Fitness clubs are at risk of disappearing

Okay, I may have chosen a somewhat sensational title to get your attention, but I really do think fitness clubs are at risk. Clubs are not going to disappear because of home fitness, boutique studios, outdoor sports or online sales platforms. They will disappear because of their inability to react and adapt their business model. They must either commit to major changes or go into major crisis.

If we want to face these important challenges, we have to start by accepting this stark reality. Let’s take a look:

  • We continue to sell facilities and equipment, just as we’ve always done. When approached by a potential customer, we show them the facilities and equipment, explain the activities timetable and charge a monthly fee for using them. We launch the client with a better or worse induction program and from that point on they are largely forgotten about. That is of course until they become inactive and decide to quit.
  • We are failing to offer a personalized service. Essentially this means that the customer’s needs are not central to the organizations. Of course we offer classes and services, but these are rigid services, requiring the customer to adapt to our schedule and format. These services are not focused on the client nor do they allow control of the customer experience. For these reasons, services and activities have become a commodity, almost uniform across clubs. By putting more emphasis on «what we offer” rather than «how we offer it”, we are failing to provide a unique customer experience with these sessions. By failing to offer these services in a way which sets us apart from other clubs, we have also failed to created a personality of our own.
  • Socialization is not a differentiating element. Today we assure ourselves with the idea that a client who trains at home will eventually return to the club to socialize. The truth is that many will not return, this is because they are not socializing at the club, and the reason for this is that the club does absolutely nothing to enhance that socialization. We need to help break the ice, to help customers relate to each other, learn each other’s names, help them to feel motivated, touched and engaged while doing activities in the club. The social issue is not a responsibility which clubs have assumed and this is a mistake which contributes to immobility and will eventually play a hand in sinking many clubs.

This makes fitness clubs easily replaceable, as evidenced by the high turnover of club members and demonstrated by customer numbers in the consumer crisis of 2010 and now during the current health crisis. Almost half of all customers have cancelled subscriptions in favor of other products which meet their sports and fitness needs.

I understand that this analysis may seem exaggerated to some managers because some clubs do have clients that receive personalized treatment. These customers are known by name and integrated socially in the club. But the reality, as shown by data studies, is that this group represents less than 50% of the total customers.

You don’t believe me? You want to check it out for yourself? I challenge you to show photos of your clients to your staff members and see how many know their names. What are their objectives? How long have they been members? In what activities do they participate at the club? Obviously you don’t have to ask about personal aspects like what hobbies they have or if they have children or a dog. You don’t have to make it that hard.

Fitness clubs can’t afford to lose 50% of their customers, they can’t even afford to lose 20%. If we don’t make changes, we’re going to lose them.

We find ourselves in a very similar situation to the one Blockbuster faced when they turned down a future alongside Netflix. Blockbuster, created in 1985, had a worldwide presence, with thousands of establishments. Netflix offered to take charge of the digital side, but Blockbuster said that when the time came to dedicate themselves to the Internet that they were up to the task. That never happened. They failed to adapt and the company went bankrupt in 2010 with a debt of 900 million euros. In 2014 it closed all but one of its stores.

Netflix was founded in 1997. Mythology tells that Reed Hastings, co-founder of Netflix, had the idea of creating a much more flexible movie rental service after receiving a $30 late return fee after returning a copy of Apollo 13. This forever changed world of entertainment.

Can you see any resemblance to the current situation in the fitness industry? Clubs clinging to an outdated and inflexible consumer model, with minimal «customer centric» culture. Forced to enter a technological model about which they know very little and find themselves competing with large companies specialized in technology, overwhelmed because there is more technology in home fitness than in the club itself…

Still we hear managers saying not to worry, after the vaccine everything will go back to the way it was, nothing needs to change. I don’t share this vision. The future depends on us and what we do in the next 2-3 years. We can’t be the next Blockbuster.

In my opinion, the changes facing the sector must be based on the following aspects:

  • Technology and digitalization: understanding the global picture and focusing on the customer, improving personal service. Digitalization doesn’t just mean virtual sessions. In fact, I think that for clubs today, this is one of the most uncertain, riskier and least profitable aspects of digitalization. Technology is the key to addressing change which improves the customer experience, setting clubs apart from substitute products, and reducing customer turnover.  Technology should focus primarily on three areas: Accessing data and information which assist in decision-making, 100% generation of immediate customer information and feedback and automation of processes which saves resources, and re-invest those savings into providing customer personalization.
  • Changes in management teams: I know that some readers will not like this, but if reading it stings, maybe you should think about whether you are starting to fall into this group. We have a PASSION crisis in some management teams. Some professionals entered into the fitness sector with energy, motivation and a desire to change things up. Today many of these managers are worn out and comfortable. The last thing these tired and complacent managers want is to complicate things, much less put their job and status on the line. These people are the first and most important barrier when addressing the changes your company needs right now and will be the culprit in the fall of many clubs. It’s not a question of age, but a question of attitude. The right attitude is the origin of creativity, ambition, energy and leadership. All these attributes are necessary to face the great challenges ahead. Without them, an organization has no way to compete in an unstable and changing environment like the one we have today in the fitness industry.
  • Job changes: we have jobs that cost more than they contribute, clubs simply won’t be able to afford to keep them. These are jobs which can be removed or replaced with technology and training people to develop skills in other areas of more value. In this process there will be people who are willing or not to adapt, there will be people who continue to be useful and who won’t. By applying new technologies, a fixed receptionist behind a counter no longer makes sense, it doesn’t make sense for a fitness instructor to be walking around or watching the fitness room, there’s no point in having a group instructor all the session on a podium teaching only the customers in the front row. We need to understand that a good customer experience can’t be achieved from behind a counter, from above a bike or on a podium. This can be done 20% of the session, but the other 80% has to be «one on one» helping each individual client, looking into his eyes, correcting or encouraging him. Of course this is more difficult, we will have to take staff out of their comfort zone, of course there will be resistance… but there’s no other choice.
  • Process changes: that which is not measured doesn’t exist and can’t be improved. We need to clearly define the customer experience we want to give in each service and activity, and control it. That experience has to be personalized, sociable and fun. These 3 things must be key in each and every service that a club offers and in all the processes that exist between the club and the client. This can only be made scalable to thousands of customers with the use of technology.
  • Facility changes: As with bank branches, changes in technology combined with putting the customer at the center, changing processes and a new understanding of business and customer experience, will result in changes needed in facilities in order to deliver services. Some of these changes will mean modifications to the design of the reception area and the disappearance of the counters. Some changes will require amplification of activity spaces in order to make the activities more fun, social and energizers. Other changes may include creating boutique spaces, giving a fuller experience and creating tribes of customers. How about redesigning the fitness rooms, creating self-contained training spaces with lots of technology and larger areas for group training?

I want to finish this article by acknowledging that this is not a complete reflection of all fitness clubs. There are clubs making big changes and pioneering important innovation processes which will inspire us all. These clubs deserve our admiration, but unfortunately they are in the minority.

Each reader must decide if this article represents his or her reality. I have decided to share my vision of the sector in the hope that it will provide the spark which puts some clubs on the path to deep reflection and business model change.

I wish you all strength and passion for an exciting future!