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Peloton or gym? Why decide? What does this mean for fitness companies

Megan Thompson trains on a stationary bike at home in New York.

Michael Loccisano | Getty Images

Yulia Yurieva still hasn’t buckled and bought a Peloton Bike, but the 38-year-old public relations specialist is actively considering it.

Yuryeva said she enjoys group classes at a local fitness studio. But since it has reopened, she doesn’t think there is enough choice. She said she might consider investing in a home gym for her Los Angeles apartment, as many of her friends have already done.

“Fitness at home is still important to me,” said Yuryev. “Yoga studio [near me] only offers certain classes with such limited capacity. They are downsized … so now not all variety is due to regulations and labor shortages. “

In the situation with Yuryev, a hybrid approach is increasingly being chosen. This may come as a surprise to some investors who are betting that the fitness options for consumers were either a choice or a choice. Either consumers will sweat at home, as they did during the pandemic, or they will return to the gym after being vaccinated against Covid-19.

Peloton’s and Planet Fitness’s promotions reflect this thinking. Peloton shares are up more than 440% last year, while Planet Fitness shares are up 4%. Peloton shares are down 36% this year, while Planet Fitness shares are up about 2%.

Rebound Gym Visits

While the demand for home fitness equipment has dropped from the frantic pace of 2020, it is still growing. US sales are up 85% from 2019 levels and reached $ 3.7 billion last year, according to the NPD Group. Fitness equipment sales grew 20% year over year during August and 108% over two years, according to the research company.

NPD Group was unable to offer a forecast for the category, but analyst Matt Powell said he expects the market to remain strong as people seek employment to stay in shape. He noted that sales usually increase again in January.

Meanwhile, attendance at fitness centers is on the mend. According to Jefferies, at the beginning of October, the number of visits decreased by only 8% compared to the same period in 2019. Gym network members LA Fitness and The Edge Fitness Clubs bounced off pandemic lows the fastest, followed by Crunch Fitness and 24 Hour Fitness, Jeffries said. The Mark Wahlberg-backed F45 training course is the biggest backlog, the report said.

A client wears a face mask when lifting weights while exercising at Planet Fitness as the site reopens after being closed due to the Covid-19 pandemic on March 16, 2021 in Inglewood, California.

Patrick T. Fallon | AFP | Getty Images

“We’re definitely seeing clear data that shows people are getting comfortable back to the gym again,” said retail and fitness analyst Randy Konik at Jefferies. “What is likely to happen is that the demand for gyms will increase significantly. … But the demand for [at-home] fitness equipment is likely to remain fairly durable. “

Searches for digital fitness platforms, including Peloton and Tonal, peaked in January when consumers made a commitment to deliver on New Year’s promises. Then, according to Jeffries, searches spiked slightly in August as the delta variant became a widespread threat. While searches for home workout items such as jump ropes and yoga mats hit record highs in April 2020, searches have dropped since then.

Nonetheless, Konik expects many American households – if given the opportunity – to adopt a hybrid training approach.

“People will realize that they can work out in the gym three days a week and then just do something at home or in the basement three or four days a week,” he said. “It’s all about convenience.”

This mindset is reflected in the latest offerings from fitness companies. Peloton has a growing corporate wellness program. Mindbody, a booking platform for the health and wellness industry, also hopes to serve businesses that will return employees to office buildings.

Life Time Fitness, a high-end gym chain that went public earlier this month, updated its mobile app and launched a digital-only subscription during the pandemic. This is still the option he offers to clients today.

Mark Mallett, co-founder and co-CEO of Obe Fitness, said the rapidly evolving landscape has allowed people to choose from what he calls a “fitness buffet.” Obe is a home fitness app that offers live and on-demand training for members who pay $ 27 per month.

“We love the fitness buffet — you work out at home three days a week, go to your local studio one day, and go jogging with friends the next day,” Mallett said. “Our job is to ensure that we deliver to people all the content, the entire community, and all the results they want.”

Obe recently launched spinning lessons for members who already own bicycles at home or use them in the gym. The company has also partnered with Obe’s investor Gap Athleta for personal training.

The competition at home is heating up

Hydrow, a $ 2,295 rowing machine manufacturer, said it received nearly $ 200 million in funding.

Source: Hydrow

“One of the goals of this campaign is to demystify rowing and make it more accessible and attractive to a wider audience,” said Gretchen Saeg-Fleming, Chief Commercial Officer, Hydrow. “The idea behind the Hydrow high is that people feel much better and stronger after training.”

One of the Hydrow rowing machines sells for $ 2,295 compared to the original Peloton bike at $ 1,495 and the Tonal strength machine at $ 2,995. The Lululemon Mirror device retails for $ 1,495, while the Liteboxer and home boxing device retails for $ 1,695. These are just a few. You can also pay $ 2,799 to upgrade your home gym with the CLMBR, a vertical climbing wall. Frame Fitness, a connected Pilates machine, retails for $ 2,999. There are many more.

In addition to the cost of the hardware, users pay a monthly fee to access the content. For example, a Peloton membership costs $ 39 per month. Tonal membership is $ 49 per month.

“The explosive growth in home fitness is directly related to the explosion of e-commerce over the past decade and a half,” said Simeon Siegel, analyst at BMO Capital Markets.

“The door was open for dollars to be thrown at various manufacturers of connected exercise equipment because the consumer gave them a challenge,” he said. “Just like the number of startups that flared up in e-commerce when consumers allowed retailers to enter their living room.”

The most successful companies will be those that keep churn rates as low as possible, meaning people stay there month after month, Siegel said.

“In the end, participation is critical,” Siegel said. “So what makes someone not cancel? This is the biggest question. “

Peloton is one of the few publicly traded fitness companies to disclose their churn rate, which remains impressively low. Peloton had an average monthly net monthly churn of connected fitness services of 0.73% in its most recent fiscal quarter. In the previous quarter, it hit a six-year low of 0.31%. Its outflow is usually lower during the winter months.

Tonal and Hydrow are reported to be looking into public offerings that will allow investors to better understand user trends. The companies declined to comment on their plans.

Community building

Peloton, meanwhile, is betting that its signature T-shirts, hoodies and tracksuits can serve as billboards for walking, even as some of its users return to gyms.

In September, it ditched its largest assortment in tandem with the company’s massive apparel marketing push. Peloton clothing ads have been stuck on billboards, digital subway slots, and even empty storefronts all over New York City.

People walk past a storefront in New York’s Soho neighborhood where Peloton is promoting its clothing line.

Source: Kevin Stankevich, CNBC

“When you see someone wearing a Peloton, you know that together you are part of this community, and there is something cute about it,” Jill Foley, Peloton’s vice president of clothing, said in an interview. “It’s really powerful.”

Entrepreneurs in the industry say community building is key – whether in the gym or at home. Khalil Zakhar, founder and CEO of home boxing FightCamp, said companies that make users feel like they belong in a group of like-minded people will be the ones to stand the test in the coming months.

“Now that we’re back in the gym, many of the concepts that worked for connected fitness during the pandemic may no longer be viable in a post-pandemic world,” Zakhar said.

“However, this is the best hope for consumers, as it will undoubtedly force companies to make their products better, and companies that survive the next few years of transition will become much stronger,” he added. According to Zakhar, the best products are those that bring in new content and attract educators.

Back in Los Angeles, Yuryeva said she was still working to justify the cost of buying a home fitness machine like the Peloton in addition to group sessions. According to her, her friends also motivate her to make a decision.

“Flexibility, especially when working remotely, is very important,” she said. “And I really need that sense of community.”


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