Social Fitnessing – Will Boutique Fitness Studios survive COVID-19?

The fitness industry was booming (at least in 2019). According to the IHRSA Global Report, the global industry revenue totaled $94 billion and the industry was on pace to reach 230 million health club members worldwide by 2030. [1] In the United States, there are more fitness options now than ever. Customers can choose from a variety of different types of exercises (HIIT, yoga, dance fitness, barre, etc) across many different mediums (big box gym, boutique studios, apps, in-home technology, etc).

Boutique studios make up the biggest portion of the growth. Customers can enjoy offer curated playlists, enthusiastic instructors, positive vibes, targeted exercises which many associate with a good workout. While all these factors could be replicated by big-box gyms, the community aspect of these studios is what keeps many of their customers coming back either through studio memberships or pre-paid class backs. One studio that has stood out among the pack is Barry’s Bootcamp. Barry’s Bootcamp deems itself “The Best Workout in the World” offering high intensity interval workouts in their famous Red Room. The workout consists of a combination of running and weight training that optimizes for muscle toning and fat loss. Studios like Barry’s Bootcamp, SoulCycle, and Orange Theory demand high price tags ($28-34/class), but have strong recurring revenue from their devoted customer bases. Barry’s Bootcamp grew from 20 studios to 60 over the past five years and plans to open 100 more globally over the next five years [2].

The group aspect of fitness is a key differentiator for these boutique fitness classes. Nearly 60 million Americans attend group workouts at least once a week. In addition, according to a survey done by mindbodyonline, group fitness leads to higher satisfaction (see below). [3] Another survey run by ASweatLife stated that “78% of respondents were more likely to try a new workout with a friend”, an efficient way for these studios to acquire customers. [2] For some customers, it is also provides a sense of belonging and identity (#tribe).

In the Midst of COVID-19

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With the COVID-19 outbreak, the government manded that most gyms and boutique fitness studios close their doors back in March. Similar to many store-front businesses, this put them in an incredibly difficult financial position. Should they still continue to charge their customers a membership fee? Most big-box gyms such as Planet Fitness and Equinox have proactively paused memberships while others allowed customers to freeze their memberships at no cost. [4,5] For many, the financial hit will be devastating as many of these businesses with require high upfront capital expenditures, high rent (if in prime city retail locations), and labor and operating costs.

While the physical locations are closed, many of the boutique fitness studios have looked to innovate on ways to engage with their customers while not gathering together physically. At first, Barry’s did what many other studios did– limit capacity. In the first few weeks of COVID, Barry’s offered 50% capacity classes and double downed on sanitation procedures. When the doors finally closed, Barry’s leveraged its strong following on social media to launch Barry’s IGTV Workouts, featuring Barry’s instructors from all over the world. Not only did it draw its existing customers to its platform, but it allowed new customers to experience Barry’s given the ease of access and no charge. On April 13, 2020, Barry’s opened up the (Virtual) Red-Room titled Barry’s At-Home, a 35-minute virtual Barry’s instructor led class conducted on Zoom. The virtual classes mimic the in-studio classes, focusing on a different part of the body such as Chest, Back & Abs, Full Body, etc. While there is no treadmill portion, the instructors include different types of in-home cardio to get the heart pumping and use a variety of in-home equipment (bands and weights). Barry’s offers a feature called BodyWeight, if you don’t have any weights or bands at home, but Barry’s also sells in-home workout equipment with branded bands, booty bands, benches and mats for you to replicate the Barry’s experience in your own home.  [6]

See their At-Home Class packages below:

A few online reviews regarding the Barry’s At-Home experience:

“The intensity and legitimacy of the workout was impressive. The moderator used Zoom’s chat feature to encourage those in the class to ‘Keep it up!’ and I enjoyed the social aspect with classmates at the beginning and the end of the class. I ended the class extremely eager to do my next, and I can’t wait to see how the company integrates these virtual experiences into their business even after our lives return to normal.” [7]

“Great class. Way way too many credits for what it is though. I think other people here have complained about it being 12 credits and I agree. It should be 6-8 credits” [8]

“Did not get to participate beyond the first 10 minutes due to technical issues.” [8]

How and why was Barry’s able to quickly launch these at-home classes only a few weeks into the COVID-19 shutdown?

1. Digital capabilities – prior to the shutdown, Barry’s had developed digital capabilities that allowed it to have access to its customers and build up their technological capabilities. Barry’s has their own app where customers can see schedules, book classes (now for virtual), etc. In addition, Barry’s had been building out their digital team focused on how to engage its customers digitally through marketing.
2. Brand – Barry’s strong brand allowed them to transition digitally while charging customers. With an existing reputation for exciting workouts, customers are more likely to try out and purchase a class. They also are one of the few studios with a global reach, allowing them to reach an international audience.
3. Instructors – Barry’s has a strong base of instructors that it invests in, supports, and can draw upon for live, at-home classes. This lowers the risk of disintermediation – trainers going directly to customers or leaving to start their own workout programs online.

Post COVID-19

When Barry’s is allowed to re-open its studio doors, what kind of world will it open back up to? Just like restaurants, fitness studios may need to limit capacity to 50% or less for its classes for the next few months until protocols such as testing, contact tracing or a vaccine exist. It is also unclear how customers will feel about going back into a “Red Room” where sweat and germs can easily build up after a few classes.

Going forward, Barry’s may have to consider modifications to their in-studio business:

1. Design – the studios are designed to pack as many people as possible into the room during one session. It is likely that Barry’s will need to re-design their layout to accommodate for more distance between individuals working out
2. Format – the schedule is also formatted such that classes are back-to-back, allowing 15 minutes in between. Barry’s may need to consider allowing longer periods of time to wipe down equipment and proper sanitation

The question remains as to how Barry’s will change its overall business model after COVID-19. Will it continue to offer these in-home classes for $20 per class? The At-Home classes could be an opportunity for Barry’s to target new customer segments and leverage its data to provide ideas for future geographic expansion. In addition, with a recession, individuals may decide to lower their spending on these premium priced boutique classes. The At-Home model would provide an additional revenue channel and retain customers who want to experience Barry’s but at a lower price point. Lastly, the At-Home model provides Barry’s an opportunity to utilize any network effects of its digital business given the platform between instructors and users and lower barrier for entry for new users (same-side effects).

In the same vein, if Barry’s wants to offer both in-studio and at-home experiences, it may have to consider the following:

1. Subscriber Model / Pricing- Barry’s faces much competition from the other in-home workout apps that have launched at much lower pricing points with access to unlimited classes for a monthly fee (rather than a per-class fee). If they want to compete with the in-home digital landscape, they should consider switching to a subscriber model rather than the per workout charge
2. Community– the community aspect will be vastly different online. Barry’s could look to examples such as Peloton to understand new ways to connect with and encourage network effects among a digital customer base
3. Expansion – Barry’s had plans to open 100 more studios over the next 5 years. With launch of digital, Barry’s can use their digital data to be more tactical about geographic locations. In addition, the management team should create a long term plan on desired split between in-studio vs. in-home

Overall, Barry’s by launching At-Home, Barry’s put itself in a unique strategical decision-making point that many other businesses are facing. While its original customer value proposition was dependent on in-person and in-studio, digital is inevitably changing the landscape of the industry overall and begs many new important questions. Should will Barry’s play in the in-home workout space going forward? If so, what organizational changes may need to occur, and what percentage of Barry’s business should be digital going forward?

References:

1. https://www.ihrsa.org/improve-your-club/industry-news/2019-fitness-industry-trends-shed-light-on-2020-beyond/
2. https://www.cnbc.com/2019/08/19/boutique-fitness-brands-could-be-hit-first-in-a-recession.html
3. https://www.mindbodyonline.com/sites/default/files/public/education/learning-assets/Fitness_Trends_in_America_2020_Report.pdf
4. https://www.equinox.com/
5. https://www.planetfitness.com/coronavirus-faq
6. https://www.barrys.com/
7. https://www.elitetraveler.com/shopping-lifestyle/beauty-wellness/barrys-bootcamp-barrys-home-review
8. https://classpass.com/studios/barrys-at-home-east-coast-new-york