The At Home Fitness Market - Perception vs Reality

An interesting dichotomy I keep seeing in the at-home fitness market right now is the appetite of consumers versus the belief from brick and mortar brands.

Surveys show that the appetite and consumption for at-home fitness is still significantly higher than it was pre-Covid:

• According to McKinsey, the proportion of fitness consumers with hybrid routines grew from 46% in 2020 to 65% in 2022.
• From a Momentive study in September 2022, 57% of US adults exercise at home at least weekly, and 72% of weekly gym goers also exercise at home at least weekly.
• A EuropeActive and Deloitte study with almost 11,000 participants that was just released (2023) found that 60% of workouts are now occurring at home.
• From another recent market survey by Market.US: “The virtual fitness market size is projected to surpass around USD 187.8 Billion by 2032, and it is poised to reach a registered CAGR of 31.2% from 2023 to 2032. The global virtual fitness market size was USD 13.3 Billion in 2022.”

However, users are not happy with their current at-home experiences:

• From the same McKinsey fitness consumer survey, “half said their at-home workouts were not intense enough, that their at-home fitness regimens were less consistent, and that they struggled to find motivation.”
• From the EuropeActive and Deloitte study, 56% of gym users are unsatisfied by their at-home on-demand offerings.

Helping people stay motivated through relationships, community and accountability is at the heart of local boutique fitness studios.  So surely the brick and mortar fitness businesses are rushing to fill the void?  Yeah not so much.

I spoke a few months back to the private equity owner of one of the most premium fitness brands that had invested millions of dollars in its own digital fitness platform during the pandemic, but has since significantly reduced its investment in digital.  Why?  To paraphrase, “We listened to our members, and they voted with their dollars.  The amount of usage was tiny.”  Now their digital initiative is really in bare minimum maintenance mode.

Some larger influencers and big brands like Orangetheory and Barry’s have spent millions of dollars creating their own fitness apps.  None of the ones I have spoken to are truly happy with the outcome.  Why?  To be honest, many feel like prototypes versus having the polish of a digital focused fitness brand (Peloton, FitOn, …), and there are always more features they want to add.  In the end though, influencers as well as brick and mortar brands aren’t software companies, and they don’t have longterm software product managers in-house.

Talking to small business fitness entrepreneurs, we have seen a few angles:

• 100% Digital:  We have seen a set of fitness entrepreneurs give up on their physical studios with associated lease costs and go 100% digital.  Platforms like Uscreen and Arketa have seen growth in this niche, and I’ll come to that below.
• Hybrid:  There are still some studios doing hybrid classes - in-person as well as at-home at the same time.  In general, most are still using Zoom.  There’s often a recognition that the experience isn’t great, it can feel a lot like the TV show Big Brother, but it doesn’t cost much to do, especially because there’s no additional coach time to add to OPEX.
• On-Demand:  Whether hosted on Vimeo or live-streaming previously recorded classes over scheduled Zoom sessions, there are studios just leveraging existing assets for a continuing digital service.  Sometimes it’s a charge per class, often it’s just bundled into higher tiers of regular membership as a checkbox item.
• Outsourced:  Gyms and studios can use third party content services - both to supplement in-studio classes and for at-home options.  Les Mills has a big presence in this space, as do FitnessOnDemand and Wexer.  Most are typically not live classes and have no interaction or sense of local community, they are just fitness videos like all the content on YouTube but better structured.

Do any of these strategies have product market fit?  Are they just good enough?

My personal view is that one challenge for brick and mortar brands doing digital revolves around what people have now got used to for at-home fitness.

Back in the heyday of P90X and Beachbody, videos alone were good enough to build profitable fitness businesses.  Two things have changed that:

1. The vast amount of free fitness videos on YouTube and other sites - now even Amazon Prime and Netflix.  Sites like Neou have dropped their pricing to $5 per month, FitOn is great and free.
2. The gamification of connected fitness solutions, which received billions of dollars in funding during Covid - see our other blog on the software costs of connected fitness.

Local fitness creators and entrepreneurs are caught between this rock and hard place - there’s so much free content, and creating a premium gamified experience is prohibitively expensive.

Of course, it’s possible to run a digital fitness service without a compelling or premium experience - a lot of fitness brands know they’re doing that today, perhaps just keeping on going through the motions to check the box.  But it can be hard to make money at it (because the unit economics on acquiring customers will be upside down), and it may cheapen the brand.

I don’t think there’s a platform that solves these problems yet, but here’s what we see in the market:

• Uscreen and Vimeo do a good job of on-demand videos, and allow charging for various options including special programs etc.  Their live video options are really for broadcasting events so not 2-way, they have little gamification or community - like high fives for getting badges, and they don’t have fitness-specific features.  Both are high quality, generalist content creator platforms.
• Zoom has the best video chat technology, and at Tribe we have a close relationship with the Zoom CTO and platform teams, but the general Meeting client was not designed for virtual fitness classes.  Zoom has brought out its Video SDK to allow custom app experiences built on Zoom’s tech, and we use that at Tribe.
• Wexer is based in London and got its start in 2009.  In general, Wexer seems focused on content outsourcing delivered through branded or white-labeled apps (versus a studio creating content in-house).  The focus is on-demand, there seems to be no gamification or community features.  They recently acquired the remaining assets of Intelivideo to try to get a foothold in the US market.
• FitnessOnDemand is also focused on content outsourcing, bringing a library of on-demand content to fitness studios and gyms.  Again, there are no gamification or community features, it’s just videos.
• Les Mills is a big brand and has great content, but again it’s focused on on-demand content with no gamification or community for studio members.
• Swerve is interesting and different, having done a pivot to digital during the pandemic, it does both live and on-demand content.  The focus so far has been in-studio and cycling / spin classes with metrics and gamification.  The technology platform they’ve used has been Stages Cycling, and Swerve is more of a content outsourcing business today than a software play for studios to use to create their own classes.
• Arketa started life in 2020 focused on individual coaches, so it has done a particularly good job of integrating pricing and packages for in real life and virtual content.  Overall though, Arketa is less focused on the digital class experience, and more on scheduling and billing, so it just launches Zoom meetings for live classes and has video clips for on-demand.  There are options for programs and courses, but few social or community features today.
• Walla is another of the new breed of gym management software disruptors targeting Mindbody, and also have strong billing features for digital with Zoom integration.  Interestingly, Walla recently published data that 72% of its customers are using hybrid capabilities, with half of that 72% using both live and on-demand.
• Funxtion:  Similar to Wexer in some ways, but Funxtion allows a studio to both create its own content and license content from other brands - with exercise clips and whole classes.  There’s no live option, it’s all on-demand, and there are no gamification or community features.
• Forte is the closest to a direct competitor to Tribe.  Forte has live and on-demand in a single platform, and has added heart rate zones and leaderboards.  Programs and community features have been on the roadmap, though seem to have been taken off the marketing wishlist page for now.
• Tribe - us.  We do have live with 2-way video and on-demand in a single platform, and we have gamification in heart rate zones and leaderboards.  We are currently adding on-platform payments.  We plan to add: programs and challenges for more gamification, more community features and more options for content sharing.

I could have added another 20 to 50 companies in this list that are all very similar, especially generalist video platforms, but it would have made my blog way too long.  None of these companies bring live and on-demand classes together with a premium experience (app and video quality) as well as the level of gamification of say Peloton or Lululemon Studio.

Getting to feature parity with connected fitness will bring a big leap for the success of local fitness, but beyond that, there are two other challenges:

1. Community:  In general, this is difficult for local studios to do in digital today (versus all the community in real life).  Some studios have Facebook pages but they can become stale.  Others have in-app challenges, but the apps often don’t make it easy to share with friends from the local studio, so it’s manual and time consuming for the studio staff to sync it all up.
2. Scale:  A 500 member boutique studio will always struggle to have the scale to be successful at digital in-house (unless it’s all just hybrid classes with Zoom in the background).  To jump this fence, there has to be content sharing and/or outsourcing - similar to what Funxtion, Wexer and others are doing, but ideally more intimate and less “YouTube-like”.

It will be really interesting to see what Peloton and Lululemon do with their digital fitness product visions now that they are both pivoting away from connected hardware as their main focus.  FitOn has done a better job than either of them on community, but FitOn has a massive user base (because there’s no buy-in), so just like Facebook or Instagram there’s a much higher likelihood that members will know each other in real life.  We’ll likely deep dive on community in a future blog.

Do I still believe in digital for brick and mortar / local fitness?  Yes I do.

I believe that early adopters will continue to try newer products, and the broader market will keep the lights on with Zoom and on-demand video offerings like Vimeo.  But for the long tail of the boutique fitness market to be successful at digital, the reality is this:

1. There’s still work to do on the software platforms to give studios and members the full experience they want.  This is a ‘whole product’ question, just like Shopify had to automate shipping for SMB e-commerce to really take off, even though shipping was not a Minimum Viable Product (MVP) requirement for online shopping carts.
2. The pendulum has to swing back from reopening physical studios post covid to digital, and it needs some case studies of small studio brands being truly successful at making money in digital and omnichannel fitness.

The golden questions we keep asking ourselves at Tribe are what’s the real mass market MVP and what’s the timing?

I remain excited about the future of digital fitness offerings from brick and mortar brands, and the white space in which they can create differentiated offerings that outcompete the impersonal connected fitness offerings out there today.

People still want and use at-home fitness options:

1. Research Drive forecasts spend in virtual fitness to hit $59B by 2027.
2. Statista expects annual spend in digital fitness and well-being by 2027 to hit $25B in the US and $147B worldwide.

Once the technology platforms support the features needed for the broad local fitness ecosystem to be successful in digital, a lot of that growth will happen in a local business led second wave, just as SMBs using Shopify have become a big piece of the e-commerce pie.