This article was originally posted by Louis Nicholls on Medium.
At Gymhopper, we love the personal touch of individual gyms. That’s why we’re so worried about recent trends in the Swiss (and European) fitness industry.
Given recent developments and trends, it isn’t too much of a long shot to wonder whether, in 10 years time, we’ll look back on 2015 as the year that individual gyms finally lost the battle for customers. We talked to over 100 gyms and almost 1000 gym-goers to identify 3 challenges which, combined, will spell the end for individual gyms not willing to embrace innovation. Here they are, briefly summarised:
1 The Market
Individual gyms are being squeezed by chains on all sides. On the one hand, discount chains such as Basefit, Discountfit etc are growing rapidly in size and undercutting individual gyms competing on price.
On the other end of the spectrum, Migros and other ‘premium’ chains are rapidly expanding and competing with individual gyms on quality and offerings.
With Swiss fitness chains of all kinds set to double in size within the next 24 months alone, the network effects and economies of scale which they already enjoy will become even stronger, putting serious pressure on individual gyms.
2 The Customer
When we started thinking about the future of the Swiss fitness industry atGymhopper, we expected that the biggest threat to individual gyms would be the price advantage that fitness chains can offer, thanks to their economies of scale.
It turns out that we were wrong.
By talking to almost 1000 gym-goers, we found out that for those with a membership at an individual gym already, price differences did little to make them swap to a fitness chain, mainly due to the (real or perceived) superior quality of care and ‘personal’ atmosphere at their current individual gym.
Instead, the main reason cited for considering a change was a lack of flexibility. This covered many things, including opening hours and available equipment, however the clear area in which individual gyms are losing out to fitness chains is the lack of geographical flexibility due to not having multiple locations. Indeed, some 60+ percent of the gym-goers we talked to indicated that they were ‘unhappy or very unhappy with the flexibility on offer at their current gym’.
3 The Information Disparity
While the revelations regarding customer motives were interesting to us, it was talking to individual gym owners that really opened our eyes to the central problem:
Despite our hearing loud and clear from hundreds of gym-goers that lack of geographical flexibility is a major issue for them, less than 5% of the gym-owners and operators we spoke to could identify this as a threat to their business!
It took a a lot of follow up interviews and probing questions to get to the bottom of, however it seems that while technological and societal trends have led to a phenomenal increase in consumer demand for flexibility in the last few years, individual gyms haven’t caught on to this trend yet, costing them upwards of 60k CHF/year and increasing.
As far as we can tell, this information disparity results from 4 key points, which operators of individual gyms should reflect upon in the context of their own business:
1. The naturally high churn rate of the gym business model (40–60% average yearly churn) means that these very important customers who leave due to lack of flexibility get lost in the masses.
2. Unlike for many ‘actionable’ issues such as equipment, facilities etc, unsatisfied gym-goers don’t complain about the lack of flexibility to staff, as they view it to be inactionable, instead choosing to move directly.
3. Many gym-operators also view increasing geographical flexibility as inactionable, leading them to disregard the possibility that it results in tens of thousands of CHF lost revenue each year.
4. Even amongst the more innovative individual gym operators who have identified a customer need for more flexibility, it was rarely understood that the relatively minor, measurable losses we see today are symptomatic of a much larger, rapidly growing and more serious threat to individual gym existence.
Our Conclusion
To stay competitive throughout the next 2–5 years, individual gyms need to spend less time worrying about onboarding new customers and put more effort into keeping existing, long-term customers happy.
They can do this by focussing on continuing to provide personal and exceptional service and, crucially, by finding a way to increase geographical flexibility for their customers, resulting in much higher customer retention amongst ‘power-users’ and resulting in saved revenues amounting to tens if not hundreds of thousands of swiss francs.
At Gymhopper, it was our goal from the outset to support individual gyms and the high quality service they represent. That’s why we spent over a year working with 100s of both providers and customers of individual Swiss gyms to build a solution which brings individual gyms all of the flexibility of a fitness chain but with none of the drawbacks. You can check it out here.
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