Eleven Predictions for the Fitness Industry in 2018
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Last month, we presented the first five of eleven fitness industry predictions for 2018. They were: 1. Business Model Migration to the Poles Accelerates. 2. Cut Rate Clubs Get Cut Throat. 3. Mobile Apps become a Requirement. 4. Monetization and Engagement will be "CRISPRed" into the Industry Genome. 5. Social Fitness will become the Norm.
To learn more about each of these, you can read Part I of this article at www.clubinsideronline.com. This month, we will complete the article with predictions six through eleven:
6. Marketing to Drive Different Will Trump Marketing to Drive Body Count. The fitness industry, with few exceptions, has placed its marketing bets on programs and tools that are price-driven and traffic-driving. As a result of this obsession with discounts, special deals and the get-them-in-the-door mentality, industry marketing has created a landscape where consumers have minimal awareness or understanding of the brands in their market; instead, what they know is what it costs, not who is offering it or why they are different. Over the past few years, ClubIntel has conducted brand health studies for a variety of fitness brands. In nearly every instance, we've found a disturbing sea of sameness, where no one knows your brand's name or what it stands for. Consequently, in an era of hyper-competition, where standing out and being different matters, clubs are heading down the wrong worm hole, believing that inundating the market, including the digital stratosphere, with ever-more enticing call-to-action marketing will turn the tide. While our findings only represent a small sample size, we believe that 2018 will be the year clubs and studios finally realize they need to tell their story. By the way, that story better be relevant and unique, or as Youngme Moon says in her book Different, "The objective is not to blend into the blur; the objective is to stand out from it."
7. The Franchising Tsunami Will Re-shape the Industry. Over the past few years, the fitness industry's growth, both traditional clubs and boutique fitness studios, has been spurred almost entirely by franchise business models. In the fitness club sector, the largest players in the industry are now franchise models (e.g., Anytime Fitness, Gold's Gym, Retro Fitness, Planet Fitness, Crunch, Smart Fit and World Gym). In the world of boutique fitness studios, franchise models are garnering most of the attention and the vast majority of investor capital (e.g., Core Power Yoga, Pure Barre, Orangetheory, 9Round, CycleBar and others). By year-end 2017, we calculated that the top ten boutique franchises had over 3,000 locations, and the top ten club franchises operated over 6,000 locations. The fact is the leading club and studio businesses by facility count, other than CrossFit, are all operated under a franchisee umbrella. In 2017, several franchisors achieved milestones for growth and market penetration. What most don't realize is this growth in franchises is not so much the result of fitness entrepreneurs entering the market; instead, it is the entry of investor groups (Private Equity) and non-fitness serial entrepreneurs who have reaped their success in other franchise-driven businesses. We see this trend accelerating in 2018, as more non-fitness professionals enter the industry through the franchise pipeline. We also postulate there will be a higher rate of turnover and failure among fitness franchisees due to the oversupply of facilities and competition between franchisors within a given market.
8. Internet Middlemen and Digital Aggregators Change the Sales Landscape. Internet Middlemen have been flirting with the fitness industry for the past seven years; quite the long romance. Well, it appears that 2018 might be the year all that romancing finally takes hold. In 2017, according to the 2017 International Fitness Industry Trend Report - What's All the Rage, only 4% of operators indicated they were entered into a relationship with one of the numerous Internet Middlemen now populating the cloud. Interestingly, 26% of boutique group exercise studios and 12% of commercial premium clubs are in relationships with these disruptive access providers, a forewarning of what is to come. In the past few years, we've seen the number of Internet Middlemen providers flourish in a rush to leverage what is likely to become the norm for fitness consumers over the next decade. The most recognized platforms in this arena are industry stalwarts ClassPass in the U.S. and PayasUgym in the U.K. More recently, we have seen the emergence of other key players such as FitReserve, Dibs, Lymber, Reserve by Google, Move GB, Zeamo, and most recently, POP!n which offers pay-as-you-go by the minute. What each of these unique digital access platforms does is offer consumers an alternative approach to accessing and using a fitness club or boutique fitness studio. As Millennials, and soon Generation Z, both digital native generations, exert their influence on the nature of doing business in the 4th Industrial Revolution, we suspect that Internet Middlemen will become more the norm than the outlier.
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