What’s the Story?

The fitness landscape in the US has transformed dramatically since the Covid-19 outbreak in March 2020, as consumers were forced to stay at home without access to gyms or fitness clubs, which have seen temporary closures and capacity restrictions. Home fitness has gained popularity as an alternative option to exercise and stay healthy, and consumer interest may remain heightened even post pandemic. In this report, we explore the booming home fitness market, including key players and trends.

Why It Matters

Before Covid-19, the fitness service industry had experienced a decade of steady growth. Fitness centers and gyms were then hit particularly hard by the pandemic, with almost all locations mandated to close in March 2020. Eight major fitness club operators filed for bankruptcy in 2020, and the IHRSA reported that 17% of fitness centers permanently closed last year. The IHRSA reported that revenue from US health and fitness clubs plunged by 58% year over year in 2020, to $15 billion. We estimate that membership declined by 30% to around 45 million, assuming around three in 10 members had canceled their gym membership during the pandemic (see Figure 1). The fall in revenue was more severe than the membership decline as many members chose to freeze their membership: According to a survey conducted by fitness consulting firm ClubIntel in November 2020, almost one-third of health club members in the US had paused their membership. However, demand for fitness remained strong, with consumers instead turning to at-home fitness equipment and solutions such as virtual classes. A survey conducted by media site The New Consumer and investment firm Coefficient Capital in December 2020 found that 76% of US consumers have tried working out at home since the outset of the pandemic and 66% of all respondents said they prefer it. For 2021, we estimate that US fitness centers will see a recovery of 20% in memberships and 40% in revenue, assuming the pandemic moderates with the rollout of vaccines. With many fitness clubs having developed digital fitness content to attract customers and offset losses amid closures, future revenue is likely to be supported by such online offerings, with clubs further enhancing their digital capabilities to boost customer loyalty and capitalize on the home fitness trend.

---

Figure 1. Revenue from US Health and Fitness Clubs (USD Bil.; Left Axis) and Number of Members (Mil.; Right Axis) [caption id="attachment_126121" align="aligncenter" width="725"] Source: IHRSA/Coresight Research[/caption]  

Home Fitness: In Detail

Home Fitness Gains Traction At-home workouts were on the rise even before the pandemic, thanks to their convenience and accessibility for exercisers. The cost to exercise at home varies, from free exercise videos to less than $50 for a pair of dumbbells or exercise bands to over $1,000 for bikes or treadmills. The average gym membership in the US costs $52 per month—around $624 per year, according to IHRSA. Although the cost of home gyms could outweigh the gym membership fee at some fitness chains, the convenience and time saved makes home fitness an attractive option for many. The pandemic has further accelerated the at-home fitness trend. Fitness app Freeletics found that Americans invested an average of $95.79 in at-home fitness during April–June, 2020. Providers of connected fitness equipment have reported significant sales growth due to Covid-19: Peloton’s sales skyrocketed 232% year over year in the quarter ended September 30, 2020; and Tonal reported a staggering 700% year-over-year growth in sales in 2020. We estimate that the total home fitness market, which includes fitness apps, wearables and equipment grew by 35% last year, to total $16.8 billion. Services have long comprised a larger part of the fitness industry—as shown in Figure 1, the health and fitness club sector was worth $35 billion before the crisis, in 2019. However, fitness products took the lead in 2020 due to the pandemic, totaling around $2 billion more than health and fitness club revenues during the year. The estimated increase in spending on home fitness totaled $4.4 billion in 2020 (as charted below) while the estimated decrease in spending on services was a much more substantial $20.7 billion. Only a minority share (of around 22%) of the savings from fitness services flowed to fitness products during the year—implying that, as spending starts to flow back to fitness services in 2021 and into 2022, the home fitness segment can hold on to much of its gains. The surge in demand for home fitness solutions will sustain as more consumers embrace active lifestyles. Against strong comparatives for 2020, we expect moderation in 2021, with the market set to total $16.2 billion this year.

---

Figure 2. US Home Fitness Market (USD Bil.) [caption id="attachment_126122" align="aligncenter" width="725"] Source: Statista/Coresight Research[/caption]   Competitive Landscape In Figure 3, we summarize the major players in the US home fitness market under four primary umbrellas: integrated fitness solutions, which usually offer connected fitness equipment that provides live and on-demand content; traditional fitness equipment manufacturers; and online-only fitness streaming services or apps. We discuss selected players in further detail below.

---

Figure 3. US Home Fitness Market: Competitive Landscape [caption id="attachment_126123" align="aligncenter" width="725"] Source: Coresight Research[/caption]   DailyBurn DailyBurn is a health and fitness company that provides multi-platform workout videos and nutrition programs:

• DailyBurn Tracker is an online service that provides fitness plans, nutritional tracking and social motivation.
• Meal Snap enables users to take pictures of their meal to access instant information on the foods in the meal and their calorie counts.
• Food Scanner is a nutritional tracking tool that enables users to scan barcodes on food products to access detailed nutritional information.

The company also provides daily workout videos. DailyBurn has over 2.5 million members worldwide. The company has experienced a massive spike in demand for its online fitness videos, with membership signups surging 268% year over year in the week of March 16, 2020. Echelon  The brand was first debut on QVC as the so-called affordable “dupe” for the Peloton bike: Echelon’s connected bike is around half the cost of Peloton’s. The company also sells touchscreen wall-mounted mirrors and rowers. In September 2020, the company reported sales growth of 700%, year over year, for the prior six-month period. On March 8, 2021, Echelon announced that it is producing one of its cheapest bikes exclusively for Sam’s Club members, priced at $799. The company’s products are sold in over 3,500 retail locations, including Costco, Dick’s Sporting Goods and Walmart. Icon Health & Fitness The company manufactures and markets fitness equipment, including treadmills, elliptical cross-trainers, exercise and stationary bikes, strength training products, weight benches, yoga and pilates equipment, performance apparel and home gym products. It owns fitness brands NordicTrack, ProForm and Freemotion that offer connected fitness membership services, as well as streaming platform iFit. Its products are mainly sold through online stores. In 2020, Icon’s revenue totaled $1.5 billion, growing by an undisclosed triple-digit percentage. The company reportedly plans to go public sometime this year and is valued at more than $7 billion after its latest round of funding in October 2020. Nautilus Nautilus designs, develops, sources and markets cardio and strength fitness products and related accessories for consumer and commercial use in the US, Canada and internationally. Its underlying brands include the eponymous Nautilus, Bowflex, Schwinn and Universal brands, as well as a fitness digital platform under the JRNY brand. The company recorded total sales growth of 82% in the fourth quarter of 2020 ended December 31, 2020—the best-performing quarter in its history, driven by the at-home fitness tailwind. In October 2020, Nautilus announced the sale of commercial brand Octane Fitness to focus on connected at-home fitness. Obé Fitness Founded in 2016, Obé is a digital fitness platform that offers an extensive catalog of over 5,400 on-demand classes and 22 live classes daily, including high-intensity interval training, cardio boxing, barre, sculpt and yoga. The cost of membership is $27 monthly or $199 annually. The company stated that it saw 70% month-over-month growth in March and April 2020. Co-CEO and Co-Founder Mark Mullett said at Beauty Inc’s Virtual Wellness Summit on July 15, 2020 that he expects the effects of the pandemic to be long-lasting, and Obé will continue to capitalize on the at-home fitness boom. Peloton  Founded in 2012, the New York-based company is considered one of the pioneers in connected fitness solutions. A Peloton bike costs roughly $2,400, and the company also sells a treadmill for $4,400. Consumers can choose to subscribe to fitness classes for $39 per month. Peloton’s premium price is one of the biggest obstacles to attracting more budget-conscious consumers, but the company said in May 2020 that it is exploring a more affordable version of its bike to expand its customer base. Peloton has seen a massive increase in sales since the beginning of the pandemic and has reported expectations of strong sales year-over-year sales growth in fiscal 2021 ended June 30, 2021, of 96%. In December 2020, Peloton signed an agreement to acquire Precor, one of the largest global commercial fitness equipment providers, for $420 million. The acquisition should further strengthen Peloton’s position in the connected fitness market. Big Tech Players  In addition to startups and innovators, big tech companies are now entering the at-home fitness market. In December 2020, Apple launched its subscription fitness service Apple Fitness+, which offers workouts on iPhone, iPad and Apple TV, with health metrics monitored by the Apple Watch. The cost of the subscription starts at $9.99 per month or $79.99 annually. Samsung also announced a similar offering at CES 2021: Its Smart Trainer solution is an addition to its growing line of fitness apps and is designed specifically for Samsung’s Smart TVs, using a webcam to track exercises. Three Trends To Watch 1.  Activewear Brands Continue To Strengthen Their Fitness Offerings Activewear brands and retailers have been increasing their fitness content offerings to engage with consumers online during the pandemic. It has proven to be an effective strategy, with companies such as Lululemon and NIKE seeing the number of users and viewers surge on their platforms. In June 2020, Lululemon announced the acquisition of at-home fitness brand Mirror for $500 million. Lululemon began selling the brand’s interactive mirror in 18 stores in November 2020. Users of the interactive mirror can access a range of workouts from fitness instructors and receive real-time feedback on the screen using the brand’s proprietary algorithms. The equipment also has a built-in camera for users to interact with other members, virtually recreating the in-person workout experience. The acquisition positions Lululemon well to capitalize on the digital, at-home fitness trend. The retailer has already established a loyal community with its membership program, and the integration of Mirror provides Lululemon an additional channel to personally engage with consumers. We also see opportunities for the company to cross-sell its products through Mirror. [caption id="attachment_126124" align="aligncenter" width="725"] Source: Mirror[/caption]   NIKE made its premium health and fitness content free for everyone throughout 2020 due to Covid-19, to help health-oriented consumers maintain their exercise routines. The company also expanded its content to mindset, nutrition and sleep on its platforms. NIKE was able to attract more potential users as well as drive online sales. The company grew weekly active users on the Nike Training Club app by triple digits in its fourth quarter of fiscal 2020, ended May 31, 2020, which led to increased purchases—the Nike commerce app also saw triple-digit growth in both downloads and monthly active buyers.   2.  Home Fitness Becomes More Personalized and Gamified We have seen companies increasingly leverage technology to make the at-home workout experience more personalized and gamified, in order to retain users. AI is being implemented in fitness products to learn users’ exercise and recovery behaviors and optimize their fitness regimes to enable them to hit goals. Tonal’s wall-mounted connected weight-training equipment uses electromagnetic technology to create resistance. Users can choose different workout goals, and with AI, Tonal automatically provides resistance for various exercises and adjusts the weight in real time. The equipment also incorporates up to 17 sensors to provide real-time guidance on a user’s form, replicating a personal trainer. Aly Orady, CEO of Tonal, noted that the brand increased its sales eightfold in 2020. Similarly, home workout system provider Tempo Studio leverages motion sensors and AI technology to deliver instant feedback to users. The sensor pinpoints 25 essential joints and generates a 3D model of the user’s body for assessment, so that during workouts, AI trainers can provide personalized feedback and notes. VR is another technology that is reshaping the home fitness market. Supernatural develops one-to-one workouts in a fun and exhilarating way, designed for VR headset Oculus Quest. The app combines virtual fitness coaches, virtual landscapes and music to create various fitness classes. Each workout is also personalized based on users’ measurements. [caption id="attachment_126125" align="aligncenter" width="725"] Source: Supernatural[/caption]   3.  Fitness Clubs Make a Pivot to Digital As fitness clubs struggle to survive during the pandemic, many have pivoted to digital to stay connected with consumers. According to fitness consulting firm ClubIntel, 72% of fitness clubs now offer on-demand and livestreaming workout classes as of September 30, 2020, up from 25% in 2019. One of America’s largest national chain gyms, Planet Fitness, began offering free online workout classes on its app in March 2020 for both members and non-members. On its third-quarter 2020 earnings call, the company reported high adoption of, and engagement on, its app, leading Planet Fitness to test a standalone digital-only membership at $5.99 per month, which could attract new customers and retain existing ones. Partnering with digital fitness platforms was another approach for relatively smaller gym chains. Equinox-owned value chain Blink Fitness collaborated with fitness app Sworkit to give its members access to customizable at-home workouts. Premier health club Life Time has included Apple Fitness+ as part of its membership since late December 2020.

What We Think

It is no surprise that gym-goers shifted to home fitness and invested in fitness equipment and wearables during the pandemic. We believe that the home fitness trend is here to stay, as more consumers are seeking active lifestyles but want the convenience and accessibility that home fitness solutions offer. Although current heightened interest may wane in line with consumers becoming more comfortable with returning to gyms due to the gradual rollout of vaccines, we believe that digital fitness will continue to be an important part of consumers’ daily lives, and the market will remain above pre-pandemic levels in the long term. The IHRSA told Coresight Research that it expects the future of fitness to be omnichannel. In its “2020 Health Club Consumer Report,” the IHRSA stated that one in five health club members used a premium online fitness service in 2019, and consumers will most likely continue to expect virtual offerings due to the shift to at-home exercise. However, the IHRSA believes that this will be alongside visiting the gym, as consumers are eager to engage in programs at their health and fitness facilities, such as small group classes and personal training. Although we do not think that home fitness will necessarily replace gyms, it does provide variety for consumers’ workout routines. The pandemic has paved the way for a hybrid approach to fitness in the future, with a blend of in-person and virtual workouts. We believe that the home fitness space will continue to expand well beyond the pandemic. According to IHRSA, 68% of Americans that started using an online fitness service during the pandemic plan to continue to do so in the future. We estimate that the home fitness market surpassed fitness services (health clubs) last year due to the pandemic. While the services market is expected to recover and overtake products again this year, we believe the gap between two will remain narrow as consumers embrace omnichannel fitness. Importantly, the estimated increase in spending on home fitness in 2020 was equivalent to only around 22% of the estimated reduction in spending on health and fitness clubs. This implies that the home fitness market can hold on to much of its gains amid a partial return of spending to services in 2021 and 2022. Implications for Brands/Retailers

• Activewear brands can leverage online fitness content to stay connected with consumers, expand their reach and create brand awareness. They can also incorporate e-commerce features into their fitness apps or platforms to boost sales.

Implications for Technology Vendors

• Digital fitness companies should continue to improve the overall user experience with upgraded hardware and software to replicate in-person workouts in order to retain users in the post-pandemic future.
• Digital fitness companies can better leverage technology such as AI and VR to make the workout experience more personalized, interactive and entertaining, thus motivating users to increase their engagement levels.