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JUSSI JÄRVINEN CONSULTING OY

Finland’s Fitness Club Market Analysis

Example report

2017

©JussiJärvinenConsultingOy (2795841-1, Vantaa)

1. Executive summary

2. Global trends

3. Fitness club market strategies

4. Local market situation

5. Conclusions

Appendix

Contents


The analysis concludes it’s difficult to grow via memberships, and therefore better option is to look for parallel markets to increase avg. revenue per user


SCOPE: KEY QUESTIONS

1. Executive summary

Q1: Do we expect to have similar market consolidation trend already seen in other markets?

Q2: Do we have market polarization trend in Finland?

Q3: Where is the market growth coming from? Do we still have room in member fees, or is it necessity to move to other markets?

ANALYSIS KEY FINDINGSRECOMMENDATIONS FOR FITNESS

CLUB OWNERS

There is still room for consolidation via M&A, but however, further consolidation destroys market value due to increased price competition of remaining chains.

Currently, mid-market seems to remain strong, that is opposite i.e. from US market.

Look for parallel markets, resales deals and subcontracting of wellness services. For smaller gyms, there could be opportunities in moving for premium.

Partially, in big cities, there is consolidation, but overall, only 28% of market value is in top5 chains.

No, We have heavy mid-market and race-to-bottom in low-market, but upmarket is niche, and not growing.

For top5, is difficult to grow in members fees per person due to high competition, so new revenue needs to be found from parallel markets i.e. nutrition and apparel.

Introduction: this report analyses if local market follows the top 3 fitness market trends i) consolidation, ii) polarization, and iii) diversification, and what could be responses to tackle these trends. The report explores key data points from the market, discuss on fitness club strategies, and conclude how local market looks like.

Disclaimer: the report is done for marketing purposes and shall not be taken as exact view, but Author has had good will to provide useful information for readers.

At saturated markets, M&A is primary way to grow. This trend drives market polarization towards volume chains and specialized luxury clubs

3. Global trends

Market consolidation

Market polarisation

Offering diversification

Global fitness club market is very active in m&A field. This typical for industry where customer has single product and number of potential customers are topped. M&A is primary way to gain footprint and play competitors out. Largest chains have over 2000 sites and are still growing.

Mid-market is getting difficult for fitness clubs, and players are moving to either direction. Especially low market has got new traction from discount chains who come with very attractive new joiner price plans.

Revenues from members fees are in saturation per user and more revenue needs to be invented via offering diversification i.e. moving wellness services and retail. Revenue growth is expected to come from these sources where member fees are stalled.

Trend Description Key question





The analysis has identified three main trends affecting global fitness club market: consolidation, polarization and diversification

implications

Implications

Premium

Discount

Average $55/mon

Revenue/member

2005

$920

$8001500

1650

Selected price positioning

2013

Membership and revenue growth between 2005 – 2013, $

Source:: ”Challenging times ahead for fitness clubs” by Zach Brown

Revenue total. $1.3m per site, stalled when physical limits are reached.

US study highlights relatively strong negative correlation between membership growth and revenue per member, setting growth to stall over time


Members per site

3. Global trends

Membership fees Wellness services Transaction fees Retail

Recurring fee One-time fee

Main revenue driver for most gyms and clubs –recurring fee starting from $30 per month to get basic access to services.

Personal trainer services, massage, nutrition consulting etc. adding value for the user.

Some of the service are baked in to monthly fee with limitations but in most cases they are add-on fees.

Some gyms have introduced transaction fees to collect additional revenues i.e. access to climbing wall that requires gym membership. On top of that additional fee is required to reserve the wall for a certain time.

Retail is cross-selling for gym/club members creating target group and sales channel.

Items are nutrition, apparel and shoes.

87% 13%Market value

share

Business model description

In case of declining membership fees, gyms and clubs are diverging their portfolio to services, one-time fees and retail


3. Global trends

Source: Fortune

High

Low

Gym & classes Diverse

A. High-end

gyms

C. Discount

chains

D.Subsidized

sport centers

B. Branded fitness centers

A. High-end gyms

B. Branded fitness centers

C. Discount chains

D. Subsidized sport centers

Premium gym for hard trainers who are ready to invest in sports, also for professional athletes and celebrities. Also, location is adding lot of premium on price.

Premium gym for hard trainers who are ready to invest in sports, also for professional athletes and celebrities.

“no frills” gym for serious and recreational trainers who expect standard equipment but are not ready to pay extra for location and brand name.

Subsidized sports centers typically located near universities or community owned sports sites. Partially covered by one-time fees, no memberships.

Offering breadth

Price point

Notinprivatemarkets

Directions out from difficult mid-market


Fitness clubs are navigating their way out from difficult mid-market position, to attract members either with “no frills” price or wide portfolio

4. Fitness market strategies

A. High end gyms B. Branded fitness centers C. Discount chains D. Subsidized sport centers

Global/US

Local

Description

LIIKUNTAMYLLY(Helsinki)

Description

David Barton operates in three locations in US, and offers pimped up gym experience for serious trainers and celebrity figures.

Equinox has 135 locations in major cities across NA and UK. It’s also strong in property business and moving to accommodation as well.

Fitness chains and gyms with hundreds of locations, mainly in NA but also in Europe. Attractive price plans to attract new members. Fitness classes for many user segments.

Example of university subsidized fitness center with 5 locations. Offers basic equipment with reasonable price and commercial buzz is non-existent.

One site high-end gym in Helsinki, with luxury outfit and service.

Incumbent fitness chain for women who competes against Nordic/European rivals, with relatively high prices (70-90€/month) and comfortable atmosphere.

Example of low-cost 24/7 operated ”no frills” fitness center located in main cities. Price point from 20€/month.

Liikuntamylly is municipal owned fitness center with gym and indoor sports options. Low one-time entry fees.

Examples of gyms and fitness clubs


4. Fitness market strategies

Finnish gym & fitness market value chain – overall ecosystem value is approximately 2 billion euros and growing

Retail sales Wellness services

High end gyms

Branded fitness centers

Membership andentry fees

Discount chains

Subsidized fitness centers

30-50m€(sales channel gym) 280m€

(800 gym Companies, 700k

members)

125m€(estimation)

50-100m€(sales channel gym)

Independent wellness service professionals and wellness

retail

500m€ wellness market


5. Finnish fitness market analysis

1000m€ fitness apparel and sports nutrition market

Growthopportunity

Sources: TEM, YLE, Tilastokekus

Segment/business model

20m€(Ladyline +

Imperial)

Average fitness club spender profile

Age: 25 – 45 years

Schedule: 3-4 workouts per week

Total spending 216€ per month

• 36€ for gym membership

• 60€ for sports apparel

• 60€ for sports nutrition (incl. diet meals)

• 60€ for wellness services*

*Personal trainers, massage, physiotherapy, self-care, mental wellness

Further consolidation is possible, but major share of the market value will be covered by independent clubs, maintaining heavy mid-market as well


Top5 gym Chains

(~115 sites)

• Sats & Elixia• Fysioline• FD Group• Fitness 24seven• Ladyline

Rest 655Companies/sites

~100m€

180m€

Selected small chains, few sites

each(total ~30 sites)• Fix• P&T• Unisport• Idealfit• Go&Go• Motivus

20m€

Further consolidation possible among top5, but rest of the market remains fragmented and difficult to reach


Market structure (2016) Market development

Premium

Intense competition in low-mid market between top10 chains in big cities

No signs of polarization, very few top-end sites,

LadyLine id only “chain”.

Middle-heavy fragmented market with tens of 1-3 site Companies enjoying benefits

of regional barriers

Total market, 800 Companies

Fitness clubs have lot of growth opportunities in parallel markets

Wellness industry 500m€

Sports apparel400m€

Nutrition500m€


Personal Training market has 7,2% CAGR (Kauppalehti), and it’s opportunity for fitness clubs to get share from this market. Options are, for example, subcontracting trainers or resales arrangement. Potential is among 700,000 fitness club members, where 6% has used PT-services so far (survey).

Source: TEM

Growth ideas

Sports apparel market has 9% y-to-y growth (Kauppalehti) overall. Fitness apparel is about 25% of total market, assuming here the same growth rate. Fitness clubs and gyms have retail opportunity to diversify in apparel sales.

37% of consumers say they use some kind of food supplement and/or vitamins (TNS survey) whereas 13% of them do have fitness club membership. There is definitely cross-sell / bundle opportunity for fitness clubs to promote membership among those who already show interest for healthy nutrition.


Key facts from wellness and nutrition industry

Conclusions: local market is not mature enough to follow global trends. In Finland, we have fragmented market, where chains does not yet dominate

6. Conclusions

Key question




In big cities, consolidation has already happened, but for overall market TOP5 players cover up about 14% of sites and 33% of revenues so there is still room for further consolidation. However, in countryside many single independent gyms do remarkably well, so there is no need to merge.

No, We have heavy mid-market and race-to-bottom in low-market, but upmarket is niche, and not growing. Mid-market is fragmented and remains strong.

There are two answers. For top5 chains, who are competing head-to-head in big cities it is difficult to grow via membership fees as the picture shows on page 5. For them, diversification is required.

For smaller chains, and independent gyms, there is still room in upmarket, to provide quality site for loyal trainers with premium price.


Answer Rationale

Partially

No

Yes/No

Appendix: data table

Other parameters

• Overall fitness club/gym market size: 300m€, 800 sites (source: YLE article)

• Number of fitness club memberships: 700,000 (source: TNS)

Appendix


Ladyline is frachising and estimated from the site revenue total Sources: Talouselämä and Suomen asiakastieto

AUTHOR

Jussi JärvinenConsultant

[email protected]+358 40 7725 840


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