deloitte catalyst | tel aviv · 7 israeli fitness club sales took massive hit ... it is not...
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Deloitte Catalyst | Tel AvivFitness Market Overview Post COVID-19September 2020
2© 2020 Deloitte Israel & Co.
Table of Contents
3 Greetings
4 Global Fitness Industry Overview
5 COVID-19 Impact and Industry Response
6 The Virtual Revolution
7 Israeli Fitness Club Sales Took Massive Hit
9 Summary and Future Outlook of The Fitness Industry
11 Introducing Deloitte Catalyst
12 Report Authors
Introducing Deloitte Catalyst
3© 2020 Deloitte Israel & Co.
Arbox is an easy-to-use business management
platform for boutique gyms and fitness studios.
With more than 1 million active users and a
focus on community-based fitness businesses,
Arbox is uniquely positioned to collect and
analyze data on the impact of COVID-19 in order
to provide key insights into the future of the
fitness industry.
Foreword,
With an increasing awareness of the importance of a ‘balanced lifestyle’ and the traction healthier
food and wellness is getting over the last several years, it is not surprising that the global fitness
market is on the rise. In addition to greater awareness, digital platforms, social media and Omni-
channel capabilities also contributed to the worldwide increase in trainees.
As highlighted by this report, 2019 was a record year for the fitness market,
demonstrating a continuous increase in market volume. Unfortunately, the
momentum has been greatly affected by the outbreak of COVID-19, which has
changed the rules of the game in the fitness world.
This report covers global fitness market trends, with a deep dive into COVID-19 implications and
suggestions for the future. Although this “new normal” is still very new, the phenomena of a sector
coming to an almost complete halt, motivated us to address the situation in real time.
The data gathering and analysis for this report was done in collaboration with Arbox, an Israeli
startup active in the fitness market, which serves 40% of the total Israeli fitness market.
We hope you find this analysis interesting and informative, and welcome any feedback, questions
or suggestions.
Stay safe and healthy,
Catalyst Team
Report contributor:
4© 2020 Deloitte Israel & Co.
U.S.A
36%
Germany
7%UK
7%China
4%
Japan
4%
France
3%
Rest Of
World
39%
Global Fitness Market Overview2
The global fitness and health club industry generates over $90 billion in revenue per year1. The United States is the largest market worldwide, not only in revenue (estimated at $30B) but also in sheer number of gyms and fitness clubs.
The growing awareness for a more balanced lifestyle is a major factor contributing to the growth of the global fitness market. Consumers are engaging with fitness and wellness companies more than ever before in an attempt to adopt healthier lifestyles and build supporting communities.
72.75
75.75
78.18
84.3283.22 83.18
87.23
91.77
70
75
80
85
90
95
2011 2012 2013 2014 2015 2016 2017 2018
Global Market Size of Health Club Industry ($B)
1Source: Statista.com, 2019, 2Source:Future of Fitness, 2019, Business Insider
Total # of Fitness Clubs Worldwide (M)
133.7
153.6
165.3
183.9 186.8
201.1 201.2 202.1
100
125
150
175
200
225
2011 2012 2013 2014 2015 2016 2017 2018
Global Fitness Industry Overview
5© 2020 Deloitte Israel & Co.
Small studio shutdowns
Negative cash flow Increased need for hybrid model (online
+ in-person)
Equipment is stationery and heavy
Cancelled/paused memberships
Larger than necessary workforce in addition to cost of
space
Pre-BookingVirtual At-Home
Online classes and streaming fitness services
Fitness booking mobile applications
Increased popularity for at-home fitness programs
As gyms, studios and fitness centers became an “immediate suspect” for COVID-19 infection, they were forced to close abruptly, while adopting new and innovative solutions and processes to survive
COVID-19 Impact and Industry Response
Brick-and-Mortar VulnerabilityFinancial Losses & Uncertainty
Expanded Online Offerings
6© 2020 Deloitte Israel & Co.
COVID-19 forced all players in the fitness industry, including boutique gym owners to face a stark decision: adopt virtual training options or risk having to shutdown permanently. With the rise of online-only players and COVID-19’s role in shattering the myth that location and facility are irreplaceable, the evolving market features new opportunities to capture the attention and loyalty of members in an already competitive market.
As the fitness industry pushes through these uncertain times, it is evident that digital transformation has, and will, continue to play a major role in the future. The collected data shows that companies that have embraced this digital transformation long before this pandemic have found themselves in a formidable position compared to their competitors who were slower to adopt digital practices.
Additionally, businesses that have offered online classes during the shutdown have been able to withstand the sharp increase in frozen memberships. Gyms and fitness studios that offered online sessions had 7% fewer frozen memberships than businesses that didn't offer a virtual alternative.
2%
38%
15%
0.0%
12.5%
25.0%
37.5%
50.0%
Before the
Pandemic
During the shut-
down
After the 1st
shut-down
Online Offering Usage Rate (Israel)3
1% 2%11% 9%
68%
9%
0%
20%
40%
60%
80%
Much more likely Somewhat more
likely
Neither more nor
less likely
somewhat less
likely
Much less likely Don't know/No
opinion
COVID-19: Public Opinion on In-Person Gym Attendance (April 2020)1
The Virtual Revolution
1Source: Statista.com 2Source: “The $94 billion fitness industry is reinventing itself as Covid-19 spreads”, 2020, CNN Business3Source: Arbox data base, 2020
7© 2020 Deloitte Israel & Co.
In Israel, the enforced closures led to a devastating 90-95% decrease in contract value of new subscriptions and renewals; an enormous hit to the market, resulting in a permanent closure of %5 of all fitness businesses. Similar to other markets, both large and boutique fitness companies developed new offerings, including online classes and training sessions and renting out their fitness equipment.
While the pandemic has taken a toll on the “service providers” of the fitness industry, gym and fitness equipment companies have seen a surge in sales. This increase suggests that the recent isolation has led people to begin at-home physical activity thus explaining the influx of online equipment orders.
PRE-COVID19 LOCKDOWN REOPEN
$9
,48
4
$9
,33
5
$1
0,5
65
$8
,07
6
$8
,23
7
$7
76
$4
25
$4
70
$6
,24
6
$1
0,9
67
1ST HALF
JANUARY
2ND HALF
JANUARY
1ST HALF
FEBRUARY
2ND HALF
FEBRUARY
1ST HALF
MARCH
2ND HALF
MARCH
1ST HALF
APRIL
2ND HALF
APRIL
1ST HALF
MAY
2ND HALF
MAY
CONTRACT VALUE OF NEW SUBSCRIPTIONS AND RENEWALS(PER HALF MONTH IN THOUSANDS)
Case Study: The Israeli Fitness Clubs Market
Source: Arbox Data Base, 2020
8© 2020 Deloitte Israel & Co.
Why did membership cancellation rates decrease during COVID-19?
• Customers who attend smaller gyms and fitness clubs have strong connections to their fitness communities and felt a responsibility to help them survive through this challenging and uncertain time.
• Many fitness clubs managed to adapt and continued training with customers through an online format.
Source: Arbox Data Base, 2020
Case Study: The Israeli Fitness Clubs Market
00.5
11.5
22.5
33.5
4
Early
March
Late
March
Early
April
Late
April
Early
May
Late
May
%
Membership Cancellation Rates in IL
During COVID-19 (Per 2 weeks)
0
5
10
15
20
Early
March
Late
March
Early
April
Late
April
Early
May
Late
May
%
% of Memberships Put on Hold in IL
(per 2 weeks)
Customer Reaction
Covid-19 Effects Begin
9© 2020 Deloitte Israel & Co.
Online presence before and during the shutdown was extremely essential in maintaining memberships and cash flow
Fitness businesses based on classes were vastly more successful than equipment-access only gyms
Gyms and boutique studios that proactively adopt new creative ways to retain customers and transition to a more digital fitness practice are best positioned to succeed moving forward
Innovative Solutions
To stay above competition, fitness and health clubs must develop
innovative solutions and exercise models to retain and grow customer bases. COVID-19 massively disrupted
this industry, but business savvy clubs can capitalize on this and pave
the way for the future of fitness.
New Fitness Models
Digital Transformation
Virtual Offerings
The sector is evolving in the digital era and developing different ways
for members to stay active anywhere, anytime. The industry is experimenting with “digital fitness”
by offering online classes and incorporating fitness based apps
for at-home exercise.
Number of holds have dropped significantly, but are still greater than “normal” times. Many gym
goers will opt for virtual solutions or a different form of
exercise (e.g., running) that does not subject an individual to the
same health risks as a gym.
Lower Overhead Expenses
Decreased Gym Volume
There are two key factors separating success and failure when trying to overcome the costly consequences of COVID-19 in the fitness industry, and during the initial months of the pandemic, three impactful trends emerged.
Summary and Future Outlook of the Fitness Industry
© 2019 Deloitte Israel & Co.© 2019 Deloitte Israel & Co.
About Deloitte Catalyst
11© 2020 Deloitte Israel & Co.
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© 2019 Deloitte Israel & Co.© 2019 Deloitte Israel & Co.
Report Authors
13© 2020 Deloitte Israel & Co.
Authors
• Michal Tagrin (Adv. And CPA ) leads the growth-stage startups team for the Deloitte Catalyst Tel Aviv.
• Michal is also a senior manager with Deloitte's Financial Advisory Services practice, where she provides M&A transaction services to clients.
• Prior to joining Deloitte, Michal worked in the M&A department of S. Horowitz& Co., Advocates, one of Israel leading law firms.
Michal TagrinDeloitte Catalyst
• In his role as Managing Director, Amit Harel is the Israeli leader of Deloitte Catalyst Tel Aviv.
• Amit has a vast experience in the fields of Innovation, Technology and Disruption.
• Amit works closely with top stakeholders, entrepreneurs and startups in the Israeli eco-system, building bridges between innovative Israeli technology companies and global leading organizations.
Ariel FoxDeloitte Catalyst
• Ariel Fox (CPA) leads the Food-Tech, Agri-Tech and Sports-Tech domains in Deloitte Catalyst Tel Aviv.
• Ariel has five years of experience in marketing and business development in the Sports business sector, including as a business development manager for the biggest sports channel in Israel.
• Prior to joining Deloitte, Ariel worked in the Start-ups audit department of PwC Israel.
Amit HarelDeloitte [email protected]
• Alen Debensason - Co-Founder & CEO at Arbox.
• As a former soccer player and a founder in Arbox, Alen has years of experience in fields of fitness, sport, business, and everything in between.
• Before founding Arbox, Alen has been working as a data analyst and software developer in various companies, the last of them was Salesforce.
Alen DebensasonArbox
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