THE WEEKLY HOWL IS STILL GOING TO THE MALL

Look to the smartphone: Fitness tracking is a fairly new space but it appears to be following the same path as cell phones. First, smartphones swallowed the cell phone market as well as any other hand-held electronic device (digital cameras, portable GPS units, PDA’s). Then, Apple swallowed the smartphone market. Smartwatches are the smartphones of the fitness tracking space. They are swallowing the fitness tracking market leaving only the very low end. From Business Insider:

  • Companies that focus on fitness tracker wearables are seeing shipments decline. Fitbit, which also generates most of its sales from fitness trackers, saw overall shipments decline 17% YoY during Q4 2017, marking the fifth consecutive quarter of YoY decline. And Fitbit's first smartwatch, the Ionic, failed to meet the company's aggressive goals, according to CEO James Park. Meanwhile, Xiaomi saw shipments decline 5% YoY to 4.9 million in Q4 2017. 
  • But Apple, which focuses exclusively on high-end smartwatches, saw 56% YoY growth in shipments, and overtook its competitors as the No. 1 wearables vendor. Apple's smartwatch shipments spiked to 8 million in Q4 2017. This propelled the company to become the single biggest wearables vendor for the first time, as it captured 21% of the market during the quarter, and pushed Fitbit and Xiaomi to the side in the process. Apple's impact was so substantial that the Apple Watch's stand-out Q4 was the driving force behind positive shipment growth in the overall wearables market during the quarter; without Apple, the wearables market would have contracted, according to the IDC. Overall, shipments of wearables grew 8% YoY to 38 million units in Q4.

If I worked in the fitness tracking space, there are only a few strategies that I would pursue:

1)      Be Apple and make smartwatches

2)      Go after the low end of the market with very cheap fitness trackers

3)      Focus on software (create fitness apps that will run on the Apple Watch)

4)      Do something with hearables (although I would be concerned that Apple will get into this too with the AirPod)

5)      Be Google or Samsung and try to corner the Android smartwatch market

Basically, I would not try to compete with Apple in hardware. I would either use their platform to make apps or try to capture a segment of the market that Apple has no interest in. Despite this trend, investors are still lining up to put money into fitness tracking hardware ventures. From Bloomberg:

Twitter Chief Executive Officer Jack Dorsey and Golden State Warriors All-Star Kevin Durant are among the newest investors in Whoop Inc., a wearable fitness tracker popular with professional and elite athletes.

The $25 million Series C funding round was led by UAE71 Capital, said Whoop Chief Executive Officer Will Ahmed. The latest investors also include former National Basketball Association Commissioner David Stern. The venture arm of the National Football League Players Association was already a backer.

That’s alright, they can always pivot to software down the road.

Cycle Stars: Just in case you weren’t quite sure that the boutique cycling phenomenon isn’t personality-driven, the NY Times is running profiles of cycling instructors now.

Ms. Chaumet was born in Paris and was raised on the west coast of France, where, as a child, she liked archery, horseback riding and surfing. Before her spinning career, the self-proclaimed tomboy (she pairs cotton sport socks with Gucci loafers outside the studio) flitted between jobs. There was waitressing at Joe Allen in Paris and folding shirts at Quiksilver, all while flying back and forth to California, where she was she was a surf instructor in Santa Barbara and a chef for the crew of “Unusually Thicke,” a reality show starring Alan Thicke and his family.

“I was really living the life there,” Ms. Chaumet said on a recent Tuesday after class, sipping a second allongé at Fragments cafe in the Marais. “I didn’t have too much money, but I’d wake up, go swimming, then work in a cafe for a bit and maybe take a yoga class. At 5 or 6, I’d surf before happy hour.”

But when she came back to Paris to renew her visa, her mother and grandmother urged her to make something more of herself. As if on cue, Dynamo discovered her growing presence on Instagram and asked her to train as one of their coaches.

“It would stop me from going back to California and traveling,” she said. “I had to do it fully. I’m really competitive with myself.”

Before she started training at Dynamo, she traveled to Mysore, India, to get a 200-hour yoga teacher certificate at the Ashtanga Yoga Mysore center. In 2016, while building her Dynamo clientele, she started Trés Intense Hip Hop Yoga, a 60-minute vinyasa flow class that she teaches four times a week at a cavernous space just off the Champs-Élysées.

              Cycling instructors are like rock stars now. I wonder how many of them have endorsement deals. How does this impact the cycling studios? It seems like this should give these instructors a lot of power in their relationship with the studios. SoulCycle has IPO ambitions but I have to wonder how scalable their business is. Can they keep finding charismatic instructors that keep people engaged? How strong is the SoulCycle brand versus an individual instructor’s brand? I can’t think of a good parallel here either. The entertainment industry is somewhat similar with movie stars versus movie studios or movie franchises (Marvel, Star Wars, Harry Potter). I’m not sure that is a good comparison though. The big question is whether SoulCycle adherents would follow their favorite instructor to a new studio or stay loyal to SoulCycle.

Military Fitness: The obesity epidemic has reduced the pool of eligible talent for the U.S. Armed Forces. Senior military leaders have been wrestling with solutions to this problem for years. Now the Chairman of the House Armed Services Committee has a novel idea. From the Military Times:

“Should we make it easier for someone who has, for example, expertise in computers to serve in the military even though they can’t meet all the physical requirements?” House Armed Services Committee Chairman Mac Thornberry, R-Texas, said during a media roundtable on Wednesday.

“Maybe there needs to be limited exceptions for these high demand areas. All of these are good discussions to have.”

The comments came as Thornberry’s committee is starting its annual work on the defense authorization bill, a massive budget policy measure that sets a host of authorities and priorities for the following fiscal year.

Earlier this month, researchers at The Heritage Foundation reported that more than 70 percent of 17- to 24-year-olds in America today are ineligible to join the military under current Pentagon requirements. About half of that group did not meet physical fitness or health requirements for service.

              This is an interesting idea. On one hand, it makes sense that the infantry would require a higher level of fitness than a cryptology specialist or a radar operator. On the other, just achieving a passing score on the PFT (at least the Navy one) is not hard at all. Lowering the standards much more could make the whole thing irrelevant. Maybe it would make sense to get rid of the whole thing or just focus on weight, at least for office-based jobs. I don’t know what that would do to the military’s culture though. There are no easy solutions to this problem. The DOD is going to have to get creative in order to maintain readiness. This idea is as good any other one at this point.

Real Estate: One side effect of the retail apocalypse is that shopping malls that have survived have been courting gyms to fill the anchor spots that used to be occupied by department stores. The other side effect from a fitness standpoint is that the mall walkers are losing their place to exercise. I had forgotten about mall walking. There was a lot of media coverage in the 1990s but almost none recently. But people are still doing it. From Racked:

Mall walking is exactly what it sounds like — a form of exercise where people walk in shopping malls. According to a resource guide created by the CDC, malls are the second most frequently used venues for walking, right behind neighborhoods. Why do people prefer them over parks and gyms? A few reasons: roomy corridors, a weather-proof environment, close parking, proximity to bathrooms, ample amounts of benches and fountains for resting, and, of course, it’s easy. Most of its participants are elderly, but some are new moms with strollers who find the wide walkways optimal for exercising.

              This is unfortunate. There is nothing else like a shopping mall in terms of indoor walkability. But malls are closing and there is nothing that is going to stop that.

However, with malls closing at a rapid rate and online shopping (i.e., Amazon) becoming the norm, the question is, “Where will mall walkers go?” and even more broadly, “What is like a mall?” 

In 2017, 18 retailers, including Payless, The Limited, and Toys R Us, filed for bankruptcy, and closed hundreds of shops across the country. It is projected that in the next five years, a quarter of America’s 1,100 shopping malls will shut down. Sears, which had 3,800 locations 10 years ago, is down to 1,104 stores; last year Macy’s closed 68 stores and J.C. Penney closed 128. Malls depended on these anchor, big-box chains to attract shoppers and then funnel foot traffic inside to smaller retailers, but as department stores vanish, this traffic flow has de-congested. According to TIME, between 2010 and 2013, holiday shopping at malls dropped by 50 percent.

              What are communities/landlords doing with those spaces? Shopping malls take up huge parcels of land. What future purpose is that all that land going to be put to? It may not be realistic but it would be great if communities put some of that land towards space that people could exercise in. Something like a public park with a walking path or a track. It wouldn’t protect the mall walkers from the elements but we need all the walkable real estate we can get in this country.

Tinker Away: ClassPass has introduced the variable pricing model that they were talking about last fall. From TechCrunch:

“We’re a subscription company, and we are aggregators just like Netflix and Spotify,” said ClassPass CEO Fritz Lanman. “But we look at companies like Uber, who have dynamic pricing, and see an opportunity that combines the best of both worlds. Marketplace pricing incentivizes customers to find great value and opens their eyes to a new workout they would have never given the time of day to.”

But how do they determine this pricing?

ClassPass has created an algorithm that takes into account all the data the company has collected after years of seeing how people browse, book, and attend fitness classes. The algorithm uses a wide array of inputs, including time of day, day of the week, weather, location and much more, to determine what a fitness partner should charge for any given class.

This also allows fitness partners to include high-demand, peak, premium inventory that has historically been unavailable on the ClassPass platform.

The new pricing structure is as follows:

  • $45/month: 27 credits (2-4 classes)
  • $75/month: 45 credits (4-6 classes)
  • $135/month: 90 credits (8-12 classes)

It concerns me a little bit that the CEO felt the need to pitch ClassPass as “Netflix/Spotify meets Uber but of fitness”. Besides that, this move makes a lot of sense. It will help studios fill in under-capacity classes and steer users away from over-capacity classes. I think that dynamic pricing is an under-utilized technique in general. The downside of this is that people seem to hate dynamic pricing. Which is probably why it’s under-utilized. Uber has done more to mainstream the idea of dynamic pricing than any other company in recent memory though. Maybe ClassPass has enough overlap with Uber customers to make this work.

CrossFit Open: Two weeks ago, Dave Castro released the first event of the 2018 CrossFit Open and it had a rowing component in it. The guidance was that the rowing machine used had to count calories in manner similar to the Concept 2 rower. Now CrossFit is disqualifying scores that used the Xebex rower.

According to research from The Morning Chalk Up, Xebex claims that their rowers are indeed of similar calibration to Concept 2 and that they “believe that it is approved for (the) Open.”

But the day after Varela and Bennett were awarded the top two spots in 18.1, CrossFit HQ removed their names from the top of the leaderboard. Their spots now belong to Denmark’s Nicolai Duus (487 reps) and Iceland’s Hinrik Ingi Oskarsson (480 reps).

CrossFit HQ published a statement on Wednesday night to confirm the rumors: You can’t use a Xebex rower for the CrossFit Open.

Last year, there was an issue with barbell burpees in which participants were loading up the bar with the smallest plates so that they didn’t have to jump very high. Those participants were disqualified from the competition. That was an understandable but still avoidable situation. I understand if it just didn’t occur to the organizers that people would try to game the work-out like that but it’s not that outside of the box either. The Xebex thing seems to be even more avoidable. Why not just list approved brands of rowers? It’s not like there are thousands of them. They left it open to interpretation and this is what happens. 

I wonder how much this will hurt Xebex. No CrossFit affiliate will want to buy a Xebex rower after this and it can’t be good for the overall perception of the brand. This is also a big win for Concept2. They’ve always been the preferred rower by CrossFit but this will put even more pressure on other companies to emulate Concept2’s method of measuring calories. I’d love to see a study on the CrossFit effect on established equipment manufacturers like Concept2. How much has it helped them and hurt competitors?

TidBits:

-ESPN reviews SoulActivate, the new offering from SoulCycle

-Strava has added an opt-out to its heat map in the privacy settings

-Shaquem Griffin has only one hand but that didn’t stop him from benching 225 pounds 20 times at the NFL Combine

-New deadlift record of 1,041 pounds at the Arnold Strongman Competition

-Roger Bannister, the first man to run one mile in under 4 minutes, has passed away at the age of 88

-44% of the people competing in the CrossFit Open are over the age of 35