Earlier this year, Hussle provided an update on the performance of the UK fitness industry based on January data, a key month on which many operators had pinned their hopes of a strong recovery after two years of Covid-related turbulence. With the ‘golden quarter’ for fitness industry sales now over, we have revisited this data to provide an update on what is happening in the UK.
Using proprietary search data from the Hussle marketplace, supplemented with analysis taken from Google Trends and Semrush, three key trends have emerged.
1. Search demand in the first quarter of 2022 hit record levels, but transactional demand remains ‘soft’.
When assessing customer demand volumes, we are looking at the number of searches made by customers online for gym-related search terms.
Pre-Covid, the typical month-on-month increase between December and January in any given year was +50%. In our last update, we observed that the increase in customer demand volumes between Dec-21 and Jan-22 was +96.7%, a significant increase from the weakened trading environment caused by the emerging threat of the Omicron variant towards the end of the year.
This increase in demand volume meant that Jan-22 reached 95% of the absolute volume seen at the peak of the market in Jan-20. With complete data now available for the full first quarter of the year it shows that 2022 has continued to grow and has now reached record levels of search demand.
If we compare 2022 to the last full first quarter of trading before Covid (2019), we see that 2022 is an incredible 87.9% up, almost double the demand volume seen in 2019.
The comparison to 2020 is harder to make given that the year started at record levels before a drop off in trade from mid-March as the UK went into its first national lockdown. UK clubs were then also closed in the first quarter of 2021.
As we previously cautioned in our last update, this good news must be caveated by noting that the quality of this demand looked ‘soft’. At Hussle we group customer search terms into ‘high intent’ and ‘low intent’ cohorts as a proxy for the quality of the demand volume.
For example, a high intent search term might relate to specific gym exercises or venues which indicates a customer that is more likely to be ‘transactional’. A low intent search term would be more generic, such as ‘gym’ or ‘gyms near me’ which indicates a customer that is in a consideration phase without necessarily progressing to a transaction.
The segmentation of these cohorts can obviously be debated, however in 2018 and 2019 the high and low intent search terms would typically increase proportionately. In January 2022 this was not the case which suggested that whilst interest in gyms and health clubs was extremely high, the follow-through to transactions was not as strong.
Our working hypothesis at the time was that ongoing Covid restrictions and work from home guidance for most of Jan-22 likely delayed the purchasing decisions of some customers that were otherwise ready to get back to the gym. This was supported by anecdotal feedback from operators who saw a slow start to the month offset by a strong finish with many eventually exceeding (largely conservative) targets.
With full data now available for the first quarter of the year our caution around demand quality remains.
High intent search demand continues to stubbornly lag at 20.4% less than comparable 2019 and 2020 levels which indicates that whilst interest is high, the number of customers transacting with gyms likely remains suppressed, relative to overall demand volume increases.
The reasons for this high intent demand lag are as yet unclear. At Hussle, our working hypothesis remains that changes to working patterns and increased working from home have likely caused a continued shift in gym usage away from historically high usage urban venues that has yet to be fully replaced by residential clubs.
If so, it remains to be seen whether this shift eventually resets as people increasingly return to pre-Covid behaviours, or whether there will continue to be a lasting and fundamental effect on how and where people choose to exercise in future.
2. Well-capitalised budget gym chains have rebounded, but public sector venues continue to face significant demand-based challenges.
In our last update we reported on a reduction in brand traffic which would typically increase significantly in January as fitness brands invest in marketing to compete for their voice to be heard. Compared to 2020 we observed that 2022 brand traffic volumes were down between 20-50% depending on which operator you analysed.
Our hypothesis at the time was that the likely balance sheet position of (some) operators meant that they were unwilling to throw money at a very uncertain market when confidence in the trading environment was extremely low (for all, given the rising threat of the Omicron variant at the time of media buying decisions).
With data for the first quarter of the year now available we can see that a number of leading brands seem to have belatedly committed significant marketing budget to drive brand awareness, particularly through paid search and in several cases through above-the-line marketing.
The budget sector has performed particularly well with brand traffic now up c.20% compared to 2020, whilst public sector venues remain c.17% down on the same basis.
This indicates either a renewed confidence in the trading environment or it could suggest that well-capitalised operators are now seeking to consolidate or grow their market share at the expense of operators that need to work within greater constraints or with smaller budgets.
The playing field therefore appears to be particularly uneven at present with the impact of Covid on the UK fitness industry likely to have created a ‘one-off’ opportunity for ambitious operator brands to aggressively accelerate growth plans, which cannot be missed.
3. Member attrition remains a concern with cancellation queries even higher than volumes prior to the first UK lockdown at the end of Mar-20.
Whilst Hussle is not privy to member cancellation volumes experienced by operators, we can analyse related search terms and trends. The second half of 2021 had previously been showing a trend for an increased volume in membership cancellation terms even prior to the turbulence caused by Covid during 2020 and 2021.
The first UK lockdown occurred in Mar-20 which makes cancellation data from this month hard to use.
However, if we compare only Jan and Feb data, we see that cancellation search terms are 25.1% higher in 2022 than they were in 2020. This suggests that attrition remains a material threat for operators which will need to be addressed through increased customer acquisition channels both in terms of channel variety and channel spend, a greater focus on retention, or increased efforts to simply ‘lean in’ to this new customer behaviour.
This is a data point that should remain under review throughout 2022 to better understand if high attrition is the ‘new normal’, expected customer behaviour or simply an anomaly linked specifically to the effects of the pandemic on the fitness industry.
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