The Boutique Storm is Cresting
What's the Play for Traditional Clubs?
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In the 1940s, economist Joseph Schumpeter coined the term "creative destruction" that spoke to the peril and promise inherent in capitalistic innovation. He said, "Situations emerge in the process of creative destruction in which many firms have to perish that nevertheless would be able to live on vigorously if they could weather a particular storm." If one didn't know better, you would presume he was speaking about today's fitness industry, where boutique fitness studios have become that particular storm of creative destruction.
Data from IHRSA's 2017 Health Club Consumer Report supports the destructive impact of the boutique studio market on the fitness industry. As of 2017, 41% of consumers report being members of studios, more than any other industry segment. Over a 3-year period from 2013 to 2016, the data shows there was a 95% growth in the number of consumers who were members of boutique fitness studios. Compare this to the actual decline during the same time period for the percentage of consumers who claim to be members of commercial fitness clubs, not-for-profits, YMCA/YWCA/JCCs and corporate fitness centers, and you begin to grasp the disruptive power of boutiques.
ClubIntel's work with its clients, whether mid-market clubs, premium clubs, or high-end businesses, show that anywhere from 25% to 40% of their members frequent fitness studios. This particular storm is about more than losing market share to boutique fitness studios; it also speaks to a loss of a club's remaining members' share of his/her wallet. In the words of Joseph Schumpeter, boutique fitness studios have become a singular storm whose destructive capabilities are heavily impacting the vitality of club operators who might otherwise have continued on vigorously.
One of the most numbing impacts of the fitness studio storm relates to how it's turned the industry's cultural DNA on its head by saying you could get people to pay more for less. Many operators we speak to can't grasp how a studio can offer consumers less than they do (e.g., facilities, programs and amenities), while charging significantly more. The majority of traditional operators still believe that consumer value is tied solely to price, facilities, equipment and programs (the more-for-less paradigm). In today's hyper-competitive environment, boutique studios have reshaped the meaning of value to better fit consumer needs, and the consumer is responding.
So, what's the play for traditional club operators? In some instances, there may not be a play, something we imagine no one wants to hear. But, for the majority, there is a play, and it will vary based on where you are, who you are and how courageous and nimble you are when it comes to change. Joseph Schumpeter spoke to the importance of adaptability and change in an environment where we have an F5 force of creative destruction hammering us on a daily basis. In his words, "profit is the payment you get when you take advantage of change." His point, in order to weather the fitness studio storm, your business has to embrace change, possibly maniacally in a manner of speaking, if extinction is not on your radar.
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