The timing for Peloton was dreadful. Last week, the high-flying digital fitness company recalled 125,000 treadmills after reports that they sucked in children and pets, leading to injuries and at least one death.
The $165m outlay hobbles Peloton’s efforts to move beyond connected stationary bicycles just as competition ramps up significantly. Not only have gyms reopened in the UK and increased capacity in the US, but outdoor activities beckon and rival digital offerings have proliferated.
Peloton was a big Covid-19 winner. Revenue jumped 141 per cent year on year for the quarter ending in March and subscriptions more than doubled. It could have done even better with homebound customers: the company struggled to meet demand, had to splash out on expedited shipping and posted an $8.6m net loss.
Meanwhile gyms suffered badly: industry group IHRSA estimates that 17 per cent of America’s 40,000 health clubs closed last year including several high-profile bankruptcies and others are suffering. In the UK, DW Sports went into administration and Virgin Active is trying to restructure.
Worldwide spending on physical activity topped $828bn annually before the pandemic, with just under half going on active participation and the rest on clothing, equipment and technology, says the Global Wellness Institute.
But exercise depends on routine, and the pandemic shattered all that. Some people improved their fitness during lockdown: downloads of the NHS’s “Couch to 5K” app shot up 92 per cent last spring. But two in five Americans reported putting on unwanted weight, with a typical gain of 15 pounds.
As societies reopen, fitness companies have a rare chance to foster new habits. Health clubs are moving to win back old customers and woo new ones. US revenues have rebounded to more than 80 per cent of 2019 levels, though visits are lower, says Daxko which provides IT to clubs. “There’s a real feeling of positivity in the gyms right now,” says Richard Darwin, who heads Britain’s The Gym Group.
Digital providers, from apps such as MyFitnessPal to connected rowing machines and mirrors, need to build on their explosive lockdown growth, attract more customers and, in most cases, find ways to be profitable.
“There is this notion that connected fitness devoured the gym. That didn’t happen,” says Simeon Siegel, analyst at BMO Capital Markets, who compares the rise of digital fitness to the growth of ecommerce. “The reality is that people still like going to stores and the same is true for gyms.”
While Peloton has 2m subscribers, not everyone can afford — or has room for — such bulky equipment. Planet Fitness, the largest listed US health club, has 14m members on its own, and 73m Americans went to the gym in 2019.
Some companies are better positioned to capitalise on the new environment. No-frills chains, such as Planet Fitness, Gym Group and Europe’s Basic-Fit, have low prices that appeal to customers who want to combine digital and in-person experiences. Several now offer their own apps.
Continued hybrid working will challenge smaller chains as well as mid-priced options: fewer people will want to pay up for a location that they only visit a couple of times a week. And early US data suggests central city clubs are recovering more slowly. “There’s going to be a shift away from fairly expensive annual membership gyms toward a network of low-cost options,” says Anna Barnfather, leisure analyst at Liberum.
High-end health clubs are likely to thrive as well, as the market bifurcates. Their classes, personal services and social experiences cannot be easily replicated. The moneyed clientele may have purchased Pelotons to get through lockdown, but they can afford to do both. Indeed Equinox, the luxury chain frequented by financiers, has gone from shuttering locations last year to pondering whether to go public….