s twice as expensive as Trainiac, I really liked that it takes accountability and trainer support to the next level. At $149 / month, this is a great replacement for mid-tiered gyms and studios.
4. Peloton (Raised: $995M | Investors: Kleiner Perkins, TCV, Tiger Global)
Those who live or have lived on the East Coast probably know that cycling outdoors in the winter months is challenging to say the least. I swapped my outdoor bike for the Peloton bike in the winter of 2017/18. To be honest, I didn’t pay for the bike, it was part of my gym in the building. What stood out to me was the well-produced live-streaming and on-demand classes and the instructors. I’d often find myself on the phone if I were on a stationary bike in the gym, but the classes on Peloton kept me engaged and gave me the sweats! In the end I only ended up using it for a few months, before hopping back on my outdoor bike, but it is excellent equipment overall, and for the devotee of indoor cycling, it is possibly a good value or even a bargain.
5. Centr — by Chris Hemsworth (Raised: N/A | Investors: N/A)
Every time I get targeted with Instagram ads, I become curious about a brand, and that’s what happened with Centr. Remember the point I made earlier about bundling? Well, Centr is your meal planner, personal trainer and Zen coach all in one. In addition to these, two things really stand out in my opinion 1) the workouts themselves. Designed for all fitness levels, the workouts are short and intense. Guaranteed sweat! 2) The knowledge resources. The app provides you content on recipes, wellness and mindfulness. Most recipes can be made in under 30 minutes and thanks to the prep advice and budgeting, shopping is effortless, too: the app knows what your meal plan is a week in advance and will automatically create a grocery list for you. Their meditation programs are short (15-min) and guided, providing a great starting point for beginners for a holistic experience.
6. Live Kick (Raised: $1.1M| Investors: Frontier Ventures & Rhodium)
Let me warn you at the outset, this is the most expensive home-fitness class I have signed up for. I was recommended this platform by a trainer at my gym who vouched for their yoga classes. At $32 / week / class it’s definitely not something most people would want to sign up for given that studios like Core Power Yoga would probably work out cheaper if you signed up for a month-long membership. Having said that, what I did like about Live Kick was the 1–1 sessions. Unlike Trainiac, Centr or Future Fit which rely more on data and user feedback, here the trainer is live on the call with you during your workout. The sessions felt more intimate and personal compared to the rest, and their trainers are highly experienced, which perhaps justifies the price tag to some elite users. This is a great product for those who’d like to workout from home but at the same time would need real-time accountability and motivation.
7. Fightcamp (Raised: $620K| Investors: Y Combinator, Unlock Venture Partners and 500Startups)
I have this at the bottom on the list because I have only tried the product a few times as it was newly installed in my gym a few weeks before the lockdown. Very similar to Centr, I first learned about FightCamp through Instagram ads and even had a colleague on my investment team who was excited about them. Unfortunately, they had just raised a round at the time. A regular boxing bag isn’t fun, it’s boring to workout by yourself especially if you’re an amateur training in the gym. What I really liked about FightCamp was the engagement and intensity. I couldn’t last all the way through some of their most basic workouts. It’s really good for those who like to spice up their cardio. I’ve been to regular boxing classes, group boxing classes and by far, training on FightCamp has been fun and gives me immediate motivation as I can view my stats in real-time.
These are a few that I found extremely useful in the context of home-fitness. What seemed impossible a few years ago is now beginning to go mainstream. Technology is certainly going to change the game, and I can’t wait to try new products and apps that will disrupt this sector further.
// all funding info sourced via Crunchbase //
Please leave your thoughts and comments below or share them via email (akash@scrum.vc). Feel free to connect with Akash Bhat across any of these platform — LinkedIn | Twitter | Instagram
About: Akash Bhat is an operator-turned investor at Scrum Ventures, Prior to Scrum, he was at Aser Group looking into investments across media, entertainment and esports. He’s also had stints at Wasserman, Nasscom 10,000Startups (an early stage startup accelerator in India), and Dazo. He’s also the host of ‘The Desi VC’, where he interviews angel investors and VCs shaping the future of the Indian startup ecosystem.
Opinions expressed are solely my own and do not express the views or opinions of my employer.
