The November 2018 pre-seen focuses on GymFiT, a company in the budget-gym sector of the health and fitness industry. Here we’re going to pick out some interesting facts and figures from our full industry analysis (available as part of our pre-seen study packs), introducing you to a few of the themes that might help to anticipate some of the issues that will be raised in the exam in February.
The budget gym industry is a fascinating and dynamic one, and has witnessed considerable relative growth in recent years. The key has been simplification in terms of membership procedures, pricing, and facilities. Many “no frills” brands have emerged on the scene through this strategy and have made huge inroads, especially at the expense of more traditional mid-market gyms. Typically, these mid-market gyms had included facilities such as saunas and swimming pools in addition to the core weightlifting and cardiovascular facilities. The new budget gyms have to a large degree stripped away these “extras”, and have focused instead on delivering quality core facilities at price points that are well below the former rates for mid-market and luxury fitness clubs. This has allowed for rapid growth to occur in this sector, as increasingly large proportions of populations are becoming highly aware of and committed to health and fitness in general. National and international brands are now beginning to make their presence felt for the first time in this industry.
To give an indication of just how dramatic this shift has been, consider the first figure below. Though this particular graphic represents the situation in Canada in 2016, the same pattern can be seen throughout North American and European markets, with similar developments expected in emerging markets in the coming years. The mid-market in Canada lost huge ground to the budget gym sector. In just one year, 581 low-cost gyms opened across the country, while 278 mid-range gyms closed. Meanwhile, only 10 new mid-range gyms opened nationally. This trend is expected to continue.
In terms of more general demand and growth trends, all indications are that demand for gym memberships will grow in the coming years. The graph below gives a clue as to how things will progress in the short-term. As you can see, there was huge growth in the years leading up to the global financial crisis. Undoubtedly the extent to which most societies have become image-conscious in the last two decades has spurred this demand, and where disposable incomes increase, demand for health and fitness products/services appears to increase proportionately. The unsurprising slump in global demand post-2008 only lasted a couple of years, and since 2010 we’ve seen the rate of growth steadily rising again. If global economic growth continues its recovery, we can expect the growth in demand for health and fitness services to approach the levels seen prior to the financial crisis.
A crucial consideration from the perspective of gaining new members is understanding the psychology of gym-goers. One aspect of this is understanding why people have left gyms (or ended their memberships) in the past. If budget gym operators can gain insights into such motivations, they can then adapt their offerings so as to minimise the risk that new and current members will be lost to rivals. The next graph presents the results of a survey on precisely this question—why former gym-goers decided to leave their previous gyms? As you can see, the most commonly cited reasons are financial, with no longer being unable to afford it and not making use of memberships being the primary reasons. This underlines the crucial importance of creating attractive, easy-to-understand, and flexible offerings and membership deals. Budget operators are of course particularly sensitive to pricing considerations, and so this is something that will already be central to their strategic outlook. Location is the third most important consideration, and as is the case with the pre-seen company GymFiT, making sure that premises are located at least within reach of reliable public transport links is vital. Perhaps the most interesting of the remaining factors are overcrowding and “feeling out of place”. It is in these areas that there is perhaps the greatest scope for differentiation in the increasingly competitive segment of budget gyms. Overcrowding is reflected in the fact that in recent years, membership growth has generally outstripped the growth of gyms. Which means that the demand for gyms is still outpacing the supply. Moreover, budget gyms will have to remain very attentive to customers’ preferences as this segment becomes increasingly saturated. Making members feel comfortable and at ease in what can be a very intimidating environment (especially for newcomers) could be the key to gaining an edge on the competition.
This article is a snippet of what's available as part of our market-leading Case Study Packs. The packs includes over four hours of pre-seen and industry analysis, mock exams weighted in accordance with official exams, exam simulators, financial ratio analysis and much more. Follow this link here to discover more.
Don't forget to check out our other free OCS November 2018 articles here and here for more insights ahead of your exam.