In this new edition of “Battle of the Brands,” we look into the dynamics behind two of the largest fitness equipment brands in the market, Technogym vs Life Fitness.
In the first edition, we looked at Gymshark vs Lululemon, so make sure you see that post as well if you enjoy this series.
A new landscape for the fitness equipment market
The fitness industry was, without much doubt, one of the most impacted by the Covid-19 pandemic.
Gyms pretty much all over the world had to close in order to comply with "lockdown-related" measures. Some people, however, did not lose interest in working out, even if that meant doing so from their own homes. As a result, during 2020 the “home” segment of the fitness equipment market experienced a spectacular growth of 25% vs the year on year average of the period between 2017 & 2019, and from then on, it is expected to grow at a compound annual growth rate (CAGR) of 4,6% between 2021 & 2028.
Furthermore, according to Global Market Insights, the overall fitness equipment market was worth $10 billion in 2020 and they project a CAGR of 11% from 2021 to 2027, when it will be worth $25 billion.
In particular, the connected fitness industry took the market by storm and can be considered a huge driver behind that dynamic of growth and recovery. Led by the amazing results of Peloton, the acquisition of Mirror by Lululemon, and the rise of brands such as Tonal, Climbr or Zwift, it seems that “Home Fitness'' is here to stay.
Many of these start-ups were able to secure significant investment rounds during 2020 and 2021 with these being the most significant so far:
Tonal, a strength-training company, was one of the most successful and has raised $250 million.
Ergatta, who offers a connected rowing product, secured $30 million in April 2021.
Climbr, a connected climbing machine brand, raised $13.5 million in May 2021.
Liteboxer, a brand that sells connected boxing equipment, raised $20 million in June 2021.
As you can see, you can pretty much think of any machine/service, a brick & mortar gym offers and you will find a “connected” version somewhere...
With such a different landscape, fitness equipment manufacturers have had to adapt and approach their business models in a different way. So let's dig into how two major players have done so!
Introduction to the brands
Technogym: Premium fitness equipment from Italy
Technogym was founded back in 1983 in Cesena, Italy and today it claims to have 50 million users across more than 100 countries. These would be distributed across 80K wellness centers and 300K homes.
Like many others, they suffered the impact of the pandemic on their P&L. Revenues during 2020 were around €510 million, which is a 24% decrease vs the year before. They do, however, believe home fitness is a great opportunity to leverage from as shown by their Q1.21 results, where home fitness equipment sales are +25% vs the previous year. The brand has been able to achieve a remarkable 10% increase in total sales which seems to be an indicator of a “momentum swing” after a tough 2020. This, along with an overall recovery of the fitness industry and robust management of their financials (they were able to close 2020 with a net operating income of 10,7%), are the drivers behind their ambitious goal of achieving €1 billion by 2024 (with 30% of those coming from Direct to Consumer operations).
Technogym has essentially positioned itself as a premium brand in the market. Not only have they closed deals with premium fitness operators across the world, but they also have partnerships in place with some of the most recognized sports properties such as the Olympic Games, Juventus, A.C. Milan, Inter Milano, the Italian and Brazilian football teams, the Rafael Nadal academy and of course, Ferrari. Moreover, they are also making efforts to enter the "lifestyle" scene, as proved by this partnership with premium fashion brand, Dior.
Life Fitness: A portfolio of brands to tackle every segment
The origins of Life Fitness trace back to 1968 when Keene P. Dimick built an exercise bike but it was not until 1984, after a series of corporate movements, that the brand was officially named “Life Fitness.” In 1991 it was sold to a Private Equity firm and in 1997, it was resold again to Brunswick Corporation for $310 million.
Finally, in 2019, Brunswick sold the brand to KPS Capital Partners for $490 million.
It is worth noting the number of times the company has changed hands among private equity firms...
According to Statista, Life Fitness's revenues in 2019 were $1,900 million, although, as of publishing this post, we were not able to find the impact of 2020 on the P&L.
From a product perspective, there is a wide family of brands under the “Life Fitness umbrella,” which enables them to play in different segments of the market.
Life Fitness: We could argue this would be their “mass market” brand, as they define it as an option “for any facility.”
Hammer Strength: Their strength training brand for more “experienced athletes.”
Cybex: Commercial fitness equipment with a more “premium” edge and a strong scientific development behind it. Through this brand, they also enable access to “on demand” workouts.
Indoor Cycling: Theoretically, the brand with which they compete with the likes of Peloton, SoulCycle, etc.
SciFit: A brand whose purpose is to help those who have a harder time with exercise, either due to injury or to the fact they have not worked out before.
Brand positioning: Approaching the market very differently
Traditionally, these two brands have made the bulk of their revenues from selling fitness equipment to commercial gyms around the world.
With that in mind, and assuming the traditional “pre Covid” scenario, if we were to make a brief distinction between both brands:
Technogym is a premium brand that has looked to work with more “high-end” health & wellness clubs. As such,and based on what we have seen after working with certain gym operators, they are in a price tier above Life Fitness.
Life Fitness can be considered a more traditional “mass market” brand that is not as selective with the type of club / gym it works with but has ambitious goals around the number of clubs they work with worldwide.
Essentially, it can be summarized that Technogym bases its business model more on “margin” whereas Life Fitness seems to pursue more “volume.”
Distribution strategy: From B2B to D2C
As we have mentioned, both brands have traditionally worked more on a B2B model selling directly to health clubs.
In addition, they also opened up the hospitality channel (hotel fitness equipment), corporate wellness and of course, the athletics realm, by supplying equipment to professional teams and organizations.
What will be interesting to see is how they embrace the D2C model from now on. While it is true they already sold to end customers, its contribution to the total business was quite low. The pandemic though has changed the market dramatically and now both Technogym & Life Fitness are increasing their efforts in this space.
Technogym for instance is putting a lot of bets into a “premium retail” strategy. As a matter of fact, they are opening showrooms in prime locations across major cities, like this one that was opened up in Madrid to which they invited sports celebrities such as Figo or Ronaldo Nazario, among many others. There are currently Technogym showrooms like this in Milan, New York, Madrid, Dubai, Mexico City, Guadalajara and Moscow.
Life Fitness, on the other hand, works through official retailers rather than owning their own set of stores.
Digital innovation: Apps, innovation hubs & connected fitness
As you probably already know, the fitness industry has had to “go fully digital” to compensate for the lost revenue coming from brick & mortar gyms. Both Life Fitness & Technogym are not different in this regard and are launching workout apps under a B2B2C model. Essentially, they offer these apps to their brick & mortar clients who in turn offer it to the end-user and the goal is that they use it both at home and their regular brick & mortar gym. Some would argue this move bridges over their B2B customers...
During our time working with a large fitness operator, we were involved in a project in which Life Fitness was launching this app into the market. We cannot disclose too many details but in essence, it offered workout routines for each customer, kept track of their progress, streaming of on-demand classes, sent customized notifications, fostered engagement with personal trainers, etc.
From a business perspective, the app helps tackle several KPIs including:
Acquisition of new customers: Every time a user signs up to the gym he or she is registered into the app. And since Life Fitness works with so many clubs around the world, the amount of users they acquire from the “get-go” is huge…
Retention is based on the theory that “progress” drives “engagement" and the app is meant to be a companion along the user´s entire fitness journey.
Upselling: From independent workout routines to personal training for example.
More importantly, it also provided great amounts of data to map out customer journeys and create cohorts. For instance, who attends classes, how long do people work out, what type of customer hires personal training, etc. And the desired result (much easier said than done) is to create a full omnichannel strategy that combines experiences in the "traditional" and "digital" realms.
Finally, the company also set up “Innovation Hubs” across cities around the world with the aim of identifying emerging opportunities and investing in new businesses and technologies that would enhance their value proposition. As you can see, digital innovation is at the forefront of their business strategy.
Obviously, Technogym has also embraced new technologies and adapted to the changes in the fitness industry. Among others, we highlight the following initiatives:
The brand revamped its app to help gyms offer live & on-demand classes to their customers.
In 2022, they announced the launch of Technogym Live, "a freemium model, where end-users will be able to access a wide library of engaging live and on-demand training experiences."
They also reacted to the success of Peloton & the connected fitness industry by launching a connected bike and strength class service of their own:
Looking into the future for Technogym & Life Fitness
Just as we have done in other editions of “Battle of the Brands,” we like to close out these posts with some personal ideas on how these organizations could evolve in the future. Again, these are not based on any “insider information” and are simply our own predictions on what could potentially happen.
Trying out new distribution channels and retail experiences to go deeper into D2C sales
Technogym seems keen on driving sales through its showrooms. Proof of this is the recent launch of “Precision Training,” an experience that users can benefit from by setting up a reservation with a personal trainer.
Life Fitness, however, knowing it is accustomed to working with distributors and that home fitness seems to be a trend that is here to stay, could look into closing partnerships with major “lifestyle” retailers to set pop-up stores in them. Just imagine a “Life Fitness Home Fitness Corner” in an IKEA-type store to understand the idea...
Partnership with connected fitness manufacturers
Peloton completed the acquisition of Precor in April 2021. The main reasons for that acquisition were to increase manufacturing capacity and potentially gain access to new international markets.
Both Technogym & Life Fitness can bring the same skills to the table in order to complement emerging connected fitness brands in a similar fashion. So, on paper at least, it makes sense to consider some form of partnership with other brands like we mentioned in the introduction in a move that would compete with Peloton directly.
Acquisition of their own “Brick & Mortar” brand
The rationale behind this idea is that if Technogym & Life Fitness are trying to increase the contribution of B2C sales in the P&L, are launching apps aimed at engaging with the users of their B2B customers (the gyms), they already have equipment in place...would it not make sense for them to try and acquire a struggling brick & mortar brand?
This would definitely help them take over another step in the value chain and reinforce their D2C strategy…
Play the virtual fitness game
It might be a bit late for fitness manufacturers to “steal” the connected fitness market but a segment that we believe has huge potential and is still somewhat untapped is the virtual fitness space. While it is true that brands like Zwift have already established a leadership position in the market, there still seem to be plenty of avenues for growth, as we covered in this post.
A strategic challenge like no other...
From a “strategy” point of view, it will be fascinating to see how fitness equipment manufacturers like Technogym & Life Fitness recover from the effects of the pandemic. On one hand, there are new potential avenues for growth that these brands could consider. On the other, it remains to be seen how they minimize the hit taken by brick & mortar gyms (still the biggest contributors to their revenue figures), given that, presumably, many expansion opportunities or equipment renovations have been put on hold until the industry gains momentum again. They will also need to embrace competition against challenger brands like Tonal, Mirror, Peloton, who has announced its plans to enter the connected strength space with the launch of Guide or Freeletics, looking to change the industry altogether through the launch of Staedium. This episode of Fitt Insider´s podcast covers Freeletics´approach to "gaming & fitness" in full detail.
We do believe though, that both brands have taken steps towards post-pandemic recovery by trying to increase D2C sales and embracing new technologies. Hopefully, in the future, we will be able to bring you further updates on how these brands adapt to a totally different landscape from the one they once knew...
Meanwhile, keep safe.