Let’s fast forward four years to 2020. Just a few years can bring momentous change; compare 2007, when the iPhone was first introduced, to 2012 when 20 billion apps were downloaded. As the growth of apps and technology explodes, classic brick-and-mortar businesses, like health clubs, get increased pressure to evolve or get left behind.
The world’s largest taxi company, Uber, owns no vehicles. The world’s largest accommodations provider, Airbnb, owns no real estate. The world’s largest media company, Facebook, creates no content. We are in the midst of an incredible revolution in business models. Industries that have operated the same way for decades are being wildly disrupted by new startups that are thinking differently.
Uber didn’t just enter the market as a new taxi company. Instead, they changed the rules of the game and tipped the scale radically in their favor. We must expect that the same type of disruptive innovation can happen in the fitness industry. Let’s consider some of the potential new business models that we may see commercial fitness clubs using in 2020.
Premium Class Based
By now you have probably heard of ClassPass. The startup out of New York City has raised over $50M from investors and employs nearly 200 people. Perhaps even more impressively, it partners with thousands of studios to offer customers unlimited access to fitness classes for $99 a month, more than double the average health club membership in 2015. The emergence of ClassPass is a strong reminder that today’s consumer is willing to pay a premium for convenience and experience.
Consumers demand variety and a unique, personalized and “special” experience. Gaining access to a plethora of different studios and creating a highly personalized work-out schedule, customized just for them, is the epitome of the new generation of customer requirements. In 2020, we should expect more traditional health clubs and chains to offer similar types of packages, where members can access a larger variety of different services, tailored to them at a premium price.
Pay As You Go
When it comes to the younger generation of millennials, car and home purchases are at an all time low. Meanwhile, ridesharing services like Zipcar and Lyft, along with house sharing services like Airbnb, are growing exponentially. On top of that, millennials are getting married far later in life than their parents did. It’s no surprise why: people coming of age today are far more averse to commitment than their parents were. For a membership-driven industry like health clubs, this creates a mandate for innovation.
By 2020, we should expect more clubs to align with consumer trends by offering pay-as-you-go options, where younger members can opt for different packages of total club visits, classes, etc. Perhaps one membership tier lets them check-in once per week, while others let them come anytime. Perhaps some members will want to pay each time they check in with zero commitment. Remember, this could increase revenue per visit as clubs can charge a premium for members to go “contract free.”
Digital And Physical Hybrid
We are seeing more brick-and-mortar businesses, such as clothing stores, hiring a “Chief Digital Officer” in their executive team. This leader is tasked with building that business’ digital presence and finding innovative ways to drive revenue beyond the traditional physical location. This responsibility has often fallen on the CIO’s of larger club organizations and the owners themselves of independent health clubs.
Regardless of who takes it on, the responsibility for creating a hybrid product that offers physical, real-world experiences (i.e. visiting a club) and digital experiences (i.e. virtual training and coaching in a mobile app) will become critical for a club in 2020 to be successful. Consumers will have options to purchase services on an “a la carte” basis, perhaps maintaining their ability to go workout in a club but receiving personal training virtually through the club’s mobile app.
All At Home
In 2013, 1-in-5 Americans worked from home. Over the last few years, that number has continued to increase as technology has broken down the barriers that required people to commute to a physical office daily. The result is a consumer movement that prefers the convenience and greater comfort of operating from one’s own home. We see the rise of services like Postmates (food delivery) and TaskRabbit (on-demand personal help) as further evidence of this trend.
We should consider that by 2020, the fitness industry could follow suit. From virtual training and coaching to on-demand trainers being dispatched to customer’s houses regularly, more and more of the fitness journey will likely happen outside the club’s walls. This adds pressure for modern health clubs to offer a variety of customizable services, delivered in person and via mobile devices, to be able to satisfy the wide variety of consumers that will be interested in fitness in 2020.
Finally in 2020, it is likely that we’ll see health clubs introducing even more novel business models, like paying adjusted rates for using facilities at certain times of the day. For example, accessing the club between 7am and 9am may be offered at a premium, while accessing the club in the mid afternoon could be offered at a discount. This idea of capacity utilization is far from new in other industries.
Consider the airline industry, where the prices of seats change drastically depending on demand and date of the flight. Again, this type of flexible membership option gives consumers a greater variety of choices to personalize their experience with a club in the way that works best for them.