In the second of a two-part interview with industry veteran John Oxley, The Side Hussle continues to explore the post-COVID landscape for the UK fitness industry.
In part one we discussed John’s views on how operators may respond to the sales and marketing challenges the sector faces, and in part two we explore the potential winners and losers from changes in customer behaviour as well as looking forward to what might come next.
Which segment of gym operators do you think will gain the greatest market share post-COVID and which, if any, segment do you think will miss out?
John: Well, COVID has brought recession and challenges to economic recovery. Historically, the value end of the market tends to gain most during these circumstances and I expect that to be the same now.
The premium market could well have a prolonged period of challenge and I expect them to focus on key locations and potentially look to shrink their portfolio.
The public sector has an opportunity to re-establish itself with a family-oriented and health-nuanced proposition; there’s a chance for local authorities to establish their facilities and leisure service as a valuable component within their communities.
Central London – and particularly boutique studios – will be impacted by a change to working patterns.
Do you think the gym membership model will continue to be propped up by sleeper member revenue?
John: I don’t think the model will be propped up to the same extent, but ‘sleepers’ will still exist in the future. Clever operators will use insight on ‘days since last visit’ as a predictor of cancellation and work to encourage greater use of the gym in the future.
However, at the value end of the market, the model will still be predicated on over-capacity sales and inevitably there will be a sleeper revenue contribution enabling the commercial model to succeed.
Do you feel enough attention is paid to understanding unit economics such as customer acquisition cost, lifetime value, payback period, return on ad spend etc?
John: In general, our sector doesn’t calculate those type of KPIs particularly well. If it does calculate them, it then doesn’t afford enough time to forensically analyse and respond to them.
However, the value of insight and our means of getting it is improving all the time and smarter operators are already diverting resources to analytics and using this to determine resultant intervention strategies.
Gathering critical qualitative and quantitative insight about your business and then investing time and effort to understand and respond to it is the single most valuable thing operators can do to ensure success.
Do you think there are gym operator market segments that do this better/worse than others?
John: Those operators who have invested substantially in technology AND the analysts to identify relevant insight will do it the best … and those backed by serious investment equity will have those KPIs demanded of them! Need I say more?
By the way, Hussle do have a real handle on it, and I feel they could support operators in developing a deeper understanding of their own businesses.
How should gym operators ensure they remain relevant to consumers over the next five years?
John: With a subtle shift from fitness to health and from markets to communities. Operators will remain relevant if they concentrate on creating the best possible in-club experience and assume a role of ‘activity enabler’ and ‘health educator’ out in the community.
Operators can be relevant whether a member comes for a workout in-club or not, but they will have to come to terms with not having exclusive ownership of the relationship as modern members will have multiple health and fitness-related relationships with connected entities from Apple and Strava to Whoop.
Those operators who quickly become comfortable being part of a consumer’s eco-system, offering them the content, interaction, and value they need, will see lifetime value soar. It will be different, and it will take agility and innovation, but it will be worth it.
Is the relevance of the ‘bricks and mortar’ gym under threat?
John: Only if we don’t become accustomed to playing a role as part of a consumer’s investment in their health. Operators must commit to engaging and developing a relationship with a member, but in collaboration with other stakeholders.
In five years, do you think the sector will look back on 2020 as a destructive year for gym operators or simply an accelerator of much-needed change?
John: I believe those who think it’s been destructive won’t need to wait five years to form an opinion!
I suspect the sector may look back on 2020 with mixed views. It will have certainly accelerated change for many, but we may look back on the time as a missed opportunity – that we didn’t go far enough. Last year enabled the ‘opportunists’ to pivot and develop new business models that capitalised upon ‘capacity during closure’.
It remains to be seen whether the period has spawned gym innovators that can broaden our sector’s appeal and genuinely position their proposition as one that contributes positively to population health.
The opportunity to move the perception of exercise subscriptions from discretionary to essential household spend is there – it’s one of the ways we develop good health, a happier and more interactive society, one which is more resilient to disease.
If you would like to speak to John about anything in this article, or to find out more about his new venture – Brand Oxley – you can contact him on: johnoxley63@icloud.com