Peloton, iFIT, & The Connected Fitness Market | In Practise

Peloton, iFIT, & The Connected Fitness Market

Former Sales Director at iFIT

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Executive Bio

Former Sales Director at iFIT

The executive has over 30 years experience in the fitness industry. He is a Former Sales Director at iFIT, a leading competitor to Peloton, where he was responsible for selling connected fitness equipment across Europe. Prior to joining iFIT, he was one of the largest distributors iFIT connected fitness products for Europe. Previously, he owned and operated traditional gyms and is now selling high-end commercial and home gym equipment.Read more

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Interview Transcript

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

We want to understand the key drivers of the industry and the market. We own between 20 to 25 companies in our portfolio, and our average position size is about 4% to 5%. We are interested in the opportunities in the connected fitness space. We have seen a lot of investment in Peloton and Apple Fitness, and Amazon is trying to get involved. I have gone to a gym since I was 13 and am now 40, so I have seen it all. When Will showed me your background I wanted to connect with you because it looks as if you have a deep experience on the other side of the table; me as a customer and you running the business and distribution side of the market.

My history is that I owned gyms, built them up and sold them because that was better profit at the time. I was also a distributor of subsidiary brands, mainly in Europe. After selling most of them I did not know what to do, then ICON approached me to go into their European business where they were having difficulties. ICON asked me to become a distributor because I knew them. For a short time, I went into the flooring business, but that was not my thing. In 2012 I moved to a company with a known factory producing for other big brands, but also with their own equipment brand.

What was running a gym in the 80s and 90s like and what has changed?

Back then, people who went to gym were athletes and body building was huge. I am not fond of body building but I saw what they were and were not doing. You do not need to motivate athletes, whereas entering a gym was more difficult for non-sporty people. Then cardio was introduced because it was based on strength; what Schwarzenegger always did. Gyms already had some bikes, treadmills and rowing machines at the lower end. People could then visit because it was no longer all about body building and strength training. That developed during the years, going from 100% strength to 30% cardio, 70% strength. Then at a certain stage it was 50/50, and small group training entered the market.

There were older people who did not understand you had to work out well to reap the rewards. In the 80s, athletes or body builders understood they needed to be there seven days per week, two to three hours per day. The biggest market remains pills and munchies; people believe if they take a pill or rub a product on their skin, they will lose weight. Today, retention is a huge thing in the fitness club industry because people still do not understand that losing weight is down to 70% what you eat and 30% training; if you train you are motivated to eat better.

The people who were attracted to the fitness industry came because they thought they could lose weight or get in shape to work on their beach muscles for their vacation. They thought they could simply go to the gym and everything would be okay. That is not the case which is why the dropout rate is very high. So that's the biggest change. From the first time a person thinks they want to go to gym, it still takes on average 15 to 20 months to join the gym. They still need to realize that they cannot only do it for a few months; it should be a lifestyle. The biggest difference is that more people enter the gym but more also drop out.

I can relate to that in terms of the motivation because it is hard to get back in once you stop working out or even take a break. It is about sticking to a plan, keeping that plan fresh and staying engaged with the equipment or gym.

It takes 13 to 15 weeks of going to the gym for it to become part of your lifestyle.

What have you seen work to keep people engaged beyond three months?

Gyms who are guided by software have the lowest percentage of dropouts. It’s about collecting moving points and wellness systems. Gyms who offer strength and cardio training have high dropouts, but if they monitor and review their data, they can motivate you. I know of a 20-year-old system, based on heart rate training, where you collected moving points. Over a 10-week training period, you received moving points only at your target heart rate zone. For example, if you are on a bike, hardly pedal and your heart rate stays low, you get no points. Conversely, if you work out at 80% to 90% of your maximum heart rate, you also get no points. You can also only get points if you were there using the treadmill, bike, rower or elliptical at the target heart rate. After 10 weeks, you are tested again and can move up to the next level. Those people stayed for longer in the gym, but before the pandemic at least, average membership was 18 months. Members who see results on their phone have the lowest dropout rates.

Software makes a difference to maintaining engagement and showing people their progress, and helps them stay motivated. A big trend over the past seven years is health trackers like Apple watches and Fitbits; how will they impact the industry and will they help traditional gyms that are not connected to the internet?

I always thought it would stay but everything accelerated during the pandemic. In the end, it is a motivation tool for people. Someone who buys a home bike is not motivated; they have to make yourself go to the bike and after three months they hang their clothes on it and it is over. With connected fitness programs from Fitbit, Apple or Peloton, you are much more motivated. The good thing about Peloton or ICON iFit is that they are building a community, so even when you work out at home, you are part of that community.

Coffee is a good example; you can drink coffee at home but people prefer to go to Starbucks. You can workout at home, but people want to work out at the gym. After what happened during Covid with all the retail businesses being sold, I think people will probably take both. They no longer go to gym three times per week; instead, they workout once at the gym and once at home. Gyms will benefit by offering memberships for once or twice a week. If you get home late or have a video meeting and cannot get to gym, you can still work out. The combination is a good thing. Of course, it will accelerate because you see wearables track data that now sync with software which give you a tailored program to reach your goal. It will be important for gym owners to adopt this, but also very good for retail fitness, to work out at home.

You mentioned people may want to work out at home and elsewhere, and many of us understand the ups and downs of traditional gyms but connected fitness is newer, so where does it fall short that may lead to people not sticking to programs?

The ones who fall out will always do so. Connected fitness like Peloton and ICON have high fees which causes big dropouts. Streaming videos and group sessions are currently the most motivating tools when working out at home, but if you have to pay your license and gym fees, that could be too much at the same time. If you never change your 10 programs that will also lead to dropouts. They need different scenery and goals or people will drop out.

Will gyms incorporate iFit or Peloton or do they see them as competitors?

At a certain point, they can be competitors, but people want to join a community and see and talk to other people. This is up to the gyms because Peloton or iFit do not care. Gyms need to convince members they offer more than online training or streaming sessions.

If you ran a gym today, would you have iFit or Peloton powered bikes?

When I had a gym I would probably not partner with Peloton or iFit, because they are too strong a competitor, but I would add online training. There are bikes and ellipticals that can stream videos and separate companies provide that online content. I am unsure what Peloton will do over the coming months after acquiring Precor, a well-known US commercial brand. They will have to find a way to stay away from competition, but still add connected fitness through gym owners.

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