Peloton or the gym? Why decide?—What this means for fitness companies

Megan Thompson exercises on her exercise bike at her home in New York City.

Michael Loccisano | Getty Images

Julia Yuriev has not yet given up and bought a Peloton bike, but the 38-year-old PR expert is actively considering it.

Yuref said she enjoys taking group classes at her local fitness studio. But since it reopened, it didn’t feel like the choice was enough. She said she might consider flaunting the at-home gym for her Los Angeles apartment, as many of her friends have already done.

“Fitness at home is still a consideration for me,” Yuriev said. yoga studio [near me] Only certain classes are offered with this limited capacity. It’s been downsized…so all the diversity is no longer there now because of the rules and the lack of labour.”

Those who are in the position of Yuriev are increasingly choosing a hybrid approach. That may come as a surprise to some investors who are betting that consumer fitness options were either an option or an option. Either consumers will sweat at home, as they have done during the pandemic. Or they will revisit the gym once they have received their Covid-19 vaccinations.

Peloton and Planet Fitness stocks reflect this thinking. In the past year, Peloton shares are up more than 440%, while Planet Fitness is up 4%. This year, Peloton shares are down 36% so far, while Planet Fitness is up about 2%.

Visits to gyms in the bounce area

While the demand for home fitness equipment has slowed down from the hectic pace of 2020, it is still increasing. Sales in the United States are up 85% from 2019 levels to $3.7 billion last year, according to the NPD Group. The market research firm said that during August of this year, sales of fitness equipment were up 20% from a year ago, and 108% over a two-year period.

NPD Group was unable to provide a forecast for the category, but analyst Matt Powell said he expects the market to remain strong as people seek activities to keep fit. He said sales usually increase again in January.

Meanwhile, foot traffic to fitness centers is improving. Visits were down just 8% in early October compared to the same period in 2019, according to tracking by Jefferies. Jefferies said membership in gym chains rebounded again as quickly as possible from the lowest levels of the pandemic, followed by Crunch Fitness and 24 Hour Fitness. She said Mark Wahlberg’s F45-supported training was the biggest lag.

A customer wears a face mask while lifting weights while working out inside the Planet Fitness gym as the site reopens after being closed due to the Covid-19 pandemic, on March 16, 2021 in Englewood, California.

Patrick T. Fallon | AFP | Getty Images

“We’re definitely seeing clear data showing that people are getting comfortable again being back in the gym,” Randy Konnick, a retail and fitness analyst at Jefferies, said in an interview. “What will likely happen is that the demand for gyms will accelerate very dramatically… but the demand for them is [at-home] The fitness equipment will likely remain fairly robust.”

Searches for digital fitness platforms, including Peloton and Tonal, peaked in January, as consumers stuck to their New Year’s resolutions. Then, in August, Jefferies said, searches increased slightly when the delta shape became a widespread threat. While online searches for at-home exercise products like jump ropes and yoga mats reached an all-time high in April 2020, such inquiries have dwindled since then.

However, Konnick predicts that many American households, given the choice, would opt for a hybrid approach to business.

“People will realize that they can work out in the gym three days a week, and then three or four days a week just to do something at home or in the basement,” he said. “It’s all about comfort.”

This mentality is reflected in the recent offerings of fitness companies. Peloton has a growing wellness program for the company. Mindbody, a booking platform for the health and wellness sector, also hopes to meet the needs of businesses as it brings workers back to office buildings.

Life Time Fitness, a high-end gym chain that launched to the public earlier this month, has redesigned its mobile app and launched a digital-only subscription during the pandemic. This is still an option marketed to customers today.

Mark Mullett, co-founder and co-CEO of Obe Fitness, said the rapidly evolving landscape has allowed people to choose from what he calls a “fitness buffet.” Obe is an at-home fitness app that provides live and on-demand workout classes for members who pay $27 per month.

“We love the fitness buffet: You work out at home three days a week, you go to your local studio one day, and the next day you go for a run with friends,” Mullett said. “Our job is to make sure we give people all the content, all the community and all the results they need.”

Obe recently launched spin sport classes for its members who already have bikes at home or use them at the gym. The company also works with Gap’s Athleta brand, an Obe investor, to host in-person workout events.

The competition at home is heating up

Amid the growing demand, a wave of new entrants is working to create a more crowded space and pressure companies to spend more to attract users.

Peloton announced plans in August to ramp up advertising, as it slashed the price of the bike and redesigned it. Its sales and marketing spending accounted for 24.5% of revenue in the three months ended June 30, up from 14% a year earlier.

Hydrow, the connected rowing maker that counts Lizzo and Justin Timberlake as investors, first launched a marketing campaign in October called “Hydrow High.” It will appear in print and digital ads as well as on television broadcasts during the holiday season. The company declined to comment on how much it would spend on the project, but said it was its maximum effort so far.

Hydrow, the $2,295 rowing machine maker, said it has secured nearly $200 million in funding.

Source: Hydrow

“One of the goals of this campaign is to demystify kayaking and make it more accessible and attractive to a wider audience,” said Gretchen Sage Fleming, Hydrow’s chief commercial officer. “The idea of ​​a Hydrow high is that people feel much better and stronger after a workout.”

One Hydrow’s rowing machine retails for $2,295, compared to the original Peloton bike’s $1,495 and Tonal’s $2,995 weightlifting machine. Lululemon’s Mirror retails for $1,495, while the Liteboxer and in-house boxing machine cost $1,695. This is just a few. You can also pay $2,799 to upgrade your home gym with CLMBR, a vertical climbing wall. Frame Fitness, a Pilates-connected repair equipment, is on presale for $2999. There are many, many.

On top of the cost of the equipment, users pay a monthly fee to access the content. A Peloton membership, for example, is $39 a month. Tonal membership is $49 per month.

“The explosion of at-home fitness directly parallels the explosion of e-commerce over the past decade as well,” said Simeon Siegel, analyst at BMO Capital Markets.

“The door has been opened to dollars being thrown at many of the connected exercise equipment makers because the consumer has given them a mission,” he said. “Just like the scale of e-commerce startups that emerged when consumers gave permission to retailers to enter their living room.”

The companies that will have the most success will be those that keep cut rates as low as possible — meaning people will stay in business month after month, Siegel said.

“Ultimately, participation is critical,” Siegel said. “What makes someone not cancel? That’s the biggest question there is.”

Peloton is one of the publicly traded connected fitness companies that reveals its slowdown rate, which has remained impressively low. Peloton’s average monthly connected fitness rate was 0.73% in its most recent fiscal quarter. It saw a six-year low of 0.31% in the previous quarter. The rate of ripple tends to decrease in the winter months.

Tonal, the in-house weightlifting machine, and Hydrow are said to be exploring public offerings, which should give investors greater insights into user trends. The companies declined to comment on their plans.

community building

Meanwhile, Peloton is betting that its branded T-shirts, t-shirts and track jackets can serve as walking billboards — even as some of its users return to the gyms.

In September, it dropped its biggest pick yet, along with a massive marketing push around the company’s apparel arm. Peloton clothing ads have been plastered across billboards, digital subway slots, and even empty storefronts across New York City.

People walk past a storefront in New York City’s SoHo neighborhood, where Peloton advertises its clothing line.

Source: Kevin Stankiewicz, CNBC

“When you see someone wearing a peloton, you realize that you are part of this community together, and there is something nice about that,” Jill Foley, vice president of apparel at Peloton, said in an interview. “It’s really strong.”

Entrepreneurs in this space say building community is key – whether it’s in the gym or at home. Khalil Zahar, founder and CEO of in-house boxing firm FightCamp, said companies that make users feel like they belong to a group of like-minded people will be the ones to stand the test in the coming months.

“Now that we’re back in the gym, many of the concepts that worked on connected fitness during the pandemic may no longer be applicable in a post-pandemic world,” Al-Zahar said.

“However, there is a silver lining for consumers as it will undoubtedly force companies to improve their products, and companies that will survive the next few years of transformation will come out much stronger,” he added. According to Zahar, the best products are the ones that keep fresh content arriving and have coaches involved.

Back in Los Angeles, Yuriev said she still works by justifying the cost of buying an at-home fitness machine, like a Peloton, as well as taking group classes. She said her friends also motivate her to make a decision.

“Flexibility, especially with all the remote work, is important,” she said. “And I really need that sense of community.”


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