2020 was already expected to be the year connected fitness took off before COVID-19 quarantined millions of Americans inside their homes. The result is that even as the economic fallout from the virus reverberates globally, connected fitness devices, virtual exercise classes, and the apps that power them are enjoying an unexpected boom.
There are, however, a number of speed bumps ahead in the connected fitness space. The flood of brick-and-mortar gyms and boutique workout studios jumping online are challenging brands like Peloton and Daily Burn. The extent to which the big brands can overcome these challenges may depend upon how they approach sustainability online, and how they navigate a radically transformed fitness ecosystem in the aftermath of the coronavirus.
Even before the pandemic, the global market for fitness apps was already anticipated to reach $14.7 billion by 2026. The forecast for the global connected gym equipment market was 45% year-over-year until 2021. Over the last quarter, however, connected fitness companies including Daily Burn, Peloton, and Aaptiv have surged past those previously rosy outlooks. Sign-ups for Beachbody have increased more than 200% from the same time last year and volume is up nearly 80%. Peloton just hit the 1 million subscriber mark and it’s stock is up 63% this year. Nautilus, which had been slow to adapt to the connected fitness trend, is now looking at its strongest quarter in over five years.
That’s the good news for the big brands. The bad news is that the connected fitness space has suddenly become very, very crowded.
Brick-and-mortar gyms and boutique workout spaces, traditionally the biggest growth drivers in the fitness industry, are all turning to platforms like Zoom, Instagram, and FaceTime to stay connected with clients, and stave off losses, at least until the pandemic recedes.
One need look no further than Barry’s, the popular immersive workout space which now uses Instagram to stay connected with clients and drive revenue. CEO Joey Gonzalez taught the first class on March 17 to an audience of thousands. Barry’s is now offering with two or three free online classes per day featuring instructors from around the world. They’re also launching a series of lifestyle videos and selling their fit band kits online. The overall response has been extremely positive.
“We had given thought to how we would be able to successfully transition Barry’s outside the red room, but didn’t have a robust digital strategy in place before COVID-19,” said Gonzalez. “We are currently building a long term digital strategy to ensure the needs of our global fitfam are not only met but exceeded.”
This new fitness normal wasn’t exactly the plan for connected fitness companies, either. Gym closures caused by shelter-in-place restrictions has prompted a surge in demand for exercise products and at-home workout subscriptions. The virtual workout space is suddenly awash in free content, which has forced connected fitness brands to rethink their marketing and monetization strategies.
“Peloton, Hydrow, Echelon, iFit, all those guys had banked on building up a wealth of content in 2020,” said John Peters, a fitness industry advisor and founder of BPT Works. “All of those companies were investing heavily into content but they didn’t plan for every brick-and-mortar chain to start producing content at home for free.”
Connected fitness brands are acquiring huge numbers of new users without a corresponding acquisition spend, but they’re also dropping paywalls and offering premium content for free to remain competitive. Nike recently made its premium content free on its app. Daily Burn extended its free trial period to 60 days. Peloton was giving users up to six free months of content when the pandemic began, but has since scaled that back to 30 days. Despite a record breaking bump in new users, the top-of-mind question is how will fitness brands keep those users when the virus (and the free trial) ends?
“The question you have to ask is: will the consumer pay full freight again?” adds John Peters. “History says that’s going to be really hard to do. This is now the story of 2020 and for the foreseeable future; how they’re all going to battle for that end user. No one saw it coming and now everyone is trying to figure that out.”
Health and fitness app users were already highly engaged before COVID-19, with 75% of active users opening their apps at least two times a week. The 25% most engaged users opened their apps more than 10 times a week. In March, Peloton saw new app installs jump 77% YoY. Daily active users of their app were up 52% YoY. In-app purchase revenue was also up 12.2% YoY.
It’s likely, though, that all these short term increases will see some sort of correction as we move into the summer. Just how much of a correction depends on how active brands are in engaging (and re-engaging) users both on and off their app. Clearly, Peloton hopes to convert free users into paid subscribers (and new bike owners). They and others are also banking on leveraging all the data they’re now collecting from new users who’ve all shown intent by downloading their apps.
For connected fitness marketers, this is vital. It’s not just about acquiring users. It’s about identifying high-quality users whowill provide long term value (LTV) going forward. Identifying these users should be the core focus of marketing and reactivation efforts for fitness brands in the coming months. Marketers can do that by utilizing platforms and technologies that allow them to better leverage their mobile channels, which now more than ever have become the leading channel for fitness products.
Mobile reactivation will be central to capitalizing on this unprecedented time as the number of new connected fitness users shrinks. Brands will need to leverage a combination of user acquisition and retention-focused data for retargeting.
“There’s a huge opportunity to reactivate those users by running reactivation campaigns,” added Peters. “Once you’ve seen that intent and you’re able to get the customer to return you’ll see a longer lifetime value.”
COVID-19 will likely accelerate convergence in the space. We should see a move towards more strategic partnerships between brick-and-mortar and online brands. An example is the recent Snapfitness partnership with FitnessOnDemand, a virtual platform dubbed “the Netflix of gyms.” It lets users pick workout videos on their devices. Brands traditionally associated with their studios and physical spaces will also begin to trot out more robust online offerings. There are already a slew of companies, like Flexit and Endorphinz, rapidly pivoting towards this opportunity.
FlexIt, which launched in 2019, is a pay-as-you-go mobile app that enables users to access fitness clubs around the U.S. They quickly reconfigured their app to address the new realities of staying fit in America when COVID-19 struck. Their app, now equipped with high-end video streaming capabilities, lets users remotely access one-on-one live personal training.
“Digital fitness is unequivocally going to become a larger part of individual fitness offerings going forward. It just is,” said Austin Cohen, CEO of Flexit. “The question is how can we recreate the really hyper-personal experience of gyms at home?”
Successfully creating those hyper-personal experiences at home could result in a shakeout within the connected and brick-and-mortar fitness spaces. Those brands lacking a direct to consumer presence or a good mobile strategy will be at a disadvantage. Some vanguards of pure-play connected fitness will be marginalized over time, as well.
“The companies that can offer a physical experience with an online experience are well-positioned,” said Matt Tingler, managing director at Baird’s sports and fitness investments. “Companies like Orange Theory and Planet Fitness that have a brand they can leverage and have a physical space are in good shape.”
Is the current rush to get online a fundamental paradigm shift in how Americans will stay fit when the pandemic finally fades? The short answer is probably yes and no. Consumers like modality, choice, and socializing with their friends, but COVID-19 has pushed the nation across the rubicon to embrace connected fitness and in-home workouts. Things are not likely to go back to what they were, which is why industry analysts are so bullish.
Connected fitness brands must maintain their recent gains in new users and stand apart from the new wave of competition. They will need to be creative and adept at converting those new users into lifetime users. Fitness as an industry will likely continue its march towards greater connectivity, as brick-and-mortar brands fully develop virtual offerings into the new normal. The brands with the best mobile sustainability strategies can best position themselves in this new era of convergence to write the next chapter in fitness.