Michael Porter is a prolific author in the genre of American business strategies. Among the topics that he covers is the concept of substitutes.
Think about how Netflix killed Blockbuster – home delivery and streaming content with no need to go to a bricks and mortar location.
On the other hand, grocery and food delivery services have not made any significant dent in the restaurant industry. Why have restaurants survived the convenience revolution? Here are some reasons:
- Social Engagement
- Energy/Experience/Memory Creation
- Escape from routine and normal life
Few people discuss the threat of substitution and the changes in consumer behavior in the fitness industry. I talk to many people with a diverse range of fitness club models, and everyone seems to be chasing the latest trend and copying what everyone else is doing. Small group functional training, or high-intensity interval training (HIIT), is the flavor of the day, which I support and am taking to market with an expanded product beyond current norms.
This makes good sense, as human beings are social creatures. Even the unsocial ones tend to have a need to be around others at times. Our increased technological opportunities and technological dependences have created an even stronger compulsion to be social.
But we have to keep the macro circumstances in mind. Fitness is now like nutrition – no one has a particular monopoly on it. Fitness is everywhere – schools, corporations, residential communities, college campuses, parks, trails, storefronts, big box family clubs, hospitals, virtual access (with devices), video streaming, DVDs, and individual pursuits. It’s not something people just do at a club, fitness center, gym, or studio. It’s EVERYWHERE.
Anything someone can do to substitute fitness activity outside our commercial industry must be viewed as a threat to our current model(s). So here’s what many traditional club members are saying to themselves: “Why would I join or stay at a club, fitness center, gym, or studio for fitness? I have a fitness center at work. I have a fitness center in my community. I have equipment, DVDs, devices, and streaming content at home. I have workout areas built around my walking/running/biking trails. I know how to walk, hike, run, swim and bike, and I know how to do push-ups, sit-ups, jumping jacks and a bunch of other fitness activities I’ve learned from childhood on. Why do I need to join a club, fitness center, gym or studio?”
And for many, and unfortunately for our traditional industry, the answer will be, “I don’t need to join.” We are seeing this with the lack of dramatic increased membership levels on a per capita basis. While we still lead the world in percentage of population that are commercial members, we are not seeing overly dramatic increases in the traditional club offering on a per capita basis.
There are two obvious scenarios whereby commercial fitness bricks and mortar sites will make a lot of sense:
Unserved/Underserved audiences. These audiences may not have a fitness center in their community, at their community college, trade school, workplace or residence, possibly without access to parks and trails. Additionally, these audiences may not have the space for or the income to invest in equipment. These audiences will increasingly find that the low-cost, convenient offerings are a wonderful solution. This will be especially true as smaller sized clubs go into markets where big boxes can’t justify entry, based on population and demographics. An example of this might be Equinox’s Blink product in some markets. Some of these audiences will probably not line up to join mid- to high-priced clubs and studios. Yet with this group, the majority of the population will demand solutions to healthy lifestyle options. And this group of consumers represents a significant market for fitness and healthy living options. We have seen a lot of growth in this segment with many quality operators.
Significant Note: I’m not suggesting that these audiences are the only ones for current convenience and low-cost operators. The expanded access, low-cost fitness providers will continue to reach well beyond the unserved/underserved market as they do offer a very strong, convenient value proposition to all audiences.
Consumers of the traditional health club, fitness center, gym and studio — expanded to those who have increasing needs as they mature.
- These consumers may want to get away from being alone and be around people and energy, even if they don’t want formal relationships with others. (Social Engagement)
- These consumers may want to be pushed to a level of exercise that they know they will never be able to do on their own – cycle, yoga, boxing, small group HIIT, Pilates, barre, etc. (Specialty/Expertise)
- These consumers may want to be around other people like them in a group accountability environment that is fun and engaging – group fitness training and classes. (Energy/Experience/Memory Creation)
- These consumers may want an escape from their life – child care, coffee/café, lounge, sauna, steam, whirlpool and pool. (Escape from routine and normal life)
- Convenience will always play a significant role in the bricks and mortar delivery of fitness experiences regardless of price point.
For our industry to continue to reposition itself and stay relevant, fitness can’t just be something consumers do at a club, fitness center, gym or studio. It’s got to be something consumers can’t simply find easy substitutes for compared to what commercial clubs offer. We have to be a source of motivation.
It’s time for all of us to innovate and evolve at a bit more rapid pace than we have historically done, as a lot of our traditional services are being commoditized rapidly. Corporations, hospitals and high-end residential offerings are well aware of their own need to deliver high-quality fitness offerings convenient to their audiences. As Michael Porter writes, it’s not about being the best, it’s about being different (and profitable).
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