As the reality of the pandemic settled in during the late spring of 2020, it became clear that while some businesses would suffer, others would experience exponential growth. The connected fitness vertical seemed ready for a breakout even before 2020. After the onset of COVID life, however, the industry took off. As businesses within the vertical made rapid gains and the space became more crowded, questions arose: What will happen when we eventually return to normal? How much of the connected fitness gains made during lockdown will fade once gyms are reopened and life returns to normal? Now, slowly, a picture of what the fitness vertical will look like going forward is beginning to emerge.
During 2020 Peloton’s revenue rose to $1.26 billion – a staggering 141% year-over-year growth. Revenue across the entire Connected Fitness vertical showed similar gains with 140% year-over-year growth. Subscription revenue ballooned to a $239.4 million, representing 144% year-over-year growth. For the first time in its history, Nautilus’s revenue exceeded $200 million. Nautilus CEO Jim Barr said that even if only 10% of consumers maintain their home workout routines after lockdown, it would still represent a $4.9 billion home fitness opportunity.
While many in the industry anticipated a surge as communities across the country locked down, even the most sanguine analysts underestimated the appetite for activity that ensued.
“What surprised me more than anything was the level of demand for fitness,” says Scott Brown, Director of Digital Fitness at Orange Theory, “The sheer numbers and the volume of the surge was daunting but, thankfully, digital can scale fast and the industry was able to accommodate.”
The lockdown forced gyms and boutique studios to get creative. In-home connected equipment (like Mirror), smart apparel and digital fitness tools all began to offer on-demand workouts and real-time performance data. With many digital services coming in at significantly lower price points than typical gym memberships, customers leapt at the opportunity to try out the connected fitness space.
“Right now, consumer demand for fitness technology products is at an all-time high,” says John Peters, Partner at Nextiles, a product that enables connected environments through fabric technologies. “At-home fitness was already happening before the pandemic and – like many other things – it was drastically accelerated. If you look at companies like Whoop, Mirror, Peloton, Tonal, Hydrow, etc; all those companies benefited from the pandemic.”
Yet, there are already signs that appetites and habits are once again shifting. Several early indicators from in-person workout settings have demonstrated that people are eager to get back to a group setting to work out. Orange Theory released a recent survey that found that 70 percent of exercising-Americans missed their pre-pandemic workout routine and more than 30 percent missed being inside a gym and/or having access to different fitness equipment.
Regardless of these shifts, the pandemic cemented (if nothing else) the concept and appeal of connected fitness in the minds of countless consumers. It also revealed unexpected user trends that suggest we may be entering into a new hybrid era of fitness; one that affords users the best of both fitness worlds.
“The fitness landscape post-pandemic is very different to what it was,” says Jenna Hauca, VP of Digital at Barry’s. “Consumers’ habits have drastically changed, and we expect to see a rise in the hybrid client, one that takes both At-Home and in-person classes.”
One of the primary reasons for this is the way people now conceive of connected fitness. Virtual fitness now means fitness anywhere. It can be out of the home, at the office or even outside. Similarly, as was the case with the gaming industry, there was an unexpected social component to connected fitness brought on by the pandemic.
“One of the reasons people used to leave their homes for fitness was social, to be around other people, to keep them motivated especially in a class. Now you can stay super connected and work out with a friend who is across the country,” says Austin Cohen, CEO of Flexit, an app that provides users with on-demand access to fitness brands around the country by offering both virtual personal training and entry into gyms. “That’s something we started to peripherally dig in on at the onset of the pandemic and that we’re really excited to blow out going forward – to build more community, to create opportunities for people to meet new people, etc. That was something we definitely didn’t expect and something we’re going to lean into more.”
While fitness technology as a social lifeline offers tantalizing opportunities to connected fitness brands, there remains a largely untapped opportunity around personalization and biometrics that has yet to be maximized. Biometrics can be defined as “the science of tracking and analyzing people’s unique biological characteristics” and presents a unique way for connected and brick-and-mortar fitness brands to engage the new hybrid consumer.
“The next phase will be about the ability for machine learning to personalize your users and the content they consume while also holistically tracking them in real time with specific biometric feedback,” adds John Peters. “Technology has areas to improve upon and that starts with personalization. The next frontier is all about biometric data – things like sweat analysis, heart rate, temperature and even glucose monitoring.”
The new hybrid client also presents opportunities for brick-and-mortar spaces and real estate companies. With the likes of Apple, Lululemon, and Barry’s now moving into the connected fitness space, most market analysts suggest that connected fitness companies will look to coexist with traditional gyms, such as those run by Equinox, in the same manner that brick-and-mortar retail stores coexist with ecommerce.
“The overall comfort level with digital communications has never been higher. Consumers have grown to love digital workouts for their convenience and effectiveness,” says Jenna Hauca. “While we’ve seen a surge in Red Room attendance, we’ve also seen that some of our in-studio die-hards are supplementing their workout routines with digital classes and we continue to welcome new clients into the fit fam who live in cities in which we don’t have a physical studio.”
Early indicators suggest there is room for both connected fitness products and brick-and-mortar gyms to exist. If anything, the hybrid fitness approach is only going to escalate.
“We should see a lot of creativity in the commercial real estate market in terms of flexible lease models, cheaper rents, etc.” adds John Peters. “I expect things like malls and movie theaters or other unused real estate to turn into something more active. It wouldn’t surprise me at all to see Peloton repurpose movie theatre chains into workout and interactive cycle studios. This type of creativity, coupled with depressed rents, could help spur a boom of brick-and-mortar return, particularly as connected fitness companies and other digitally native retail brands lean into the brick-and-mortar space.”
There remain hurdles, however, that the industry is just now grappling with. Managing uneven vaccination rates, COVID variants and churn are all just the tip of the iceberg. Understanding customer trends – such as who and where your customer is – will be paramount. As demographics shift it will be incumbent upon gym owners and connected fitness companies alike to meet their new hybrid clients where they are, learn about them and (in real time) offer up solutions and options for them.
Brick-and-mortar and connected fitness businesses are already anticipating these coming changes. Barry’s new digital product, Barry’s X, is launching in August and is a perfect example of how fitness brands might address these challenges. Barry’s X is a community-driven digital fitness experience that leverages innovative technology to provide an experience as close to Barry’s traditional Red Room experience as possible while still utilizing opportunities specific to digital to enhance it. This includes “micro” production studios in 3 major markets to produce high quality workouts featuring some of Barry’s top instructors from across the country allowing the founding instructors of Barry’s X to remain accessible to in-studio clients and those who live in cities in where Barry’s lacks a physical presence.
Adds Jenna Hauca, “While we loved the relatability and intimacy provided by trainers teaching from their living rooms, kitchens and backyards, the world is ready for the transition to more intentional and higher-end production environments.”