THE WEEKLY HOWL IS GOING TO THE MALL

Mallrats: Shopping malls are in the midst of an identity crisis. As more retail activity is moving online, malls are looking for a way to make themselves internet-proof. It logically follows that in order to do that, malls need tenants who are internet-proof. Restaurants are one option; people still enjoy eating out. The second option is usually a gym. And gym operators are eager to fill those anchor tenant spots. From the Detroit Free Press:

Chris Klebba, who owns 14 Planet Fitness franchises in Michigan, Indiana and Canada with his son, has two Planet Fitness gyms in enclosed malls in Burton and Michigan City. Other gyms are in buildings that used to be Staples, Kmart and ABC Warehouse.

More than anything else, he said, the availability of retail space is driving fitness clubs to move to malls.

Fitness clubs, he added, are helping to breathe new life into dying malls.

"We're bringing in anywhere from 1,000 to 3,000 members a day using a club," he said. "Just the very nature of having people in there has a positive effect. In areas we've come to, we give landlords a boost on their leases."

                It is not easy to find anyone who wants a 50,000 square foot space anymore. The foot traffic that gyms bring is an added bonus these days. Malls are remaking themselves as entertainment centers. Think of a vibrant downtown area in which people are drawn by trendy restaurants and yoga studios and then wander into a store to buy something. That is what malls will need to recreate in order to survive. And they will need gyms.

Wearables: The FitBit smartwatch isn’t due until October but the folks at Wired got a look at it. It’s called the Ionic and no surprise, it was designed around fitness.

After years of watching companies struggle to find the smartwatch's raison d’etre, Park realized that Fitbit’s device needed to be laser focused. “What we’d been seeing in the marketplace were devices where the technology was really looking for a problem to solve,” he says. “Consumers were just confused and unclear about what the purpose of a smartwatch was when it first launched.” Fitness and health, they decided, was the killer app. And so the company set out to create a smartwatch that was a fitness tracker first, traditional smartwatch second.

                I have one bone to pick. I don’t think that you can call fitness the killer app for wearables. It’s too general. I think that fitness will be the category from which the killer app springs but I think that all the wearable makers are still looking for it. Feature-wise, the Ionic has GPS, Bluetooth, and NFC. It can track your heart rate and your breathing patterns. And it has 4 days of battery life. Price-wise, it will set you back $300.

                Samsung also has a new fitness-oriented smartwatch coming out: the Gear Sport. It can track your heartrate, download music, and you can take into the pool. Battery life is equivalent to the Ionic but it does not track your breathing. The biggest weakness seems to be Samsung’s insistence on using its own proprietary operating system (Tizen) instead of Android Wear. This doesn’t seem like the best way to lay claim to Android users entering the smartwatch market. Samsung is not going to get iPhone users to buy its watch. I don’t know if using Tizen here is part of a broader strategy to eventually wean themselves off Android or if it’s just so they don’t have to admit that they didn’t need to develop their own OS. But they have hitched their wagon to Android whether they like it or not.

                Apple will be launching a new watchOS soon and details keep leaking out. The latest is that there will be a way to track and/or save a plethora of activities. From The Verge:

The icons depict the following activities: badminton, barre, baseball, step training, surfing, sailing, skating, snow sports, pilates, paddle sports, kickboxing, jump rope, lacrosse, stretching, functional strength training, golf, fishing, fencing, equestrian sports, downhill skiing, dance, curling, cross training, cricket, cross-country skiing, core training, bowling, boxing, and climbing.

                Just in case you have any doubt that health & fitness is driving smartwatch development.

Gym in a Box: There has been more coverage of Mipao, the Chinese operator of those gym-pods and with it, some more details on the business model. From Mashable:

Still, investor interest in Mipao is mounting. The company said this week, it has successfully attracted some 25 million yuan ($3.7 million) in financing, and expects to break even in just eight months — assuming each of its 1,000 rooms is used for six hours, on average. 

                Wow, their costs must be much lower than I would have guessed. At $0.03/minute, 6 hours of usage daily would come out to just under $4,000 in annual revenue per room. Unless, I am misinterpreting the definition of the $15 deposit. I am assuming that users get that back but perhaps something is being lost in translation. Maybe that’s more of an initiation fee?

                Some gym-goers have noted that it is not as cheap as it appears:

Of course, not everyone is enthused by the idea, as the South China Morning Post reports. According to the newspaper, the lack of shower facilities has been unappealing to some. Others noted the cost, calculating that if one were to try to use these mini gyms as often as they use their standard gym, the cost could amount to 1,600 yuan (or roughly $250 USD) per year—a price that some might find hefty for a gym without free weights, weight machines, elliptical machines, classes, or shower facilities.

                 Middle-market, big box gyms get a lot of heat these days so it’s easy to forget that they are the best deal in the fitness world. For $30/month, you can get 24 hour access to a 30,000+ square foot gym with free weights, strength training machines, almost every cardio machine, unlimited group exercise classes, and possibly a pool. Paying $0.03 a minute doesn’t sound like much and it’s not. But once you start comparing it to a big box gym, you realize how much value you’re getting for a gym membership.

Hotel Gym: Hyatt Hotels & Resorts has made its 2nd fitness/wellness acquisition of 2017, purchasing Exhale Spa. This is part of Hyatt’s strategy to move into “adjacent spaces”. That could be “food and beverage” i.e. restaurants or “health and wellness’ i.e. gyms & spas. When Hyatt CEO, Mark Hoplamazian, talks about adjacent spaces he is referring to other industries in which Hyatt can leverage its expertise in real estate and facility management. Gyms are definitely in this category. The gym business is all about location. Lack of convenience is the #1 obstacle to people working out and the easiest way to offset that is to belong to a gym that is nearby wherever you live or work. This is part of the larger trend of hotels starting to focus on fitness. They’re beefing up the hotel gym, offering fitness-oriented rooms, and making acquisitions. Why are they doing this? Because their best customers care about fitness:

 Yes, so our strategy really is formed first and foremost around a focus on the high-end traveler. The key thing that we will do for high-end travelers is deliver experiences that really resonate with them, and that matter to them. A lot of that will be recognizing what their desires happen to be and to make sure that we can help to fulfill those desires, and I would say that we are open-minded in increasing the aperture through which we think about serving our guests to include, of course, hotel stays, but also extend beyond hotel stays.

And what experiences resonate with them?

Another area that is very clearly in demand and an increasing desire amongst our customers is a more holistic and perhaps a more in-depth approach to wellness. Maybe a more mindful approach to wellness, but wellness extends across a number of different areas, so it could be nutrition, it could be fitness, or it might be spa-related.

                Fortune pointed out that there has been a first wave of private equity money flowing into the fitness industry. Are we about to see a second wave of strategic buyers?

Group Exercise: Equinox has created a test space for new group exercise programs: Project by Equinox.

Equinox, the luxury health club chain, opened the new space, Project by Equinox, in March to experiment with new kinds of exercise, equipment and teaching methods. Instructors get to invent new classes and practice them with willing participants before rolling some of them out to the wider world.

“It’s a think tank, or incubator, or lab, or start-up, or whatever you want to call it,” said Vanessa Martin, the studio director.

This space is a welcome addition for instructors and customers who like to experiment, said Ms. Martin. Many New York fitness studios, in order to scale their offerings, ask teachers to follow set scripts and workouts, stifling their creativity, she said. Other clubs turn to gimmicks that have no real physical benefit. “New Yorkers have 45 minutes a day to exercise, and they want results.”

                This is a smart move. Group exercise classes can drive gym traffic and having your own pipeline of programming could be invaluable. Especially when you’re a high-end gym like Equinox. But not everyone is a fan:

Some fitness experts are dubious, however. Jason Kelly, the author of “Sweat Equity: Inside the New Economy of Mind and Body,” agreed that there is a desire for innovation. “The appetite for the next fitness thing is robust, especially with the 20- or 30-something set,” he said.

Still, he worries about the ramifications of following trends. “Doing the next cool thing sometimes feels like making sure you’ve eaten at the greatest restaurant or gone for a drink at the cool new rooftop bar. If fitness turns into this strange one-upmanship of, ‘If you aren’t doing this cool new thing, you aren’t doing it right,’ that can be a bit of a turnoff,” he said. “At heart, I still love the idea of just going out for a run.”

                I share Jason’s skepticism about “innovation” in fitness but it’s not like this is anything new. Equinox is just trying to get out ahead of the next big thing. The thing that Jason is forgetting is that nothing being developed in Project by Equinox is designed for him. The people being turned off were never going to sign up in the first place. That is not a problem. We all don’t need to have the same fitness experience. What worries me is if people start to think that you need to spend $35/class in order to get in shape. That is very concerning.  

You Can’t Buy Fitness: We have an obesity epidemic in this country. People are struggling to maintain healthy nutrition and activity levels in the face of our modern lifestyle. There is a strong demand for solutions right now and in typical American fashion, many believe that the answer is money. More specifically, there are a rash of companies that launched a few years ago that want to use money to incentivize you to workout. The basic idea is that you give them your credit card number and then they either fine you for not meeting your fitness goals or they give you money for meeting your goals. These companies have started to go out of business. Why? Because money is not the answer to the obesity epidemic. You can’t incentivize people using money to go to the gym. Invoking the concept of loss aversion might impress some investors but it’s not really different from trying to pay someone to go to the gym.

Romy Oltuski of Prevention Magazine tried using Pact (formerly GymPact, now defunct) to motivate herself to workout. It did not go well:

This went on for about a month and a half, and my commitment continued to dwindle. I felt a pang of guilt the first week I didn’t fulfill my three-workouts-a-week quota, but not as guilty as I did when I passed by my yoga studio one day and decided to cheat, logging in without even going to class. (I know!) My dates with the gym became fewer and further between, and week after week I was alerted to the fact that I hadn't fulfilled my goal. I told myself I was only losing $5. Regrettably, I’ve wasted more.

In the end, I broke just over even, walking away with .38 points, which translated to a laughable 38 cents.

 

What I did take away from the experience was the realization that you need to be real with yourself about your motivations if they’re going to propel you. If I'm going to hold myself to working out on a consistent basis, it will be because I’ve truly committed to my body, appearance, and health—not because I put $5 on the line. (Why haven’t I committed to my body, appearance, and health? That’s another issue I’ll need to contend with…) If making money were a viable motivating factor for working out, then logic follows that saving money would, too. Now think about all those times you've had a gym membership you never used but continued to pay for each month.

               

                Romy really nailed it here on two key points. First, the loss aversion thing sounds great but the fitness industry is based on it already. Plenty of people get their credit cards charged every month for gym memberships and never utilize the services that they are entitled to. Second, if you want to be fit, then you need to change your lifestyle. You don’t get huge changes from small amounts of money. You get small changes. A huge change requires true commitment. It requires intrinsic motivation, not extrinsic.

Side point: I don’t know if I really trust a fitness company that is banking on a large number of its users to not meet their fitness goals. If you have to pay someone for meeting their goals, then you need someone else to miss their goals so you can fine them. Otherwise, you will be losing money. This sounds like a casino not a company that wants to help you meet your fitness goals.

TidBits:

-BeachBody was fined $3.6 million for charging people without their permission

-James Harrison is a beast

-In space, no one can hear you sweat

-Now you can get personalized workouts based on your DNA

-Maybe Jazzexercise should change its name