Deloitte Catalyst | Tel Aviv · Deloitte Catalyst | Tel Aviv Fitness Market Overview Post COVID-19...

Deloitte Catalyst | Tel AvivFitness Market Overview Post COVID-19September 2020

2© 2020 Deloitte Israel & Co.

Table of Contents

3 Greetings

4 Global Fitness Industry Overview

5 COVID-19 Impact and Industry Response

6 The Virtual Revolution

7 Israeli Fitness Club Sales Took Massive Hit

9 Summary and Future Outlook of The Fitness Industry

11 Introducing Deloitte Catalyst

12 Report Authors


Arbox is an easy-to-use business management

platform for boutique gyms and fitness studios.

With more than 1 million active users and a

focus on community-based fitness businesses,

Arbox is uniquely positioned to collect and

analyze data on the impact of COVID-19 in order

to provide key insights into the future of the

fitness industry.

Foreword,

With an increasing awareness of the importance of a ‘balanced lifestyle’ and the traction that

healthier food and wellness is getting over the last several years, it is not surprising that the global

fitness market is on the rise. In addition to greater awareness, digital platforms, social media and

Omni-channel capabilities also contributed to the worldwide increase in trainees.

As highlighted by this report, 2019 was a record year for the fitness market,

demonstrating a continuous increase in market volume. Unfortunately, the

momentum has been greatly affected by the outbreak of COVID-19, which has

changed the rules of the game in the fitness world.

This report covers global fitness market trends, with a deep dive into COVID-19 implications and

suggestions for the future. Although this “new normal” is still very new, the phenomena of a sector

coming to an almost complete halt, motivated us to address the situation in real time.

The data gathering and analysis for this report was done in collaboration with Arbox, an Israeli

startup active in the fitness market, which serves 40% of the total Israeli fitness market.

We hope you find this analysis interesting and informative, and welcome any feedback, questions

or suggestions.

Stay safe and healthy,

Catalyst Team

Report Contributor:


U.S.A

36%

Germany

7%UK

7%China

4%

Japan

4%

France

3%

Rest Of

World

39%

Global Fitness Market Overview2

The global fitness and health club industry generates over $90 billion in revenue per year1. The United States is the largest market worldwide, not only in revenue (estimated at $30B) but also in sheer number of gyms and fitness clubs.

The growing awareness for a more balanced lifestyle is a major factor contributing to the growth of the global fitness market. Consumers are engaging with fitness and wellness companies more than ever before in an attempt to adopt healthier lifestyles and build supporting communities.

72.75

75.75

78.18

84.3283.22 83.18

87.23

91.77

70

75

80

85

90

95

2011 2012 2013 2014 2015 2016 2017 2018

Global Market Size of Health Club Industry ($B)

1Source: Statista.com, 2019, 2Source:Future of Fitness, 2019, Business Insider

Total # of Fitness Clubs Worldwide (M)

133.7

153.6

165.3

183.9 186.8

201.1 201.2 202.1

100

125

150

175

200

225

2011 2012 2013 2014 2015 2016 2017 2018

Global Fitness Industry Overview


Small studio shutdowns

Negative cash flow Increased need for hybrid model (online

+ in-person)

Equipment is stationery and heavy

Cancelled/paused memberships

Larger than necessary workforce in addition to cost of

space

Pre-BookingVirtual At-Home

Online classes and streaming fitness services

Fitness booking mobile applications

Increased popularity for at-home fitness programs

As gyms, studios and fitness centers became an “immediate suspect” for COVID-19 infection, they were forced to close abruptly, while adopting new and innovative solutions and processes to survive

COVID-19 Impact and Industry Response

Brick-and-Mortar VulnerabilityFinancial Losses & Uncertainty

Expanded Online Offerings


COVID-19 forced all players in the fitness industry, including boutique gym owners to face a stark decision: adopt virtual training options or risk having to shutdown permanently. With the rise of online-only players and COVID-19’s role in shattering the myth that location and facility are irreplaceable, the evolving market features new opportunities to capture the attention and loyalty of members in an already competitive market.

As the fitness industry pushes through these uncertain times, it is evident that digital transformation has, and will, continue to play a major role in the future. The collected data shows that companies that have embraced this digital transformation long before this pandemic have found themselves in a formidable position compared to their competitors who were slower to adopt digital practices.

Additionally, businesses that have offered online classes during the shutdown have been able to withstand the sharp increase in frozen memberships. Gyms and fitness studios that offered online sessions had 7% fewer frozen memberships than businesses that didn't offer a virtual alternative.

2%

38%

15%

0.0%

12.5%

25.0%

37.5%

50.0%

Before the

Pandemic

During the shut-

down

After the 1st

shut-down

Online Offering Usage Rate (Israel)3

1% 2%11% 9%

68%

9%

0%

20%

40%

60%

80%

Much more likely Somewhat more

likely

Neither more nor

less likely

somewhat less

likely

Much less likely Don't know/No

opinion

COVID-19: Public Opinion on In-Person Gym Attendance (April 2020)1

The Virtual Revolution

1Source: Statista.com 2Source: “The $94 billion fitness industry is reinventing itself as Covid-19 spreads”, 2020, CNN Business3Source: Arbox data base, 2020


In Israel, the enforced closures led to a devastating 90-95% decrease in contract value of new subscriptions and renewals; an enormous hit to the market, resulting in a permanent closure of 5% of all fitness businesses. Similar to other markets, both large and boutique fitness companies developed new offerings, including online classes and training sessions and renting out their fitness equipment.

While the pandemic has taken a toll on the “service providers” of the fitness industry, gym and fitness equipment companies have seen a surge in sales. This increase suggests that the recent isolation has led people to begin at-home physical activity thus explaining the influx of online equipment orders.

PRE-COVID19 LOCKDOWN REOPEN

$9

,48

4

$9

,33

5

$1

0,5

65

$8

,07

6

$8

,23

7

$7

76

$4

25

$4

70

$6

,24

6

$1

0,9

67

1ST HALF

JANUARY

2ND HALF

JANUARY

1ST HALF

FEBRUARY

2ND HALF

FEBRUARY

1ST HALF

MARCH

2ND HALF

MARCH

1ST HALF

APRIL

2ND HALF

APRIL

1ST HALF

MAY

2ND HALF

MAY

CONTRACT VALUE OF NEW SUBSCRIPTIONS AND RENEWALS(PER HALF MONTH IN THOUSANDS)

Case Study: The Israeli Fitness Clubs Market

Source: Arbox Data Base, 2020


Why did membership cancellation rates decrease during COVID-19?

• Customers who attend smaller gyms and fitness clubs have strong connections to their fitness communities and felt a responsibility to help them survive through this challenging and uncertain time.

• Many fitness clubs managed to adapt and continued training with customers through an online format.

Source: Arbox Data Base, 2020

Case Study: The Israeli Fitness Clubs Market

00.5

11.5

22.5

33.5

4

Early

March

Late

March

Early

April

Late

April

Early

May

Late

May

%

Membership Cancellation Rates in IL

During COVID-19 (Per 2 weeks)

0

5

10

15

20

Early

March

Late

March

Early

April

Late

April

Early

May

Late

May

%

% of Memberships Put on Hold in IL

(per 2 weeks)

Customer Reaction

Covid-19 Effects Begin


Online presence before and during the shutdown was extremely essential in maintaining memberships and cash flow

Fitness businesses based on classes were vastly more successful than equipment-access only gyms

Gyms and boutique studios that proactively adopt new creative ways to retain customers and transition to a more digital fitness practice are best positioned to succeed moving forward

Innovative Solutions

To stay above competition, fitness and health clubs must develop

innovative solutions and exercise models to retain and grow customer bases. COVID-19 massively disrupted

this industry, but business savvy clubs can capitalize on this and pave

the way for the future of fitness.

New Fitness Models

Digital Transformation

Virtual Offerings

The sector is evolving in the digital era and developing different ways

for members to stay active anywhere, anytime. The industry is experimenting with “digital fitness”

by offering online classes and incorporating fitness based apps

for at-home exercise.

Number of holds have dropped significantly, but are still greater than “normal” times. Many gym

goers will opt for virtual solutions or a different form of

exercise (e.g., running) that does not subject an individual to the

same health risks as a gym.

Lower Overhead Expenses

Decreased Gym Volume

There are two key factors separating success and failure when trying to overcome the costly consequences of COVID-19 in the fitness industry, and during the initial months of the pandemic, three impactful trends emerged.

Summary and Future Outlook of the Fitness Industry


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Authors

• Michal Tagrin (Adv. And CPA ) leads the growth-stage startups team for the Deloitte Catalyst Tel Aviv.

• Michal is also a senior manager with Deloitte's Financial Advisory Services practice, where she provides M&A transaction services to clients.

• Prior to joining Deloitte, Michal worked in the M&A department of S. Horowitz& Co., Advocates, one of Israel leading law firms.

Michal TagrinDeloitte Catalyst

[email protected]

• In his role as Managing Director, Amit Harel is the Israeli leader of Deloitte Catalyst Tel Aviv.

• Amit has a vast experience in the fields of Innovation, Technology and Disruption.

• Amit works closely with top stakeholders, entrepreneurs and startups in the Israeli eco-system, building bridges between innovative Israeli technology companies and global leading organizations.

Ariel FoxDeloitte Catalyst

[email protected]

• Ariel Fox (CPA) leads the Food-Tech, Agri-Tech and Sports-Tech domains in Deloitte Catalyst Tel Aviv.

• Ariel has five years of experience in marketing and business development in the Sports business sector, including as a business development manager for the biggest sports channel in Israel.

• Prior to joining Deloitte, Ariel worked in the Start-ups audit department of PwC Israel.

Amit HarelDeloitte [email protected]

• Alen Debensason - Co-Founder & CEO at Arbox.

• As a former soccer player and a founder in Arbox, Alen has years of experience in fields of fitness, sport, business, and everything in between.

• Before founding Arbox, Alen has been working as a data analyst and software developer in various companies, the last of them was Salesforce.

Alen DebensasonArbox

[email protected]

mailto:[email protected]:[email protected]:[email protected]:[email protected]

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