The fitness industry has experienced boom in past 10 years. According to the IHRSA (International Health, Racquet & Sportsclub Association), the $30 billion health and fitness industry in the U.S. has been growing by at least 3 – 4% annually for the last ten years and shows no signs of slowing down anytime soon . The fitness lifestyle has continued to grow worldwide with the proliferation of boutique studios, famous Instagram trainers and social exercising.
The growth of the industry has brought big changes to its structure. Fitness Boutiques re-defined the industry, driving much of the membership growth over the past decade. Admittedly, boutiques started from a smaller base, but their share of total revenue is now above 35%2. The very health conscious, social media addicted millennials have part of the blame for this industry shift. Millennials prefer to pursue more specialized, social and diverse experiences when they look for work out options. Group activities such as event-style classes, equipment-based classes, HIIT classes, Barre classes, yoga classes and HIIT small group training were the fastest growing activities over the past few years, as well as those with the highest adoption rates in 2017.
Another promoter of the growth of boutique boutique studios has been the proliferation of Digital aggregators in this space. The most recognized platforms in this arena are industry stalwarts ClassPass in the U.S. and PayasUgym in the U.K.. The success of this platforms has been built on that fact that customers want the diversity and variety of classes and not to commit to a single class type. These platforms have actively affected big box gyms as customers get more bored of the solitary, repetitive gym routine.
Class Pass founded in 2013, offers subscription packages. Through ClassPass, users can sign up for an assortment of different fitness classes at various studios in their city for a fixed subscription plan. When it first launched, ClassPass subscribers could sign up for a flat-rate subscription plan. A monthly fee of $45 gave access to 5 fitness classes a month, regardless of what the class actually taught or where it was held. Today the subscription varies in price, depending on the user’s location and now, instead of being completely unlimited, the subscription gives you a certain number of class credits every month. An especially popular studio class might require as many as nine credits, while a more general fitness class could call for only one or two5. Class pass currently has partnerships with over 8,500 studios in more than 50 cities.
As of March 2018 ClassPass also launched an on-demand feature, which offers users unlimited workouts that they can do from home. Through the app users will be able to stream live classes or recorded classes. For an additional price the user can also purchase a heart monitor that connect to the app and measures performance stats. With this new business model ClassPass is now in direct competition with the boutique studios it partners with.
Customers. This technological revolution in fitness has benefited customers immensely. Through platforms like ClassPass users can have access to the variety of classes they desire at an affordable price. Customers no longer have to sign up for multiple boutique studios or pay the very expensive single class rates to have access to a wide variety of classes.
With the proliferation of fitness boutiques, it is very hard for the owner of a boutique to acquire a large number of loyal subscribers. ClassPass is a great source of marketing for these boutiques because it brings a big number of new customers in the doors. Famous boutiques like Flywheel and Barry’s gained huge popularity through ClassPass. It is also a great way to fill empty spots in their unfilled classes and bring in revenue that otherwise might be lost.
Nonetheless, it has been argued that the loss in revenue/client due to ClassPass can have a negative effect on a studio. ClassPass negotiates a per class payout rate, so essentially the studios are offering their classes at a discounted price. The negotiated payout price is generally 50% of the studio’s lowest package. This could end up hurting studios if ClassPass users start replacing full time subscribers but to avoid this ClassPass limits its members to three classes at any one studio per month. This makes sure people don’t change their studio membership for a ClassPass membership. Studio owners can also limit availability to prime-time classes (which tend to be popular on their own) and open up more spaces during less popular times like the middle of the day. In addition, boutique owners can take advantage of the free data that ClassPass offers. The startup collects reviews on studios (they have 2 million ratings to date). It also provides insight on the best time to open a new class based on members’ demands8.
Boutiques. Can boutiques start suffering as the in-home on demand apps proliferate? ClassPass is definitely not alone in the at home space where players like Peloton, Aaptiv and Kayla Itsines are competing. The real question is whether consumers will adopt this form of fitness and give up the social aspect of fitness. In a future ClassPass could really turn into a for boutiques,
Big – Box Gyms. The big losers in this industry shift are the Big – Box gyms. As ClassPass makes it easier than ever to try multiple boutiques and have a diversified workout routine, Big-Box gyms will continue to lose some subscribers. For the time being they can keep focused on the more process sensitive customer that pays $25 a month but they shouldn’t trust this segment won’t be disrupted too. They can avoid losing higher income clients by offering a wide variety of classes with high quality teachers. They can also get on a part of the game by joining ClassPass to offer their own studio classes.
 2017 International Fitness Industry Trend Report