The coronavirus pandemic has severely impacted businesses that provided services and relied on the physical presence of its customers. The fitness industry was no exception, with many lockdown orders explicitly calling out the shuttering of gyms and fitness centers. This essentially wiped out any new revenue streams and threatened existing membership renewals, especially at a time when many people needed fitness products and services. However, Equinox Group responded swiftly to the pandemic, altered its operating model and brought a completely new fitness offering to the market.
SoulCycle, a brand under Equinox Group, traditionally offered cycling workout classes (spin classes) in its studios. In parallel, recognizing the digital threat before the pandemic hit, it had been working to bring its own at-home fitness bike to market and compete with Peleton’s offering. Once COVID-19 effected lockdowns across the United States, SoulCycle realized the urgency to adapt its offering and accelerated the launch of its at-home bike. More importantly, SoulCycle partnered with Equinox Media, its sister organization, to roll out a streaming app called Variis, offering a variety of on-demand fitness content to users. This digital capability allowed SoulCycle to recreate its cult in-studio workout experience in the homes of loyal customers and members. SoulCycle partnered with companies like Precision Run, Pure Yoga, Headstrong and Myodetox to bring their content on-demand for the first time on the Variis platform. This allowed SoulCycle to diversify beyond its expertise of spin classes, appeal to a broader audience and provide access to content on multiple fitness regimens like high intensity interval training, yoga and meditation.
Since SoulCycle had to rush to launch Variis, it implemented a phased roll out strategy, starting with a soft launch for existing members. The timeline for introducing the bike was also altered to align with release of the streaming platform. The bike was priced at $2500 and Variis subscription was priced at $40 a month. However, Variis remained free to access for members and SoulCycle bike owners.
How do these products help?
Equinox, as a premier fitness brand with thousands of loyal customers, had been planning to respond to growing consumer need for on-demand content and was seeding digital capabilities across its brands, especially in Equinox Media. As COVID-19 pushed the company to respond, SoulCycle was able to leverage Equinox Media’s digital capabilities to roll out a streaming platform alongside their at-home bike.
In the short-term, this was an effective strategy to counter the lockdown. Variis’ free access to existing members allowed the company to offer a comparable experience and reduced attrition to other brands. In a time of scarce cash, it minimized the risk of refunding membership dues. The digital platform allowed Equinox (and SoulCycle) to continue to engage their employees and trainers in creating fitness content for the platform, as opposed to furloughing or laying them off. Moreover, the expanded library of content on Variis, enabled users to customize their consumption based on their specific fitness needs. This was the first step towards creating a deeper relationship with the customer in a digital ecosystem and initial reports of the app were overwhelmingly positive.
The shift in strategy and product offering would be defensible even in the long run. Previously, SoulCycle’s growth was limited by the number of physical fitness studios it could profitably operate. The on-demand fitness model will allow it to scale up and reach areas where it had no presence earlier but had significant brand equity. Similarly, the company can attract new segments of customers by offering variety and depth in content. Once life returns to normal and lockdowns are lifted, Equinox can position itself as an omni-channel option by having both – fitness studios and at-home bike – as opposed to Peloton’s only at-home model. Customer’s would then have an option to complete their workouts in person at the studio or in the comfort of their homes, giving them greater flexibility. It would also give latitude to Equinox to introduce creative content and pricing models to keep members engaged across all channels.
Equinox and SoulCycle have strong communities, making their customers sticky. By investing in creating this community online during the shutdown, it would create higher switching costs post pandemic. Finally, the on-demand fitness content is not a fad during the pandemic and has built up customer demand over the years, ensuring that Variis as a concept is here to stay.
Undoubtedly, the launch of SoulCycle bike and Variis platform was rushed and the company wasn’t as prepared. A soft launch is helpful to get customer feedback early and iterate over the product. However, during this pandemic when the demand is high, the staggered launch has caused the awareness to remain low. The offering has specifically favored existing customers, and this has frustrated potential new adopters. If the brand does not remain top of mind when rest of the competition is moving fast, Equinox might risk losing its potential customers to competitors.
The pricing of the product has also been a source of risk, with the bike and streaming subscription being priced above that of Peloton. Peloton has offered its app for free and launched an Android TV app during COVID-19. With this contrast, Equinox would find it hard to attract volumes of customers and create communities of fitness enthusiasts the way Peleton can. Variis has started to release limited free content on Instagram, but its impact on customer engagement and growth remains to be seen. Finally, Variis can differentiate itself from the fast-growing competition based on its content and Equinox would need to constantly push for high-quality content and good app experience.
Digital capabilities are the oxygen for sustained growth in services industry. While Equinox managed to launch its on-demand streaming platform and bike, it was not fast enough to seize the lead from its competitor. Further, it could not scale as massively and quickly due to a soft launch/experimental phase. It highlights the importance to be cognizant of the digital trends in the industry and constantly revisit operating models to have enough diversification if the primary product fails. SoulCycle partnering with Equinox Media also underlines the importance of partnering with skilled entities when your own organization lacks the expertise. Through Equinox’s turnaround, businesses in the services industry must acknowledge the gravity of having an omnichannel model to sustain through highs-and-lows. Because of digital transformation, businesses can move past their ‘supposed saturation’ of in-person customers and accelerate growth from new segments which are physically away.