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On December 14, 2015, LC commented on The NCAA: It was fun while it lasted! :

Thanks for bringing to light how fraudulent this whole system is. I think what saddens me most is how the vast majority of college athletes are being required to work and sacrifice for their teams (often at the expense of their long-term education and well-being) while receiving very minimal economic benefit. No real other comment here, just wanted to recommend to you one of my all-time favorite long-form articles, The Shame of College Sports (here: ). It’s a few years dated now, but covers very thoroughly many of the issues you discuss here.

On December 14, 2015, LC commented on Some Go to Church, Others Go to SoulCycle :

I doubt I’ll be able to convince you otherwise with just words, but I’ll do my best! I agree, $34 per class is expensive by any standard. But whether or not you can justify paying that number depends on whether or not you value the FULL EXPERIENCE that SOUL offers. Why do people pay $3 for a bottle of Fiji water when tap is free? Why do people pay $5,000+ for an Hermes bag when they can go to Macy’s and find dozens of options for under $50? As we talked about in marketing, companies can find a way to (successfully) to price their products / services at a premium if they can convince their customers that they’re selling more than just water / a handbag / a workout. In this case, someone who’s looking to sweat isn’t going to be a SOUL customer. But for someone who doesn’t normally enjoy working out and enjoys a high-touch, personalized experience, paying up for SOUL may make some sense…

Separately, I generally agree with your second comment regarding SOUL’s ability to scale outside major metros. You definitely need to be located in a pretty high-end demographic to make the box economics attractive. SOUL’s S-1 states that they believe they have enough runway to grow to 250 domestic locations (up from 47 today). While I’m not sure I’d peg it at such a high number, at their current pace of opening ~10 stores / year, that’s still MANY years of new store growth left just in the U.S.

On December 14, 2015, LC commented on Hai Di Lao: Service Beyond Imaginations :

This business sounds INCREDIBLE. Agree with the above comments that the very intentional focus on customer experience and operations makes this feel a lot like Benihana. But they seem to have taken it to a whole new level with this waiting area concept, that’s a full 1/3 of the entire store! In a way, they’ve almost pivoted away from the hot pot business and are just in the “Hai Di Lao” business, where customers expect to spend two hours, one getting a manicure / massage and the second eating. All of these “free” add-on services are also a way for people to justify paying top dollar for hot pot (which, as you state, is otherwise pretty undifferentiated).

Numbers probably aren’t public but I’d love to know what the financial health of this business looks like. Is the investment in such a large waiting area and extra staff worth it to justify (only) a 20-30% pricing premium? Do they have room to push this up given how differentiated their customer value prop is?

In any case, thanks for opening our eyes to such a unique concept. Can’t wait to try one out one day and see it in action!

On December 14, 2015, LC commented on Planet Fitness: Fitness for Everyone :

Really interesting to see how Planet Fitness has disrupted the “lower end” of the fitness industry. Their real estate / store layout strategy that you detail above reminds me a lot of the business I wrote about (SoulCycle), even they they serve completely opposite ends of the market! Both businesses have really focused in on the features that their customers want and stripped away the unnecessary amenities so that they can have small boxes and maximize productivity. Makes me worry about the health of the big box gyms that try to be everything to everyone (e.g., 24 Hour Fitness, Gold’s Gym, etc.). Like a lot of other consumer-facing industries, feels like there’s been a real bifurcation in spending with high end and low end doing well and the middle being squeezed…

On December 14, 2015, LC commented on Peloton: Breaking Away from the Pack :

I agree with the comments above that the community / culture aspect of group fitness has been a key success factor for many studios. But I’d argue that this is also a really interesting concept that could scale into areas that have high end customers (e.g., can afford and value fitness enough to make a $2,000 upfront investment) but are outside of the major metros where boutique fitness studios are less likely to enter because they don’t have enough density of their target customers. Not sure if that was their intent when starting Peloton but could be a way to not directly compete with the likes of SoulCycle, Flywheel, etc.

On December 14, 2015, LC commented on Zara: Upscale, on-demand fashion :

Zara is a PHENOMENAL business and I’ve enjoyed watching them take the U.S. by storm over the last few years, a time when most retailers here have really been struggling – just look at all the 40% and 50% off sale signs at the mall!

What I love most about this business is how well aligned the operating model is to not only its business model but also to imperatives of the industry. Success in the fashion industry relies on being on trend, and Zara’s entire model (from the very beginning) was set up to pick up, execute and deliver on trends for their customer all in the matter of weeks! To answer Komal’s question above as to why it’s so hard to copy Zara’s model, I think it’s because the supply chains of traditional B&M retailers such as the Gap, J. Crew or Ann Taylor have been set on 9-month or 12-month production calendars for so long, it’s really hard to change such ingrained behavior. Not to mention, there’s A TON of execution risk associated with changing out suppliers and setting up a bunch of small mills like Zara has. H&M, Primark and Forever 21 have somewhat different value props that are really about delivering cheapness, so with them, it’s really their massive scale that allows them to offer their products at such a low price

On December 14, 2015, LC commented on Some Go to Church, Others Go to SoulCycle :

Hi Daniella! Great question – wanted to respond to this one directly. I actually think these new a-la-carte models such as Classpass are more of a potential threat to SOUL long-term than a new studio cropping up here and there. To the extent the success of Classpass represents a new revealed preference in consumer attitudes – that studios are more or less interchangeable and price / convenience / variety are what really matter – then I think SOUL may have to long-term change its model to accommodate this behavioral shift. Personally, I’m more of the belief that consumers (at least some segment of them) really care about specific brands, the communities they engender and the experiences they offer. As a result, I think that as long as SOUL continues to invest and really deliver on that value prop, they’ll continue to maintain the loyalty of their core customers.

From a business perspective, I have to wonder how happy these studios are to be part of the Classpass network. Sure, they’ll fill the seats in the room near-term but I wonder what potential long-term damage that does to their brand long-term? I’m sure the national brands such as Flywheel and Barry’s receive more favorable pricing from Classpass vs. the small independent studios out there, but I worry about the long-term viability of their brands by diluting it in this way…

On December 14, 2015, LC commented on Some Go to Church, Others Go to SoulCycle :

Thanks everyone for your thoughts on SOUL! I see a few general themes in the comments above so to avoid repetition, I’ll try to answer them to the best of my ability in one comprehensive post…

Issue #1: SoulCycle differentiation and sustainability

I personally think SOUL’s differentiation comes back to the value that it creates for its customers: a fun, interactive workout built around a community. Given its scale / first mover advantage, price premium and high utilization, I’d venture a bet that SOUL is a lot more profitable than its competitors. As a result, it can afford to offer (much) higher instructor pay, invest in more ongoing training programs, higher quality equipment and real estate in order to continue to differentiate is fitness experience and maintain its competitive edge.
Sure, at its most basic, SOUL’s just a bunch of bikes in a dark room and loud instructor…but Snapple too is “just” sugar water and Starbucks is “just” caffeine. But again, by really honing in what matters in delivering the high-end, unique experience its customers are looking for, I think SOUL has managed to create something really special and difficult-to-replicate in fitness.

Issue #2: Evolution of competitive landscape

Lots of people touched on this above but SOUL’s success has spawned lots of competitors, not just in spinning but boutique fitness more broadly. I’d argue that these models have grown the pie more than anything (i.e., making exercise more palatable to more Americans) and taken more share away from gyms vs. each other (so far…). Inevitably, SOUL’s going to have to worry about potential models that crop up that’ll eat away at their customer base. But besides Flywheel – founded in 2010 by former SoulCycle co-founder Ruth Zuckerman to appeal to a more athletic (and male) clientele – no formidable challengers of scale have emerged. I think this is likely because it’s really hard to make it in the high-fixed cost world of fitness unless you have a brand or a really differentiated angle (e.g., Flywheel with its technology play). I’d bet that your local spin studio doesn’t have the utilization or profitability of a SOUL or Fly, ultimately making it really hard for them to scale.

Issue #3: Pricing pressure

SOUL has held firm in terms of prices so far. They don’t offer discounts of any kind (except pricing your first class at $20) and the only way one can save a couple of dollars per class is by buying packages of 10-, 20- or 30-classes. To my knowledge, no other studio in the Boston market has such a strict pricing policy.
It’s hard to say how this will evolve going forward. They still manage to achieve high utilization despite their ultra-premium price point, the coexistence of a Flywheel / other local competitors and without being a part of the Classpass network. So my bet is that because they view themselves as THE premium fitness experience, they’ll continue to price above their competitors in each of their markets and reinvest the profits back into the company.
From a customer perspective, I think it’s also really interesting how people rationalize the high prices that SOUL charges. Because it’s perceived as a total mind / body experience, some customers don’t benchmark SOUL prices to those of other gyms or boutique studios. Says SOUL co-founder Julie Rice, “It’s cheaper than personal training. It’s way cheaper than therapy. A class is the same as what’d you spend on two cocktails.”