COVID-19 has hit the health and wellness industry hard. State-mandated closures have shuttered many gyms for good: 25 percent of fitness businesses in the United States are expected to close permanently this year, and 500,000 workers have been furloughed or laid off. And while restaurants and hotels received specific waivers in the first Paycheck Protection Program loan package, fitness centers did not, compounding the impact.
The at-home fitness retail industry, however, has thrived. Many companies have pivoted to respond to customer need – a good example for other retailers looking to expand their markets, especially as the holiday shopping season approaches.
Harrison Co., a consumer-focused investment bank, has estimated that $10 billion annually could leave the health club sector for home fitness options, even post-COVID-19. As Americans rushed to buy home gym equipment, retailers sold out of weights and other products. Equipment sales grew 170 percent during the first two months of lockdowns.
Fitness companies capitalized on the demand by targeting broader buyer demographics. Peloton, for example, reduced the price of their spin bikes and added new product tiers, like a new Bike+ with a four-speaker sound system (the company reported a 66 percent increase in sales last quarter). When Lululemon bought at-home fitness company Mirror, it opened new revenue streams as people buying activewear sought creative ways to put that activewear to use at home. Mirror instructors, for instance, now wear Lululemon products.
Companies that relied heavily on brick-and-mortar are pivoting as well. The St. James, a premier sports, wellness and active entertainment destination based in the Washington, D.C., metro area, developed an all-in-one app that allows customers to make online food orders for pickup from their restaurant, reserve spots in a socially-distanced health club, and access classes from their home.
Other retailers can follow the example of the wellness retail industry and identify and build toward their customers’ needs, particularly as the seasons shift. Colder weather will force people to spend more time indoors at home, and as we’ve already seen throughout 2020, digital offerings must be front and center.
The reason the at-home fitness industry is thriving isn’t just because people are spending more time at home. The industry is thriving because it has recognized new customer needs and is responding to them through digital products. Similarly, successful companies of all industries have built to excel at change, to accommodate shifting trends and needs quickly. As industries reopen, this might mean building toward a hybrid of in-person and at-home offerings. It could mean finding new revenue streams by diversifying offerings, like Lululemon. This winter shopping season could see just as many shoppers as last year — but the way people shop will look a lot different, and retailers will have to respond in kind.
Casey Craig is senior vice president of retail at 3Pillar Global.
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